Weekly reads - 12th December 2018: Bernie Madoff edition

Nearly 10 years ago, on 11th Dec, 2008, Bernard Madoff was arrested after his gigantic Ponzi scheme was exposed. Here are some articles to refresh our memories of what happened and what has happened since.

What happened then - an article from the Economist explaining what happened when the fraud was exposed

Timeline of events, from The Guardian

Some not-so-rich people who were hurt by the fraud. 

Some rich people who were hurt by the fraud

What did Madoff do , as explained by Harvard Business Review

Red flags that might have alerted people that its a fraud

Interview with Harry Markopolos, the man who tried to expose Madoff

10 years later, where are they now?

A surprising amount of money is recovered since the fraud was exposed

Random thoughts - Government Linked Companies, how are they doing now?

Many people, rightfully or wrongly, view Government Linked Companies (GLCs) as blue-chip and safe investments. How are they doing in these troubled times?

Let's take a look at the FSSTI since the start of the year:

So basically not so good. 

How about the GLCs listed on the Singapore Stock Exchange?

Here is a list of companies that are considered GLCs.

-comparing their prices as of today against the 52 week lows, quite a number of them are at, or quite near these levels.

-looking at the dividend yields, a number of them appear quite juicy at the 4% or more range. Do note that special dividends may have been included in the data above, skewing some of them

-2009 was the nadir of the Great Financial Crisis and many stocks plumbed all time lows during the year. Comparing the current prices against the lowest price hit during that year, 1 company stands out: SIA

-taking the average price of the various companies during 2009, we can see that a large number of them are trading near the 2009 average levels. Some of them are trading lower than the average price during 2009


So price resilience wise, the GLCs are hit by the recent market turmoil, but on the bright side, stock pickers may wish to start checking some of them out.

None of the above should be construed as investment advice. Do your own due diligence as I will not be responsible for any loss/risk.

Weekly reads - 4th November 2018: Inflation, Grand Theft Auto and more

From Forager Funds - After a decade of extraordinary monetary policy, has everybody underestimated the threat of inflation?

A short profile of Houser Brothers. The guys behind Grand Theft Auto and Red Dead Redemption

Eddie Lampert interview after the Sears bankruptcy

John Authers moves from the Financial Times to Bloomberg

Jeff Gundlach speaks

Random thoughts - After last week's bloodbath..

Just a quick check on what some market indices look like. Looks like a correction (if  not a full blown bear) is in full swing.

And some local Singapore banking stocks. 

As well as a couple of ETFs tracking the Singapore and Hong Kong market

If we use dividend yields as a rough valuation guide, by plotting a graph of the dividend yields of the 2 ETFs from 2010 to now and comparing it against the average yield from 2010 to now,  it looks like the yield at current price is going above the average yield. 


STI ETF

The STI ETF yield is approaching a high, from 2010 onwards. Its yield is about 3.75% and if the ETF price hits 2.80, meaning the STI index drops to 2800, the yield would be about 4%.


Tracker Fund of Hong Kong

The Tracker Fund is surprisingly still not at a high if we look at the yields from 2010 onwards even though it has dropped close to 25% vs the 52 week high.

I guess this is the time when everyone's fortitude is tested. In such a market, most fundamental or value investors should start hunting for bargains.

None of the above should be construed as investment advice. Do your own due diligence as I will not be responsible for any loss/risk.

Temasek Bond addendum

Have to say, this Temasek Bond seems really interesting.
A lot of people have been posting on this.

Here is the list from my previous post:
financialhorse
investmentmoats
singularitytruth
investsingaporebonds
fifthperson
thesleepydevil
mysweetretirement

6 more new postings this weekend. Just in case anyone is still trying to make up your mind about to subscribe or not to subscribe:

bedokianportfolio
singapore-ipos.blogspot.com

risknreturns

The Tale of Azrael
sgyounginvestment
sgbudgetbabe

Jumping on the bandwagon - otherwise known as my 2 cents worth on the Temasek Bonds

A lot of bloggers have opined on this. The roll so far:

financialhorse
investmentmoats
singularitytruth
investsingaporebonds
fifthperson
thesleepydevil
mysweetretirement

I won't go into details about the bonds. If you have to pick a couple from the list above to read, go with FinancialHorse and Investmentmoats for their detailed explanation.

Here are some thoughts on the Temasek Bonds, from my personal perspective.

Here's a snapshot of the current levels of some stock indices, vs their 52 week highs. Some markets have entered a bear market (Hong Kong, China) or are pretty close (Singapore).

If you are familiar with the Singapore Savings Bonds, you will also note that the yields have been rising steadily this year.

Here is a list of the average interest rates for the Nov 2017 to Nov 2018 issues. The average interest rates are based on the assumption that you hold the bonds to year 5. The rates have risen from 1.56% to 2.22%, an increase of 0.66%.

Assuming the same rate of increase continues for 1 more year, the 5 year average rate for the Nov 2019 issue could be 2.88%, beating the 2.7% rate of the Temasek bond.

Given that the bear has arrived for some markets, it makes sense to start hunting for bargains. This means I should keep my warchest in liquid assets that will keep its value until I need it.

While I am not a prognosticator of market direction, I will go out on a limb and say that we are probably in a rising interest rate environment.

