The myth about leverage / debt being bad

The late Dennis Ng Kah Wan likes to emphasize that not all debt is bad. There’s "good debt and bad debt".

Bad debt is car loan, credit card debt, among others.
Good debt is your housing loan, investment property mortgage loan, and business debt, especially those obtained with without collateral!  (See, that is why perpetual bonds is really good for companies but bad for you!)

I hold the same view as well, but such view is not common because you would more often hear people saying that you should try to be debt free earliest possible.  May be people who are like that should take note and ask themselves: Which multi-millionaire has no bank debt?  That will help them to expel all those myths...

CPF Life Annuity return calculation [for WOMEN]

Does the CPF Life Standard Plan or the Basic Plan give better payout for WOMEN? 

Well, based on existing data given by CPF at this URL...

   
We can do some estimations......

Below you can see 2 tables for Women's CPF Life annuity, 1 for Standard Plan and 1 for Basic Plan, assuming the woman has $155,000 in her retirement account at 55 years old :

CPF Life Annuity return calculation [for WOMEN] - Standard Plan

 

CPF Life Annuity return calculation [for WOMEN] - Basic Plan

For Women's CPF Life Standard Plan:
If you die at 85 years old, your return range from 0.84% to 1.93% (based on lower payout & lower bequest to higher payout & higher bequest).  .
If you die at 75 years old, your return range from -4.67% to -2.94%.
If you die at 65 years old, your return range from -30.66% to -27.48%.

For Women's CPF Life Basic Plan:
If you die at 85 years old, your return range from 2.63% to 3.52%.
If you die at 75 years old, your return range from 2.27% to 3.35%.
If you die at 65 years old, your return range from -9.65% to -4.63%.

It seems that only when you live to 85 years old and choosing the Basic Plan will you stand to obtain maximum return of 3.52% !!!
This is provided these figures do not get changed by CPF Board in future! 
However, WHO told us that Singapore's women average age is only 85 years old, so most of you women going to lose out because you are 50% unlikely to live past 85 years old! 

And the above figures show that you are better off choosing the CPF Life Basic Plan than Standard Plan !!!

Doing yourself great disfavor to invest in perpetual bonds!

Recently, perpetual bonds issuance by companies have been the rage.  What is so good for these companies getting such dirt cheap perpetually long-term forever financing, obviously is very detrimental for you and me! 

So my advise is, never ever invest perpetual bonds!
If you understand how perpetual bonds operate, you would never want to "invest" in such bonds! 

CPF Life Annuity return calculation [for MEN]

Does the CPF Life Standard Plan or the Basic Plan give better payout for men? 

Well, based on existing data given by CPF at this URL...
   
We can do some estimations......

Below you can see 2 tables for Men's CPF Life annuity, 1 for Standard Plan and 1 for Basic Plan, assuming the man has $155,000 in his retirement account at 55 years old :

CPF Life Annuity return calculation [for MEN] - Standard Plan

CPF Life Annuity return calculation [for MEN] - Basic Plan

For Men's CPF Life Standard Plan:
If you die at 85 years old, your return range from 1.84% to 2.94% (based on lower payout & lower bequest to higher payout & higher bequest).  .
If you die at 75 years old, your return range from -4.19% to -2.80%.
If you die at 65 years old, your return range from -30.74% to -27.55%.

For Men's CPF Life Basic Plan:
If you die at 85 years old, your return range from -3.97% to 3.80%.
If you die at 75 years old, your return range from 2.57% to 3.67%.
If you die at 65 years old, your return range from -8.18% to -3.20%.

It seems that only when you live to 85 years old and choosing the Basic Plan will you stand to obtain maximum return of 3.80% !!!
This is provided these figures do not get changed by CPF Board in future! 
However, WHO told us that Singapore's men average age is only 80 years old, so most of you men going to lose out because you can't live till 85 years old or more! 

And the above figures show that you are better off choosing the CPF Life Basic Plan than Standard Plan !!!

What about women?  Does CPF Life Standard Plan or the Basic Plan give better payout for women?    
I will try to answer this in a future post.

Introducing Corning (GLW)

Corning is a rather strange company - strange in that most of the people in the world are using their products, and yet most have never heard of "Corning"! 

Regardless of whether you are using an iPhone, an iPad, a Samsung smartphone, or Samsung tablet, all uses a Corning product, called Gorilla Glass.  Corning basically has a big chunk of the market in the glasses for smartphones and tablets!  Not only that, it also has a growing optical fibre networking and life science business.  

Company Profile:
Corning Incorporated (US stock quote GLW) manufactures and sells specialty glasses, ceramics, and related materials worldwide. The company operates through five segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, and Life Sciences. The Display Technologies segment manufactures glass substrates for active matrix liquid crystal displays (LCDs) that are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. The Optical Communications segment manufactures optical fiber and cable, and hardware and equipment products comprising cable assemblies, fiber optic hardware and connectors, optical components and couplers, closures, network interface devices, and other accessories. The Environmental Technologies segment manufactures ceramic substrates and filter products for emissions control in mobile and stationary, and gasoline and diesel applications. The Specialty Materials segment manufactures products that provide approximately 150 material formulations for glass, glass ceramics, and fluoride crystals. The Life Sciences segment develops, manufactures, and supplies scientific laboratory products, such as general labware and equipment, as well as specialty surfaces, media, and reagents for cell culture research, bioprocessing, genomics, drug discovery, microbiology, and chemistry. This segment also develops and produces various technologies, including the Corning Epic technology for screening; the Corning HYPER platform of vessels for cell yields; Corning Microcarriers for cell scale-up, therapy, and vaccine applications; Corning CellBIND, Matrigel, BioCoat, and Synthemax II surfaces; and Corning stemgro media. Corning Incorporated has strategic collaboration agreement with World Kitchen, LLC.

