How to become a MILLIONAIRE!

It is actually quite possible for any ordinary person earning a very average salary to become a MILLIONAIRE and retire early - the secret is "save more spend less, and earn higher return on your capital"! 

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.

Let's just assume that household expenditure is $5,594 per month. 
That means the median household can save $2,276 per month or about 29% of the income 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 for the couple or almost $1M for 1 person! 

So, you can see that it is actually quite easy to become a MILLIONAIRE in Singapore! 
But then, the next question pops up: Is $1M enough for a person to retire for 30 years (assuming the person retire at 62 years old and live till 82 years old)? 

Well, Let me try to start some number crunching based on the available statistics and inflation figures............

Introducing American International Group Inc (AIG)

Company Profile:
American International Group, Inc. (US stock quote AIG) provides insurance products and services for the commercial, institutional, and individual customers in the United States and internationally. The company operates in two segments: AIG Property Casualty, and AIG Life and Retirement. The AIG Property Casualty segment offers casualty insurance products that cover general liability, commercial automobile liability, workers' compensation, excess casualty, and crisis management insurance; industrial energy-related and commercial property insurance products, which cover exposures to man-made and natural disasters; aerospace, environmental, political risk, trade credit, surety and marine insurance products for small and medium sized enterprises; and various forms of professional liability insurance products. It also provides personal accidental and supplemental health products for individuals, employees, associations, and other organizations; and life products, as well as a range of travel insurance products and services for leisure and business travelers. This segment distributes its insurance products and services through brokers, agents, and direct marketing and partner organizations, as well as the Internet. The AIG Life and Retirement segment offers a suite of products and services to individuals and groups, including term life insurance, universal life insurance, accident and health insurance, fixed and variable group annuities, administrative and compliance services, mutual funds, and financial planning. This segment distributes its products through banks, broker-dealers, financial advisors, independent marketing organizations, insurance agents, structured settlement brokers, benefit consultants, and direct-to-consumer platforms. The company also provides private residential mortgage guaranty insurance and direct investment book services; and derivatives intermediary services.

Financials & Outlook:
Last traded = US$55.32
Market Capital = US$78.54B
Current P/E = 9.08
P/S = 1.16
Dividend Yield = 0.9%
Beta =
Quick ratio = -
Debt/Equity    = 0.36
P/B    = 0.74
P/Cash = 43.2
P/FCF = 15.04
ROE    = 8.6%
Profit Margin = 13%
Div Payout ratio = 7.4%
The technicals show strong support at about  (BUT doesn't mean the stock will fall to this price). 

AIG has come a long way since 2009 when it nearly collapsed after Lehman's crisis saved only by US government's bailout and it seemed to have recovered very nicely.   
AIG will benefit from impeding increase in Fed rate in late 2015...
As this is a very interest rate sensitive stock, any small increase in Fed rate will have big benefits to AIG. 
I would rate this as a strong buy now. 

Introducing Hartford Financial Services Group (HIG)

Company Profile:
The Hartford Financial Services Group Inc. (US stock quote HIG), through its subsidiaries, provides insurance and financial services to individual and business customers primarily in the United States and Japan. The company’s Property & Casualty Commercial segment offers workers’ compensation, property, automobile, marine, livestock, liability, and umbrella coverages, as well as customized insurance products and risk management services, including professional liability, fidelity, surety, and specialty casualty coverages. Its Consumer Markets segment provides standard automobile, homeowners, and personal umbrella coverages to individuals. The company’s Property & Casualty Other Operations segment manages property and casualty insurance. Its Group Benefits segment offers group life, accident and disability coverage, group retiree health, and voluntary benefits to employers, associations, affinity groups, and financial institutions. The company’s Mutual Funds segment provides mutual funds for retail and retirement accounts; and investment-management and administrative services, such as product design, implementation, and oversight, as well as includes the runoff of the mutual funds supporting the company's variable annuity products. This segment distributes open-end funds and 529 college savings plans to national and regional broker-dealer organizations, banks and other financial institutions, independent financial advisors, and registered investment advisors; and The Hartford’s funds to professional buyers, such as broker-dealers, consultants, record keepers, and bank trust groups.

