Category: invest_gtmp

competitive trec≠predictor@outPerformance #pick`bet

Posted on by tiger40490

Past competitive performance is not predictor of future out-performance

Scope: wide, relevant, not highly specific

— (the opening example) when we buy a mufu or hedge fund, we bet the fund manager’s competitive skill would endure

— When I “bought” Singapore at an early “price”, I was betting the system strengths [comparative advantages, resources,,] would endure for 50 years until I pass away. See https://btv-open.dreamhosters.com/17679/boughtsg-early/

retrospective?

— When I “bought” WStC and stayed lukewarm about WCBA, I was betting WSt’s relative profitability, the relatively age-friendly job market would endure

— when I “bought” NUS and UChicago, I was betting these brands would keep their competitive values for 50 years.

Now I think NUS is basically a government-run organization competing with top dogs in Asia and globally.

Let’s focus on UChicago? What specific “features” are enduring????

How about Shiyan and HCJC? They too add some brand value to my personal /profile/.

— When a product advertiser signs a 3Y contract with a celebrity brand ambassador, the manufacturer is betting the star power would endure for 3Y. Too much competition among the stars.

— When Warren Buffett picks a stock, he would buy the management, the moat, the business model,,,

How about the brand? I think brand value is perishable 🙁

 

##trust`(someone)n invest`

Posted on by tiger40490

k_FLI2

In this bpost, “Trusting” means trusting an investment salesperson, and trusting a commercial company.

— My FLI2 experience

Trusting in Singlife in their “projected” payout rate.

Trusting in CIMB as the marketing agency. Contrast it to DBS as marketing agency for Manulife.

Trusting in Linna and her colleague.

— my RBBT experience .. I did my due diligence on the LIR calc
Trust in the bank system for calc algorithm.. is no longer a big concern, but bigger than in the EGA case.

Initially, the promised super-low LIR was too good to be trust-worthy.

— Oanda vs Saxo
Oanda was more fair to customers. I feel Saxo’s FXO practice was really mean to customers.

— my HY/PE experience ..
With E12, I did my due diligence and decided to trust Chip Taylor.

With Jill, I invested multiple times. I still assume Jill might be trust-worthy but she (and her managers) had poor judgement on the companies that received the money.

Overall, I don’t feel very sure about the trust-worthiness (of those people), even though each company is different.

— My SEAsia rEstate decisions .. I visit the sites. I trust a salesperson after a long interaction. I transfer fund only to an account given by the same salesperson.

In each case, there is some big reputable company in the “equation”. That company lends credibility.
— my Rbh experience
Zero commission sounded too good to be trust-worthy, so I started small.

Similarly Vanguard has very low-cost mufus and they have earned my trust.
— my EGA experience .. I did my due diligence on the interest calc
The EGA-IR was too good to be trust-worthy.
Trust in the HSBC calc algorithm .. is not a big concern.

leverage≠killer_skill 4investors #Singtel

Posted on by tiger40490

— eg: Singtel .. in Mar 2006 Singtel held cash_balance (i.e. cash equivalent) to about 5month worth of operating expenses. In Mar 2016 that “cushion” was down to 14D of operating expenses. This is a form of financial leverage.

With a strong financial position, Singtel could easily tap capital markets (bonds etc) and bank financing to raise working capital. Therefore the increased leverage may or may not be a concern.

— eg: Lehman .. (based on https://hbr.org/2009/09/lessons-from-lehman) was overleveraged at 30+.
^^^^^^^^^^^^^^^^^^^^^^^^^^
In both cases, the leverage is powerful, enviable, a sign of strength when times are good. Those good times could last decades, so the observers may never notice the hidden weakness/risks.

Individuals can borrow from banks but corporations do that at a fundamentally deeper level — some players in a given market must take on leverage just to compete. My focus is _personal_ (and family) finance.

  • eg: Individual home buyers, car buyers … can avoid leverage. It may look silly, but legit.
  • eg: Individual currency traders can use low leverage like 10, even though it may be unexciting and slow.
  • — Below examples are not about leverage but about risk-taking for higher profit:
  • eg: Individual stock investors can avoid hot stocks, even though many believe “If you bother to trade U.S. stocks but avoid hot stocks, then what’s the point?”
  • eg: Individual stock investors can favor stocks with high dividend but low growth. This style is often sidelined, dismissed, but still a legit style. Many (me too) believe that the hottest growth stocks don’t pay dividends.

In many of these examples, the good times would cast these risk-averse individuals in bad light, as laggards, as /also-rans/, as “missed the show”, but what about in bad times? XR would probably agree with me that “strength would emerge”.

Buffett once quoted his partner saying “there are only three ways a smart person can go broke: liquor, ladies, and leverage.”

In my case, I actually take risky bets with my HY/PE etc but that’s a digression.

##keyVariable] %%bets #bigTicket++

Posted on by tiger40490

The pattern — In each investment decision, we are actually betting on one or two key “Variables”. After the dust settles, we can see which  Variable actually dominated.

I prefer specific words for each Variable. For example, MarketRisk is a vague, generic phrase.

— MSFM: (not a financial bet) variable is SnD of quant talents .. poor bet
— FXO: Variable was USD/SGD
— Jill’s HY/PE: good bets for the first deals. Luckily I minimized the quantum. Looks like Variable is credit risk.
— US HY bond mufu: Variable is segment sentiment (part of mkt risk)
— PLIP: if Sora (the likely Variable) remains low for 8+ years, then PLIP would be a good decision.
— Blk177: good bet. Variables were 1) market risk including rental 2) prime (HDB heartland) location
— BGC:

  • Variable 1: rental yield .. much lower than expected. Poor bet.
  • Variable 2: timely completion (developer)… Many construction projects got delayed. BGC was delayed by a few years but I still count myself lucky
  • Variable 3: SGD/PHP… Not too bad.