Financials & Outlook:
Last traded = US$20.92
Market Capital = US$27.02
Current P/E = 23.18
P/S = 3.03
Dividend Yield = 1.94%
Beta = 1.63
Debt/Equity    = 0.19
P/B    = 1.38
P/Cash = 4.52
P/FCF = 10.15
ROE    = 6.1%
Profit Margin = 14.3%
Div Payout ratio = 44.4%

The technicals show strong support at about US$14 (BUT doesn't mean the stock will fall to this price). 

News: S&P500 index just passed 2,000 mark!

S&P500 index just passed 2,000 mark!
If this 2,000 level can be sustained, there is still more room for gain for some selected stocks! 

CPF Life annuity payout - Difference between men and women

Recently, I saw on newspapers that according to WHO, Singapore's women can expect to live to 85 years old and men to the age of 80. (and not 86 years old that I quoted previously). 

Because the average lifespan of women are expected to be longer, hence their CPF Life annuity payout is expected to be lower per month, and you can see the difference from the table I have attached below:

 

 

Does the CPF Life Standard Plan or the Basic Plan give better payout for men?  

Does the CPF Life Standard Plan or the Basic Plan give better payout for women?  

I am now trying to make calculations to assess this... Stay tuned! 

 

Introducing ManuLife (MFC)

Company Profile:
Manulife Financial Corporation (US stock quote MFC), together with its subsidiaries, provides financial protection and wealth management products and services to individual, corporate, and business customers primarily in Asia, Canada, and the United States.

It offers various individual life insurance, and individual and group long-term care insurance products, which are distributed through various distribution channels, including insurance agents, brokers, banks, financial planners, and direct marketing. The company also offers annuities, pension contracts, and mutual fund products and services; various retirement products to group benefit plans; banking products and services comprising deposit and credit products to Canadian customers; and non-guaranteed, partially guaranteed, and fully guaranteed investment options through general and separate account products. These products are distributed through distribution channels comprising insurance agents and brokers affiliated with the company, securities brokerage firms, financial planners, pension plan sponsors, pension plan consultants, and banks.

In addition, the company is involved in asset management, property and casualty reinsurance, and run-off reinsurance operations, including variable annuities, and accident and health. Further, it invests in commercial properties, which are leased to third parties.

Financials & Outlook:
Last traded = US$19.98
Market Capital = US$37.12B
Current P/E = 12.40
P/S = 1.03
Dividend Yield = 2.40%
Beta = 1.94

Debt/Equity = 0.31
P/B = 1.46
P/Cash = 2.89
P/FCF = 5.38
ROE = 15.00%
Profit Margin = 9.80%
Div Payout ratio = 24.20%

The technicals show strong support at about US$12 (BUT doesn't mean the stock will fall to this price).

This stock will benefit greatly once US Fed increases Fed fund rate.
I rate it a buy at current price.

To become rich, never ever buy lucky draws like TOTO, 4D etc!

This time, I am trying to bring the idea across that to become rich, never ever buy lucky draws like TOTO, 4D etc!
If you are not rich and the more you gamble or buy lucky draw, the poorer you will be!
Many people just don't understand why!

Ok, somebody will surely ask me (just like my friends), isn't your trading of futures a form of "gambling"?
Isn't your so-called investment in stocks etc also a form of "gambling"?
Oh well, this is a difficult question to answer unless you know the difference!

Let me try to explain in layman terms:

1) When you trade futures - What is your chance of winning?
Here, to certain extend, you can control the chance of the winning outcome, at least after you learnt some skills and knowledge they will help you to increase your chance of winning.
You can increase your probability of winning, so to speak.
Good traders can achieve 7-8 profitable traders out of 10, which is a winning rate of 70-80%.

2) When you gamble and buy luck draws like TOTOs, 4D - What is your chance of winning?
When you buy 4D, your chance of winning is 1 / 10,000 = 0.01%
When you buy TOTO, your chance of winning is 1 / (42 x 41 x 40 x 39 x 38 x 37 ) = 0.00000002648% !!!!!! (which is why TOTO can afford to pay you so much much more when you win than 4D and still rack in BIG PROFITS!!)
And the "best" (to Singapore Pool obviously) part of all is that: You could not have any influence in the outcome to be in your favour!!!!

To me, anything is "gambling" as long as you could not have any influence in the outcome to be in your favour and you are unable to increase the chance / probability of winning!

What do you think?
What is your definition of "gambling"?

News: Singapore ranks world No. 4 for life expectancy

" SINGAPORE has the fourth-best life expectancy rate in the world, latest World Health Organisation (WHO) figures reveal.

Average life expectancy at birth stood at 82 years in 2011, making it a joint fourth with Italy.

Women here can expect to live to 85 and men to the age of 80.

The top three countries were Japan - which has a female life expectancy of 86 and a male life expectancy of 82 - Switzerland and San Marino.  "

- See more for the details at this URL...
http://www.straitstimes.com/breaking-news/singapore/story/singapore-ranks-world-no-4-life-expectancy-20130527

My main purpose of finding the Singaporean's life expectancy is to poke around CPF Life annuity payout calculations and to estimate their assumed returns, and also which CPF Life plan is more worthwhile: Standard Plan or Basic Plan, which I will reveal in future post.  

News: Brazilian Embassy casts doubt on authenticity of EcoHouse letters

More bad news for investors who invested into the properties under construction in Brazil by EcoHouse.

Just to summarize:

* EcoHouse insisted that it has official links with a federal housing programme in Brazil and a state-owned bank.

* But, the Brazilian Embassy here questioned the authenticity and relevance of the papers, and asked EcoHouse to furnish proof of its links to the Brazilian government (as EcoHouse claimed).