Financials & Outlook:
Last traded = US$36.80
Market Capital = US$16.5B
Current P/E = 14.1
P/S = 0.79
Dividend Yield = 1.96%
Beta = 1.91
Quick ratio = -
Debt/Equity    = 0.31
P/B    = 0.85
P/Cash = 10.9
P/FCF = 3.24
ROE    = 3.3%
Profit Margin = 3.0%
Div Payout ratio = 42.6%

HIG will benefit from impeding increase in Fed rate in late 2015...
As this is a very interest rate sensitive stock, any small increase in Fed rate will have big benefits to HIG. 

I would rate this as a strong buy now. 

Options vs Futures as your trading instrument

Between "Options" and "Futures", I would say Futures is a better trading instrument, and easier to make money, but that could be just me because I have been able to grasp "futures" much better than "Options". 

Options just appear too complicated to me as compared to Futures.  In investing, we always have to KISS (Keep it simple stupid!) so that we can understand very well what we are getting/investing into................. 

New SGX trading rules - The issue that has yet to be tackled

Recently, SGX has came out with a slew of changes for stock trading on Singapore Stock Exchange (SGX), and you can see this news, title "New SGX trading rules: What you need to know" at this URL...

In particular, I don't see how the new rules will help the young investors and small investors, as claimed in the article:

" Board lot size reduction

What is this?
This move cuts the minimum purchase "lot" of SGX-listed securities from 1,000 to 100 units.

That means you will be able to buy just 100 DBS shares, for example, instead of having to purchase a minimum of 1,000, which is the case currently. For example, to invest in pricier blue chips like DBS, which closed at $17.92 last Friday, you would need to put up $17,920 to buy 1,000 DBS shares. But under the new rule, you can buy 100 shares for $1,792.

How does it benefit investors?
This will make blue chips and index component stocks more affordable and help investors build portfolios with a smaller capital outlay.

Young investors with typically smaller cash reserves will have a wider range of equities to choose from, while longstanding investors can diversify further into blue chips.

For example, an investor could easily build an equity portfolio by buying 100 DBS shares, 200 Keppel Corp shares, 100 Jardine C&C shares and 300 Global Logistics Properties shares - all for an investable amount of $10,000. "   

You see, 1 of the main issue that has not be raised, let alone tackled, to allow young investors and small investors to trade or even dollar-cost average every month is the high minimum commission charged by Singapore stock brokerages.  This minimum commission ranges from $25 to $35 dollars just for online trading of stocks (with no stock broker / remisier's help).  For example, if somebody is going to buy 100 DBS shares at $1,792 and pay a brokerage commission of $25, that would be 1.4% in commission! 

In order to achieve their stated aim, they have to seriously look into this high minimum commission issue....................

Introducing Devon Energy (DVN) - US marching to be an energy-independent country

For people who do not know, US will soon be an energy-independent country - That is, it does not need to import any oil & gas for its domestic needs.  In fact, they can produce more that they have capacity for exports! 

Why so?  Well, this is thanks to newer technology which have allowed extraction of natural gas and liquids and oil sands etc from what has been almost impossible or too costly to extract, and companies such as Devon Energy (US stock quote DVN) are the beneficiary of such trend...

Company Profile:
Devon Energy Corporation (US stock quote DVN), an independent energy company, is engaged primarily in the exploration, development, and production of oil, natural gas, and natural gas liquids. The company holds interests in various properties located in Anadarko Basin, Barnett Shale, Mississippian-Woodford Trend, Permian Basin, Rockies, and other regions in the United States. It also owns oil and gas properties in Canada. As of December 31, 2013, the company had 701 MMBoe of proved undeveloped reserves. It also operates approximately 24,000 wells. In addition, Devon Energy Corporation offers marketing and midstream services, such as gathering, compression, treating, processing, fractionation, and marketing services to the company and other third parties.

