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!