* " One disgruntled investor, Mr Brijesh Vora, 37, who came forward after reading TODAY’s reports, said he recently received notification that the project which he had ploughed money into last year will be delayed by about six months to a year, due to reasons such as slow and poor construction work. He added that he had invested in several units.
Various media reports have put the number of Singapore investors in EcoHouse projects at between 800 and 1,500.
Up to S$70 million had reportedly been put into three housing projects. Reports have been filed against EcoHouse with the police and the Commercial Affairs Department. "

You can read the full details at this URL...

News: UK's boss-worker wage gap widens to 143x

Today, this article in Business Times titled "UK's boss-worker wage gap widens" caught my attention, parts of which I extracted as follow:

" [LONDON] The heads of Britain's largest companies earned 143 times as much as their average employee last year, a study said, exposing the growing pay gap between bosses and workers.

The wage divide has nearly tripled since 1998, when the average chief executive of firms in the FTSE 100 earned 47 times as much as staff, the report found.

"When bosses make hundreds of times as much money as the rest of the workforce, it creates a deep sense of unfairness," said Deborah Hargreaves, director of the High Pay Centre think-tank, which wrote the report. "

You can read the full details at this URL...

Any thoughts on the situation in Singapore?

Good trader only has 7-8 profitable trades out of 10

I would like to caution people reading my blog that while it seems easy to make a lot of money trading futures based on leverage, it is also just as easy to lose money.

My blog is not about "get rich quick" secrets because in real life there isn't any, but if you learn the necessary knowledge and skills of which I am sharing in my blog, you will be able to make reasonably good money from investment and trading (better than sloughing on a salary)....

To hammer back this point, I will show you a losing day.  Still, if you master the trading trade well, you would be able to hit 7-8 profitable trades out of 10, and the sum of profits is much greater than the sum of losses........

Introducing BYD (1211), alternative to Tesla (TSLA)

Company Profile: 
BYD COMPANY LIMITED (HK stock quote 1211) is principally engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries and mobile phone components. The Company operates its businesses primarily through automobile business, which provides automobiles, including G6, S6 and other series; secondary rechargeable battery business, which provides lithium-ion batteries and nickel batteries, which are applied in mobile phones, digital cameras, electric tools, electric toys and other portable electronic devices, as well as mobile phone components and assembly businesses, which offers casings, keypads, liquid crystal display (LCD) modules, cameras, flexible circuit boards, chargers, and mobile phone design and assembly services. The Company operates its business within domestic market and in overseas markets.  BYD's subsidiary, BYD Auto, sold a total of 506,189 passenger cars in China in 2013, making it the tenth largest selling brand and the largest selling Chinese brand.

The company's main focus of business is now in manufacture automobiles, particularly of electric vehicles, like Tesla (US stock quote TSLA) of US, and has currently many pilot and trial runs going on.  We should see more of these turning into actual sales contracts for BYD's electric vehicles.  

Financials & Outlook: 
Last traded = HK$52.45
Market Capital = HK$127.63B
Current P/E = 180
P/S = 5.65
Dividend Yield = 0.14%
The technicals show strong support at about HK$38.

For this I am actually neutral at current price, watching closely...

However, for people who are interested in Tesla (TSLA), they may want to consider BYD (1211) as an alternative to TSLA and with cheaper valuation.  A consolation and companion for you in buying BYD is that Warren Buffett, the legendary and famous investor in the World, has 10% investment in this company through his investment vehicle Berkshire Hathaway.

Read NEWS with eyes wide open and brain functioning!-(2)

Can't help but to raise this issue again: Please Read NEWS with eyes wide open and brain functioning!

It is really hilarious to see news reported of some issues or some comments that doesn't make sense, and yet appear in newspapers as though they are facts!  This time, I am referring to a Channel News Asia article with title: "Experts optimistic about take-up rate of buyback scheme", you can read the details at this URL...

The part I am referring to are as follow:

" Property analysts have welcomed the extension of the Enhanced Lease Buyback Scheme to four-room flats, noting that the option to unlock value from their dearest asset would now be available to close to 60 per cent of the population.
...
He also felt there was no need to extend the scheme to owners of five-room or bigger flats. “They can always downgrade. They also have more rooms to lease out for additional income,” he said. "


Comments:
* If 5-room flat owners can always downgrade, the same is also true of 4-room flat owners, why disadvantage against 5-room flats' owners?

* HDB 5-room flats also only have 3 bedrooms, and are no different in term of number of bedrooms compared to 4-room flats!  So, if 5-room HDB flat owners can lease out their rooms for additional income, the same is also true for 4-room HDB flat owners which also have the same number of bedrooms.  So, why there is no need to extend the scheme to owners of 5-room flats when 5-room flats are just like 4-room flats (except with an additional dining room)?!

PM's National Day Rally speech - Lease Buyback Scheme & New Silver Support Scheme & CPF changes

The Prime Minister's National Day Rally speech looks like a welcome to those silver hairs generation who have little cash on hand but with a HDB flats as an asset.  I extracted some relevant portions from the news:

------------------
Lease Buyback Scheme extended to 4-room flats: 

"CPF members can count their homes in the Minimum Sum, meaning they need to set aside just half of it in cash, which works out to S$77,500. Mr Lee conducted a poll of the audience at the Rally using an example of a fictitious couple Mr and Mrs Tan.

"I ask Mr Tan - how much do you think you will need in retirement every month?" Mr Lee said. "What do you think? S$3,000 per month? That's about two-thirds what he is getting now. S$2,000 per month - less than half what he is getting now? Or S$1,000 per month?" 

The majority picked S$2,000 a month. Mr Lee said this means the Tans will need S$250,000 for their retirement needs - which is more than the Minimum Sum. And if Mr and Mrs Tan pledged their home, the amount of S$77,500 kept in their CPF account would only give them S$600 a month. They would then need to find other sources of income to plug the shortfall.

Mr Lee said there are options to achieve this, including continuing to work, getting support from their children, tapping on savings or getting money of out their house.