Financials & Outlook:
Last traded = US$75.42
Market Capital = US$30.85B
Current P/E = 18.91
P/S = 2.27
Dividend Yield = 1.27%
Beta = 1.76
Quick ratio = 0.90
Debt/Equity    = 0.58
P/B    = 1.42
P/Cash = 18.09
P/FCF = -
ROE    = 7.8%
Profit Margin = 11.9%
Div Payout ratio = 24.20%
The technicals show strong support at about US$60 (BUT doesn't mean the stock will fall to this price). 

DVN Energy started off mainly as a natural gas exploration and production company, but due to the continual suppressed prices of natural gas in US, DVN has started to explore and switch to increase production of natural gas liquids and oil from their sites, which will give them much better margins and profits.  DVN has been pretty successful up to now on pursuing this strategy and the management's effort is starting to bear fruit.   

I rate DVN as a buy. 

Dissecting TDSR (Total Debt Servicing Ratio) introduced by MAS (Monetary Authority of Singapore)

It has recently been reported in the news that there are many people whom have been unable to refinance because of the Total Debt Servicing Ratio (TDSR) that has been introduced by the Monetary Authority of Singapore (MAS).  Usually, policy implemented should not be retrospective, i.e. should not apply to people who already bought and financed their properties.  However, TDSR has affected many people retrospectively, when they needed to refinance to get out of the higher rates being charged by their banks after the lock-in period (which usually incurs much lower rates during the lock-in period). 

Not sure whether it is due to TDSR, or may be due to a combination of other property cooling measures like ABSD (reducing number of buyers significantly), the mortgagee sales (banks' forced-sold properties) advertised seem to have more than doubled after the introduction of TDSR. 

Because of the above, my curiosity was arose as to how TDSR is being computed and why suddenly so many people are affected?  So I decided to take a deep look into the TDSR components and dissect it, and have made the following discovery in the process:

1) Your free-holding S$ cash has depreciated current value in the eye of MAS, because MAS instructions to banks is to only considers 70% of your free-holding S$ cash value as the computable asset value into its TDSR calculation....

2) Somehow, free-holding foreign cash is so much more inferior to S$ cash in the eye of MAS that MAS instructions to banks is to only considers 30% of your free-holding foreign cash value  as the computable asset value into its TDSR calculation (as compared to 70% of value for S$ cash!)...

3) Even if you pledge your foreign cash to the banks,  MAS instructions to banks is to only considers 70% of your free-holding foreign cash value into its TDSR calculation (vs 100% for S$ cash).....

4) Your other free-holding financial assets (like shares, bonds, gold, unit trust holdings etc) are only worth 30% of their value according to MAS instructions to banks in calculation of TDSR.......

5) Your other financial assets (like shares, bonds, gold, unit trust holdings etc), even after you pledged to the banks for their loans, are only worth 70% of their value according to MAS instructions to banks in calculation of TDSR.......................................

I am really bewildered about all the above though, is MAS expecting foreign cash to depreciate by 40% against S$ to have such instructions to banks to consider its value at only 30% of current value vs 70% of S$ current value?  Not only is the above 40% depreciation assumption totally unrealistic (because currency won't depreciate by so much in short-term), BUT I would have expected that going forward, it is very very likely, >90% chance, that S$ will depreciate against other major currencies like US$ and hence it should be S$ cash that should have lower value than Foreign cash instead? 

Is MAS expecting other financial assets (like shares, bonds, gold, unit trust holdings etc) to depreciate >70% to give banks instructions to only consider 30% of their current market value in calculation of TDSR?  This is at a time when global economy is recovering?  Won't it be more realistic to expect further gains of such financial assets, and hence they are of more value than S$ cash on hand??? 

All the above rules for computing TDSR not only seem arbitrary to me, but also do not gel with reality, such as why free-holding foreign cash is only worth 30% of its market value while free-holding S$ cash is worth 70% of its market value in the computation of TDSR etc!!!!........................