When interest rate rise, bond prices fall. So there is a chance that the price of Temasek bonds may fall, if you try to sell them at a later time. Also, the market for retail bonds are supposed to be terribly illiquid, so you may not get a good price if you have to sell.

So I won't be subscribing for these bonds, since opportunities are appearing in the equities markets.

None of the above should be construed as investment advice. Do your own due diligence

Weekly reads 14 October 2018 - Sears, Musk, Carson Block and more

Forager Funds on the potential impact of credit tightening on some Australian companies.

Platinum Asset Management on why Fintechs may find it hard to eat the banks’ lunch

Carson Block vs Manulife

Bloomberg's Charles Schwab profile

Old article on Elon Musk’s mistake to overestimateautomation and underestimate humans

Eddie Lampert and the end of Sears

Things are getting interesting...

This will be a short one.

Here are a few snapshots of some market indices:

If we compare today's close versus the 52 week highs, some markets are definitely faring worse than others.

Looking at the 3 major banks in Singapore, we are definitely looking at bear territory.

I'm not one to call market top or bottom, but if one is a stock picker, its definitely time to take a closer look and start hunting for bargains..

Weekly reads - 8th October 2018

Here is the world's most beautiful battery
Power grids store excess output in ingenious ways. This battery happens to be in a location with great views.

The appealing myth of the frugal billionaire
An interesting take on "frugal" rich people.

GE’s $23bn writedown is a case of goodwill gone bad
On GE's write-down of Alstom (paywall).

China Used a Tiny Chip in a Hack That Infiltrated U.S. Companies

The attack by Chinese spies reached almost 30 U.S. companies by compromising America's technology supply chain.

Savings matter - or why you should forgo that cup of Starbucks

An article recently went up on Dr Wealth, arguing that switching out your daily cup of Starbucks for a normal cup of kopi as a way of saving money is missing the point. Small savings like this is not a great way to grow your wealth.

This article attracted quite a bit of brickbats on the BIGS World Facebook group, mainly slamming the article for using the example of Starbucks to illustrate the impotence of saving money on small things.

To be fair to the author, he makes a lot of valid points. To save money and grow your wealth effectively, you should focus on the bigger picture. Having a system for saving and investing would be more important. Agonizing over decisions on small purchases doesn't really work because it is very hard to restrain your spending on small things day in day out. You will probably lapse and then spend time feeling guilty over it. More importantly, the Starbucks story is an example and readers should substitute Starbucks coffee for any activity that applies to them, such as taking Grab rides.

However I think the article is missing the point in a few ways.

Savings is a vital pillar of achieving Financial Independence, Retired Early (FIRE) 

The idea behind financial independence and retiring early is simple.  Save enough for retirement and invest your savings.

Savings = Income - Expense

To do that you need to increase your income and reduce your expenses. Why do you limit your focus to just the Income part of the equation and neglect the Expenses part?

Underestimating the difficulty of increasing your income

The article reads like it was written from the viewpoint of a person with certain advantages. Someone who has the opportunities, spare time and energy and skill-sets to increase their income. In reality, it is not easy to grow your income because you have less control over your income than you think.

-if you are a salaried worker, you need your company to be doing well, your boss to like you in order to get a pay raise.

-if you seek to grow a side hustle, you need time and energy to invest in your side hustle. This is difficult if you have a family to look after, is a care-giver, a job that takes up much of your waking hours

-you need to have skills that are marketable, and if not, you have to invest time and money to learn the skills. For example, you can't be an Uber driver if you don't have a Class 3 license.

So for those us poor mortals without any of the above advantages,  what can you do?  Go back to basics; save more by cutting back your expenses.

Savings if compounded over time can have massive effects

The example he uses in his article goes like this:

Cost of Daily Starbucks for 1 Year: $7 X 365 = $2555 
Cost of Daily Kopi for 1 Year: $1X 365 = $365

Your Savings in 1 Year: $2190

If you invest your savings from cutting back on your daily Starbucks in the SPDR Straits Times Index fund, you’ll have made a 4% annualized returns on the average for the last 10 years.

You’ll have made an extra: $87.6 per year.

(Data as of 6th September 2018)

I’m pretty sure you’ll forgo the $87.6 a year to get your much needed caffeine boost in the morning.

Actually, if you compound this over a period of time, you get a different figure.

Imagine you save the 2,190 bucks in 2007 and on 10 Jan 2008, invest it into the STI ETF. On 2nd Jan 2009, you invest the dividends received in 2008 and the money saved in 2008 (2,190 bucks) into the STI ETF. 

Do this over and over again annually.

As of 28 September 2018, you would have 30,135.60 worth of STI ETF units, and received 1,050 bucks of dividend in 2018, which gets you about 150 cups of Starbucks. Granted, its not 1 cup a day but who really wants to drink a cup every day...

In conclusion, while the writer makes great points about not overly focusing on savings and neglecting growing your income, he seems to have made the same mistake of focusing only on growing income and neglecting savings.

Weekly Reads 3rd Sept 2018

What an Ancient Historian Says About theU.S.-China Clash

Heard of the Thucydides Trap? Here's what it means.

How to Retire in Your 30sWith $1 Million in the Bank

A write up in the New York Times about FIRE

Facebook’s Massive Insta Asset

An article on the Forager blog about the massive potential in Facebook and Instagram