For example, he could rent out a room for S$700 a month, or move in with his children and rent out the entire flat for S$2,500 a month.

"The third thing you could do is to 'right-size': sell this flat and buy a smaller flat. Let's say you buy a studio apartment, you move into the studio apartment and then in the process, you can enjoy a silver housing bonus from the Government which is S$20,000. We can do the sums, you get quite a lot of money - S$210,000, plus S$800 per month," explained Mr Lee.

Another option is the Lease Buyback Scheme, which will be extended to 4-room flats. In Mr Tan's case - if he sells the remaining lease of 35 years to HDB - he will receive a lump sum of S$27,500 in cash, plus S$900 per month.

The Lease Buyback Scheme currently covers 3-room flats and below. Mr Lee says that extending it to 4-room flats will cover more than half of all flat owners in Singapore.  "

------------------
PM Lee's National Day Rally Speech - Overview: 

" Singapore Prime Minister Lee Hsien Loong has highlighted the need for economic growth and a cultural change to help all Singaporeans achieve their potential. Speaking at the National Day Rally on Sunday (Aug 17) evening, Mr Lee outlined how Singaporeans can attain success through different routes, regardless of their academic qualifications. To help the older generation of Singaporeans, Mr Lee also announced policy enhancements to the national savings scheme.

Mr Lee also gave more assurance that older Singaporeans would be provided for after they are retired. He said the national savings scheme - the Central Provident Fund (CPF) - has served Singaporeans well. "It works well for most Singaporeans, but not quite for all, especially the lower income. Also it is not quite flexible enough, and I think we can and should improve the scheme further," Mr Lee said.

A new scheme for low-income elderly Singaporeans called Silver Support will be introduced. Low-income seniors will receive an annual bonus from the Government, starting from age 65, to help with living expenses.

Singaporeans could soon also have the option to take out part of their CPF savings in a lump sum when they need to, subject to limits. Mr Lee also said the CPF Minimum Sum will be raised to S$161,000 next year, but added that he did not see the need for further major increases in the Minimum Sum beyond that.

In closing, Mr Lee urged Singaporeans to be the pioneers of their own generation in the next 50 years and beyond.   "

------------------
You can read the full details at this URL and this URL...

Comments:
In the example quoted by Mr Lee, he said Mr Tan says he need $2000 a month for retirement as this is less than half his salary.  However, I feel Mr Tan's figure should be referring to his household expenses with his wife and not him alone?  This is because if we take 1 person's salary, then we  also know that about 70-80% of Singaporeans don't earn more than $4000 per month individually, so taking an income of somebody who earns above the 70-80% percentile is not a good example.  We should be taking the bottom 20th percentile which should be about $1,500 per month salary.
Remember, CPF Life is meant for basic living, the bottom 20th percentile living expenses (below 20th percentile the government is helping them through subsidies), not the top 70-80th percentile living expenses.

Potash (POT) - for long-term "food" future

Company Profile: 
Potash Corporation of Saskatchewan Inc. (US stock quote POT), together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. It mines and produces potash, which is primarily used as fertilizer. The company also offers solid and liquid phosphate fertilizers; animal feed supplements; purified phosphoric acid, which is used in food products and industrial processes; hydrofluosilicic acid; and silicon tetrafluoride. In addition, it produces nitrogen fertilizers and nitrogen feed, as well as industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate, and nitric acid.

The company owns and operates five potash mines in Saskatchewan and one potash mine in New Brunswick. It holds the right to mine 769,260 acres of land in Saskatchewan; and 58,263 acres of land in New Brunswick in Canada. The company sells its fertilizers to retailers, dealers, cooperatives, distributors, and other fertilizer producers, as well as industrial products primarily to chemical product manufacturers.

Potash is the world's largest producer of potash and the third-largest producer of phosphates and nitrogen. Its production facilities are among the lowest-cost potash operations in the world.  Fertilizers are essential for obtaining higher yield from food crops.

Financials & Outlook: 
Last traded = US$35.02
Market Capital = US$29.04B
Current P/E = 19.35
P/S = 4.77
Dividend Yield = 3.6%
Beta = 1.03
The technicals show strong support at about US$30.

I rate it a buy at current price.

Property News: Developers hard-pressed to price projects modestly

Another private property news, see Business Times URL for details:

I extract some relevant part as below:

" LATEST official statistics showed that developers' housing sales continued to languish last month, but the focus now is on the likely launches for the rest of the year and how much room developers have to price them attractively to get potential buyers into making a commitment.

Many developers paid high prices for 99-year private housing sites at state tenders in the past couple of years as they sought to replenish land following strong home sales at the time.

"Those with a high breakeven cost but who need to launch a project are likely to adopt a "Star Buy" strategy for inferior stacks of units in the development to draw out initial take-up to drive confidence in the launch," a seasoned developer told BT yesterday.

"But even those who paid high land prices and left with less room for price adjustment may be willing to lower their price expectations. This could enable them to clear some units and generate cash flow - rather than maintaining the status quo and doing nothing as market conditions deteriorate further."

There will be heightened competition for buyers as more property launches are expected by developers who had bought residential land after December 2011. These developers are required to complete the projects and sell all units within five years, otherwise they would have to pay a hefty additional buyer's stamp duty on the land price with interest, Ms Chia noted.

"This goes to show that developers can revive sales at existing launches with meaningful price cuts. What remains to be seen, however, is whether this will result in a price war, which could be triggered, for instance, if one player were to sharply cut prices relative to other projects in the vicinity." "

From my past experience, when developers need to cut prices to move sales, they will always incorporate the strategy of cutting materials, construction, workmanship, and furnishing costs to bone, ending up with very inferior quality products!

More on Staples (SPLS)

Company Profile:
Staples, Inc., together with its subsidiaries, operates office products superstores. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. The company offers a range of office supplies, business technology products and services, facility and breakroom supplies, computers and mobility products, and office furniture under the Staples, Quill, and other proprietary brands. It also provides copy and print services to retail and delivery customers, as well as technology services through its EasyTech business. The company sells and delivers office products and services directly to businesses and consumers through its Staples.com and Quill.com Websites, as well as through retail stores, contract sales force, and direct mail catalog business. As of March 7, 2014, it operated approximately 2,200 stores worldwide.

Financials & Outlook of SPLS:
Last traded = US$11.49
Market Capital = US$7.43B
Current P/E = 13.86
P/S = 0.33
Dividend Yield = 4.3%
Beta = 1.62
The technicals show strong support at US$10.90.

I rate it a buy at current price.

To become rich, save more and spend less on your income!

It is actually quite possible for any ordinary person earning a very average salary to be able retire early - the secret is "save more spend less"!

Just give a very simple example:
Gross Median household income from work of employed residents (excluding non-employed and retiree) in Singapore is S$7,870 per month in 2013.
Note that this figure for Household income from work includes employer Central Provident Fund (CPF) contributions.

I can't find latest figure on household expenditures, but in 2007 the household expenditures of those household with income of $7000-$7999 is $4685 per month.  Assuming inflation of 3% from 2007 to 2013, let's assume the expenditure is $5,594 per month in 2013.

That means the median household can save $2,276 per month.
Let's assume the household maintain this savings for 30 years, and they are able to obtain 5% return per year.
At the end of 30 years, they would have: $1.894m !!!
You would ask: "Is your calculator faulty?", "Did you make a mistake in the calculation?"
Well, the answer is: NO!
You see $1.894m is because of the power of compounding return at 5% !
Thus, as you can see, your return need not be large over a long-term of say 30 years, you just need 5% compounded return or more!

BUT: Assuming you obtain low returns, or worse, you obtain 0% return, then at the end of 30 years, you would only have: $819,360.

How scam operates (their typical modus operandi)

As investor, we seek to earn higher returns from our capital investments.
However, there is also another very important aspect that investor must do:
*** Minimize your risks and probability of losses.

As investor, when assessing potential investments, be very very aware of "get rick quick" scheme!  These are typically "scam"!

How to smell that the touted investment is likely a scam?
They usually have these following characteristics:

- Promising high fixed returns (like 20% or more) over some fixed period or extended period of time.

- Low investment capital (small bit-size) so that it is easier to lure the general population and lower-middle class investors who are also typically not so investment-savy.

- Usually involves investment of things like properties, farms, and factories under construction, or just paper-promise of owning some valuable assets like gold from them (these things are not physically there and will not be there ultimately!).

- Will try to claim to be affiliated with some reputable bodies (actually they don't) so that you will have more trust to "invest" with them.

- At the start of their game, they may usually do real large payout to early investors so that these people will go around spreading news to increase their "business" but really the money are from their later "investors" to pay off the earlier "investors" (and not because their operate genuine business that are generating large profits!).

The Peril of buying overseas properties

Today, there is a news that reminds us the peril of buying overseas properties (yet again!), this time is EcoHouse.  The news title read: "Brazil denies links with property firm EcoHouse".

In summary, this is what is all about:
- 1,500 investors here reportedly poured S$70m into Brazil housing projects linked to UK-based company EcoHouse.

- EcoHouse is a property developer claiming to be working with the Brazilian government on a social housing programme.

- Yesterday, the Brazilian Embassy said that its government had no dealings with the company EcoHouse.

- EcoHouse, which has abruptly shut down its Suntec offices, is neither affiliated with the Brazilian national housing programme nor registered as a partner of its state-owned bank.

- Some investors have begun legal action against EcoHouse to recover their capital investments, which amounted to a minimum of £23,000 (S$47,810) per unit.

- EcoHouse had promised a 20 per cent fixed rate of return for a 12-month investment contract, but many investors said they have not received their returns or their capital despite their contracts reaching maturity.

- The company was recently put on the Monetary Authority of Singapore’s (MAS) Investor Alert List, which lists unregulated companies that may have been wrongly perceived as being licensed or authorised by the MAS.

- Reports have been filed against the company with the police and the Commercial Affairs Department (CAD). On whether EcoHouse is under probe, a CAD spokesman would only say: “It is inappropriate to comment on police investigations, if any.”

- In response to TODAY’s queries sent on Tuesday, EcoHouse chief operations officer Deen Bissessar said yesterday that the closure of its offices in Suntec Tower 2 was part of measures to “consolidate into our Brazil operation and managing global affairs from our global headquarters in London”.

- For companies regulated by the MAS, investors could seek redress at the Financial Industry Disputes Resolution Centre. However, such a recourse is not available for EcoHouse investors.

- Consumer watchdog CASE advised consumers to be mindful of the high risk involved when investing in overseas properties.  CASE executive director Seah Seng Choon pointed out that the laws in other countries are different from Singapore’s and investors may not enjoy the same degree of protection. “Seeking redress in the event of dispute can be cumbersome and in most cases consumers are not able to get their money back,” he said.

You can read the full details at this URL.

I am sure this is definitely NOT the first time and will not be the last!
So, investors better keep their eyes wide open!
Singaporeans are so used to the strong safety, security, and protection measures of investing and doing businesses in Singapore that they have forgotten about all these when dealing with overseas investment and businesses!

Interesting information on private property prices

Today's Business Times has an article on OCR and CCR private residential properties' largest gains and largest losses, you can see at this URL:


I find the information very interesting, and I just summarize below:
(1) For CCR biggest absolute quantum gain, the % gain are: 35, 23, 15, 22, 9. (Average = +20.8%).

(2) For CCR biggest absolute quantum loss, the % loss are: -21, -7, -13, -23, -23. (Average = -17.4%).

(3) For OCR biggest absolute quantum gain, the % gain are: 54, 46, 41, 47, 40 (Average = +45.6%).

(4) For OCR biggest absolute quantum loss, the % loss are: -11, -4, -1, -0.3 (Average = -4.075%).

So, the above correlates with what I observed and mentioned previously that CCR private properties have risen the least and dropped the most, while OCR private properties have risen the most and dropped the least as of now!

What if CPF Life annuity payout is based on assuming a 5% return?

Ok, let's be realistic that this is a hypothetical exercise because it is unlikely that anybody would pay you 5% return without taking any risk!
Still, let's just do the exercise (assuming you are willing to take some risk to get higher return)...

Assume your original capital at 65 years old = $240,450.
Assume no bequest, dead At 86 years old (i.e. you live for 21 years thereafter from 65 years old).
Expected payout period in years    = 21
Rate (Annualized) p.a.                  = 5%
Payment per month                       = $1,543

Now, $1,543 per month is actual not bad for 1 person to live on!
Don't forget, median household expenses is about $5,594 per month and that is for about 4 people's expenses (assuming there is 4 people in 1 household)!

Divide $5594 by 4 means the average monthly expenses per person in the 4-people household is about $1398.50, less than the hypothetical 5% return CPF Life annuity payout!

Startling facts about Singaporean incomes

I am rather surprised to see below news about CPF today, obtained from Channel News Asia -> URL:

 "More than half of workers reaching 55 years of age are not able to achieve the Minimum Sum - the amount needed to give them a regular income upon retirement at 65 - even after they pledge their property value. Less than 30 per cent are able to meet the Minimum Sum entirely in cash."

 Now, less than 30% of Singaporeans are able to meet the CPF Minimum Sum of S$155,000 entirely in cash!  If so, why need to keep increasing CPF Minimum Sum since so few people can achieve it?

Why Singaporeans must go holidays overseas at least once or more a year?

Soon, it will be end of the year School holidays period again. I am starting to receive brochures, flyers etc touting overseas holidays tours. I then remembered a foreigner friend ever asking me: "Why Singaporeans must go holidays overseas at least once or more a year?", "Is there no place in Singapore worth spending your free time in for a few days?" I was basically dumb-founded and I have no answer to this question.

Housing loan calculator online

Please click on this highlighted link -> Property loan calculator online
to go to the property loan calculator online page...

1 CCR properties I eyeing, price down almost 25% already !!!

In an earlier post on property prices, I mentioned that:

"Similar transacted price trends can be seen for most other properties in the OCR and CCR neighbourhood whereby there is very little price increase for CCR properties bought in 2009 and now, while there is a huge increase of almost 85% or more for OCR properties.
You will be even more confused if you know that during the 2007 property price peak, similar OCR property was only transacted at about $700 psf while similar CCR property was transacted at >$2500 psf! "

I would like to elaborate further, again poking hole at the Channel News Asia's news article that says:
"Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says."

Actually, when I look at 1 of the CCR properties I am eyeing, the unit had transacted at about $1500 psf in 2009, went up to about $2800 in 2011, and it was NOW down to about $2100 or a drop of about 25% !!!

In Singapore, generally we regarded a property price drop of >20% as having considered that property price has crashed, and that is it - CCR property prices have already crashed!

However, when I look at OCR properties in general, they don't seem to have gone down at all!  In fact, the unit had transacted at about $450 psf in 2009, went up to about $900+ in 2011, and went up further to >$1000 NOW !!!

These general trends are true for other properties in CCR and OCR neighbourhood, so much so for "have declined by just 3.3% over last 3 quarters" according to the news article!

Does the above give you the impression that such lobe-sided effects could be because the implemented property cooling measures are pretty lobe-sided as well?

So, if you are truly rich and can hold for long-term, time to cherry pick CCR properties!

Main secrets to making a lot of money - "Leverage"!

My blog is about make / making money secrets, so time to cover this main topic:

To people who are interest in the secrets to making a lot of money, especially if you have only small limited capital to start with, I can sum up for you, very simple, and it is just 1 word: "Leverage"!

Trading futures by itself is based on "leverage" (if you understand the principle of the "futures" financial instrument).

In fact, many Singaporeans have knowingly or unknowingly been using "leverage" in their favourite investment: property!

Property investment is an investment that is fundamentally based on "leverage", because there is basically no other asset / financial instrument where you can get 80% loan from banks on the cheap!  (Property mortgage loan is the cheapest form of bank loan available anywhere in the world compared to renovation loan, personal loan, business loan, etc!).

Trading futures is also by itself based on "leverage", because for each US$1 position you opened (be it "long" or "short"), you are controlling about $20 position!
That is to say, when you open a $50,000 position, you are exposed to $1,000,000 ($1 MILLION) opened position and hence market risk!

Europe stock markets outlook don't look good

"The Euro has weakened against the US dollar on Tuesday (Aug 12) as investors weighed a plunge in investor confidence to a 20-month low in Germany, Europe's largest economy", see:
http://www.channelnewsasia.com/news/business/international/euro-falls-after-weak/1309144.html

This doesn't bode well for Europe stock prices!  

Read NEWS with eyes wide open and brain functioning!

On 24 July 2014, we saw NEWS on Channel News Asia with headline news like this:
"‘Too early’ to ease property cooling measures: MAS"

The news article then continues to say:
"Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says."

You can read the full details at this URL.

There is no doubt that the above is true in the overall sense, but only on face value.
If you delve deeper into the overall conclusion, you will find that the conclusion is NOT true of Singapore properties in certain specific localities, mainly the Core Central Region or CCR (i.e. the urban city area).

Since they said "Property prices risen 60% over last 4 years", I will look at the property prices from 2009 - 2014 now specifically in different locations, E.g.:

1) In 2009, a 1367 sqft 99-years leasehold property in Outside Core Region (OCR) or suburb, Sengkang, was transacted at about $500 psf.
In 2014 Jun, the property was transacted at $929 psf.  This is a gain of 85.8%.

2) In 2009, a 2293 freehold sqft property in Core Central Region or urban city in Orchard, was transacted at $1153 psf.
In 2014 July, the property was transacted at $1168 psf.  This is a gain of only 1.3% (after about 5 years!).

Similar transacted price trends can be seen for most other properties in the OCR and CCR neighbourhood whereby there is very little price increase for CCR properties bought in 2009 and now, while there is a huge increase of almost 85% or more for OCR properties.

You will be even more confused if you know that during the 2007 property price peak, similar OCR property was only transacted at about $700 psf while similar CCR property was transacted at >$2500 psf!

Thus, we can see that statement that the private property prices have risen 60% over last 4 years is a serious under-statement for OCR property prices AND yet a serious over-statement for CCR property prices.  This is despite of the so many cooling measures and the most recent most damning ABSD and TDSR.

On the other hand, we can see that the biggest bargain to be had right now is the CCR private residential properties (vs historical prices)!
However, I also note that despite of this fact, most ordinary Singaporeans can't afford such CCR properties, rendering them no choice but to buy "expensive" OCR properties that are "more affordable" to them.  The truly rich are having their big cherry to picks (other than having to pay ABSD)! These CCR properties are mostly fire-sale by those owners who are not rich and are now in need of money, partially also squeezed by TDSR and inability to re-finance at a better terms and rate etc.

For exposure to China, try CSOP FTSE China A50 ETF index fund (2822.HK)

For those interested to equities / stocks exposure to China, you may want to look at CSOP FTSE China A50 ETF index fund (HK stock quote 2822.HK).  This is an exchange traded fund listed on Hong Kong Stock Exchange (HKSE).  As of now, the last transacted price is HK$9.64.

CSOP FTSE China A50 ETF index fund seeks to track the performance of the FTSE China A50 Index. The Fund invests most of its total assets in the equities of member companies of the FTSE China A50 Index. This is a RQFII fund.  Note that this fund holds the physical shares of the listed companies included in the FTSE China A50 Index (and hence is not a synthetic ETF index fund which only has derivatives exposure to the companies included in FTSE China A50 Index).

You must take special note that CSOP FTSE China A50 ETF is the first physical ETF based on the FTSE China A50 Index and offers investors the most direct channel for participation in the China blue-chip market.

The FTSE China A50 Index represents the 50 largest A-Share companies listed on Shanghai and Shenzhen Stock Exchanges and is tracked by both domestic investors and internationally through a range of QFII investment portfolios.

CSOP A50 ETF index fund is different from iShares FTSE A50 China Index ETF index fund (HK stock quote 2823.HK).  The latter is another popular A50 ETF index fund also traded on the HKSE, but this is a synthetic ETF index fund that also tracks FTSE China A50 Index.

You want to make profit of S$8542 in a day from trading?

Is it possible to make net profits over a long-term from trading?
Well, it is possible, provided you learnt the skills.

Continue from my previous post on large profits from futures trading, I show another screenshot of one of my future trades statement (see below), with a profit of EUR2425 + US$3625 (about S$8542) in 1 day.  This is my trade on US S&P 500 stock index futures (the e-mini S&P) and the Germany's DAX stock index futures (FDAX).

For those who have no experience in trading and are tempted to jump straight into trading of futures etc because of my posts on large profits, please stop!
Nobody can make large profits from trading without first learning the hard way and paying some "school-fees"!  Learn the skills first and then thereafter start small!

What is the outlook of Staples (US stock symbol SPLS) now at US$11.45

Since I mentioned Staples (US stock symbol SPLS) previously a few days ago which was at US$11.18, it is now trading at US$11.45.  For those reading my post, sorry that I didn't get the time to put all the facts together to write a detail analysis.  However, I would just like to summarize that I believe Staples (SPLS) at about current price is worth a go at it.  I believe the worst is probably over.  There is no guarantee that it will not drop further, but the scope of drop is likely to be quite limited (in my view), while the potential for upside is significantly higher than dropping.  

Financial Planning v2 (version 2)

The other day I shared about Financial planning theory in a short summary, but I then realized I missed out the most important part that I stressed in my maiden post - Protection!  Yes, Protection through insurance!

So, I updated the Financial planning theory v2 here it goes:

1) When you earn from your job, spend less and save more.

2) When you have income, you want to protect your income because you are the only money-earning "machine", hence the need for sufficient insurance!  (Many kinds to cater for different scenarios, will cover this in future).

3) Make your savings work hard for you via investment.

4) Hopefully by 55 years old (or even earlier), your capital has grown big enough that this capital is self-sustainable to generate sufficient passive income that is sufficient for your living expenses and you don't have to rely on income from work! (This is similar to annuity but I am never a fan of annuity because their returns are just all too low!)

You want to make large profit of US$2,200 in a day from trading?

The other day, I shared with my friend my large profit from trading futures.  You can see the attached a screenshot of one of my future trades statement, with a profit of US$2,200 in 1 day (or about S$2750).  This is my trade on S&P 500 stock index futures (the e-mini S&P).

Trading futures is 1 of the secret of the "get rich quick" (with disclaimer!) way of making large profits!  However, if you can make as much, you may also lose as much!

From what I know, traders who are experienced and really good in their trade can make money from trading, but the psychological stress is very high!  Many would choose to give up and take life easier once they have earned enough instead of continuing to play the high-risk highly leveraged trading game or they will wind down and do smaller trades to reduce their risks.  Anyway, when a person is poor, there is nothing much to lose (other than declaring bankrupt), so some people think it is worth a shot at it.

Financial Planning - theory very simple, execution to achieve goal damn difficult!

Financial planning theory is very simple, yet the execution to achieve the goal is damn difficult!

The ultimate goal of financial planning is to be able to retire (retire early hopefully) and smell the roses with passive income to cover your living costs (may include draw-down of your capital but you hope it can last until you "go"!).

Financial planning theory here it goes:
1) When you earn from your job, spend less and save more.
2) Make your savings work hard for you via investment.
3) Hopefully by 55 years old (or even earlier), your capital has grown big enough that this capital is self-sustainable to generate sufficient passive income that is sufficient for your living expenses and you don't have to rely on income from work!

CPF Life annuity payout is low

Recently, there have been a lot of buzz regarding Singapore's CPF Life, a form similar to pension plan in other countries.  The issues started from the ever increasing CPF Life's min sum (from $80,000 in 2003 to $155,000 in 2014) that people need to lock up in their CPF when they reach 55 years old.  

Below are certain issues that came out of my discussion with my friends.  

Just for background, CPF Life is administered by a Singapore government statutory board called CPF or Central Provident Fund Board.  CPF Life is also similar to annuity scheme sold by insurance companies in Singapore, in that you pay some money every month and at a fixed age some time later (in the case of CPF Life is when you are 65 years old), you start to receive annuity payout until you die.  However, CPF scheme is much more complicated than that.  Any way, to summarize, Singaporean workers are required to contribute about 20% of their pay to CPF every month, and employers need to co-contribute another about 15%, and these are placed into 3 accounts according to some fixed percentages, namely Ordinary Account (OA), Special Account (SA), and Medisave Account (MA).  They will contribute as long as they are working.  By the time they reach 55 years old, everyone of them who has $155,000 in OA+SA will be transferred into a Retirement Account (RA).  This sum will be held in RA under CPF Life scheme (and cannot be withdrawn) until 65 years old when by then the person can start to receive annuity payout from CPF Life scheme. 

According to current projections by CPF Board, CPF Life annuity payout for a RA sum of $155,000 will be about $1100-1223 per month.  

However, some people questioned why is this CPF Life annuity payout so low?  

To see why is this so, we can do following calculations, and we take the average payout of $1161.50 (= (1100+1223)/2) per month for our calculation: 

* CPF min sum $155,000 at 55 years old locked up with interest of 5% below $60,000 and 4% for remaining above $60,000, so total at end of 10 years at 65 years old is = $240,449.67

                             Amt below $60k           Amt $60k & above
Amount:                60,000.00                    $95,000.00
Interest:                5.00%                         4.00%
No. of Years:          10                               10
At end of 10 years: $98,820.57                   $141,629.10
Total $240,449.67

** Next come annuity payout part, to pay out $1161.50 per months mean your annuity return is only 1.93%, calculated as follow: 

No bequest - Assume Dead At 86 years old
Present value at 65 Years old      = $240,449.67
Payment per month                   = $1,161.50
Expected payout period in years = 21.00
Rate (Annualized) p.a.               = 1.93%

Now, it seems that this Government administered annuity scheme's annuity payout is even lower than annuity payout of the insurance companies in Singapore!!! 

So, therein lies another problem: Annuity payout's assumed return is low, even assuming an average person dies at 86 years old. Furthermore, CPF Life payout of this amount is not guaranteed despite giving so low return of 1.93%. Seems like people expect that a nation-wide annuity scheme should do better because of economy of scale and also the need to pay better because of the enforced scheme (i.e. you don't have the choice to opt out). 

Diversified investments

In terms of diversification of investments, I am currently invested in the financial instruments (mainly stocks) listed in these countries:
1) Singapore
2) US
3) HK (and H-shares as proxy to China)
4) Germany

I have exposure to these currencies:
1) SGD
2) USD
3) HKD
4) EURO

What is the outlook of Staples (US stock symbol SPLS)?

Staples Inc stock price (US stock quote SPLS) has crashed to historical lows, as of now at US$11.18.  Its 52-week historical high is US$17.3 and 52-week historical low is US$10.70.  What is the outlook of the SPLS stock price going forward?

Will it rise from ashes and you should buy now?

Or will it fall further and you should be aware not to catch a falling knife?

I have done some mental notes and appraisal on SPLS, but will need time to write it down here in details and with proper argument to support my judgement, stay tuned!  

What is the outlook of private residential property prices in Singapore?

Property investment seems like a favourite investment class in Singapore.  This is particularly so for private residential property prices in Singapore where there is "more free" market and can be purchased by foreigners (compared to the public HDB flats - which is restricted to citizens).  It is not difficult to see why, given that the best place to invest in properties have the following characteristics:

1) Small available land area (Singapore is just a small dot of about 700 sqm in the world!)

2) High population density (Singapore is the top most populated country in the world!)

3) High GDP per capita (Singapore has one of the highest GDP per capita in the world!)

But given the many private residential property cooling measures implemented by the Singapore government, what is the private residential property price outlook from here?

Let me make a proper summary and will get back here to let you know my view............

What is the outlook of stock market?

Arising out of sanctions by US and European Union against Russia and the hit-back by Russia against their imports, stock prices in many countries have seen a large drop.  What is the outlook of the stock market?

My view:
US stock market, using S&P500 as a guide, is expected to go beyond 2000 points by end of 2014.
However, European countries are likely to be much more affected by the tit-for-tat sanctions and perform poorer (i.e. unless ECB starts their version of Quantitative Easing (QE)!)

Insurance - Whole-life vs Investment-link vs Term + different types

Insurance policies are very varied, ranging from whole-life to Investment-link to Term-life, which is more value for money?  Which is more suitable for you?  What are the different types of insurance, such as death, permanent disability, partial disability, hospitalization, impatient etc you need?  I will try to give a summary in future post.

This is my maiden post - Protect yourself!

This is my maiden post (ha ha ha!)

Before any person ever thinks about making money, think about protection first!  Yes, life insurance!  Please buy sufficient life insurance coverage for yourself (as the bread-winner) as a gift to your family!