— Cambodia units:

  • Variable 1: GRR credit risk of the developer .. good bet
  • Variable 2: location .. neighborhood growth momentum .. not bad, largely thanks to China investment
  • Variable 3: timely completion (developer) … Good bet
  • Variable 4: efficient title transfer process.

Some may say a key variable is the developer’s credibility, but I think such a variable is too vague to be useful. I feel I bet well on MIH, much better than Megaworld.

%% favorite assets=seldom highly-mainstream

Posted on by tiger40490
  • xp: I shun SG condos, in favor of SEA emerging market rEstate.
  • xp: I shun new HDB flats, in favor or older flats
  • In the U.S. I will avoid SDXQ expensive homes.
  • xp: I shun insurance-linked products /peddled/ by SG retail banks… Too safe and not competitive.
  • xp: I have repeatedly halved my mufu allocation. Mufu is probably more mainstream than stock-picking
  • xp: I favor a large number of often unknown stocks.
  • xp: I shun growth stocks. My dividend stocks are supposed to be mainstream among retirees, but my cohort are not retirees and I don’t know anyone interested in my low-growth dividend stocks.

Philosophically, very mainstream assets are well-researched, well-publicized, and offer me no bargain.

Some very mainstream assets can be hot assets attracting hot money.

[[Living off Dividends in Retirement]] #5%CDY

Posted on by tiger40490

See also

https://www.simplysafedividends.com/intelligent-income/posts/1-living-off-dividends-in-retirement (updated after the 2020 pandemic) is fairly in-depth as an info-commercial, written to promote dividend stock picking as an alternative to bonds/ETF/annuities…

The webpage mentions a 2015 WSJ illustration (not in-depth analysis) assuming

  • assuming (Treasury yields match the inflation rate) stock dividends grow 3.5% per year …
  • assuming you retire with $1 million .. perhaps for an affluent couple
  • assuming you desire $40k/Y in annual inflation-adjusted retirement income… higher than cpfLife ERS payout
  • assuming inflation runs at 2% .. comparable to the official SGD inflation target
  • assuming 600k of your nest egg goes into dividend stocks, generating $18k/Y at 3% DYOC .. realistic

“(Dividends) can reduce volatility and make it psychologically easier for retirees to stay the course during times of turbulence.” — I feel the same.

“Living on dividend income in retirement can make it easier to stick to a plan by providing passive cash flow without incurring the stress of figuring out which assets to sell and when, especially if another market crash is around the corner.” — echoed on my blogpost https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=17257&action=edit

— Why dividend stock picking beats dividend ETF .. “Some of (the stocks in an ETF) are good businesses with safe dividends, while others are lower in quality and will put their dividends on the chopping block. Some have high yields, others hardly generate much income at all. Simply put, an ETF is a hodgepodge of companies which may or not match your own income needs and risk tolerance very well.” — echoed on another blogpost or email

— concentration risk in high-yield sectors .. “only owning high-yielding stocks concentrated in one or two sectors, like real estate investment trusts (REITs) and utilities. Should interest rates rise and trigger a major investor exodus in high-yield, low-volatility sectors, significant price volatility and underperformance could occur.”

— Be suspicious of unsustainable CDY above 5% … “In our opinion, investors are usually better off pursuing lower-risk stocks that yield 5% or less. These companies tend to have better prospects of maintaining and growing earnings and investors’ principal over time.”

T:US is a rare high-yield blue-chip.

##sure-win investment schemes@@

Posted on by tiger40490

I think in every case, some risks are underestimated. Shiller may consider it questionable investor learning.

Sure-win mentality breeds the gambler behavior

eg: Is SP500 ETF a sure-win? Many American investors seem to feel that way.

eg: Is DIVA an arbitrage, sure-win?

eg: Q to H.Luo : Is Singapore condo a sure-win? I think many investors use maximum leverage to invest in Singapore condos. Sure-win due to Ponzi nature. https://tanbinvest.dreamhosters.com/26043/sg-home-buyers-max-out-mtg-quantum/

— Single stocks:
eg: Is Singapore IPO sure-win? This was one of my first “sure-win” bets.
eg: when Singtel shares were offered to the lay public, some probably considered it a sure-win. Utility stock backed by government.
eg: in 2020, my wife picked SIA as a sure-win stock.

excess household savings → rEstate+stocks #TJ.Liu

Posted on by tiger40490

As I wrote to a fellow investor TJ.Liu,

I mostly agree with your observation that when people have too much spare cash in savings, they usually invest it in 1) pp (i.e. properties) or 2) eq (i.e. equities). I also know people who put big savings into 3) CPF-SA 4) gold.

However, most people are not big savers even in Chinese societies. If I use a benchmark like “Do you save 30% of your total cash income including non-work income, excluding unrealized profit, excluding CPF or 401k or other compulsory savings?” I guess only 30% of Singaporeans qualify.

— over-valued? My yardsticks
When we have excess savings, it’s reckless to go blindly into any investment, even mainstream investments. It’s relatively easy to compare asset classes and check over-valuation.

  • current yield or payout rate … is my favorite yardstick which is [ annual_payout/total_investment_amt ].  pp (SEA) > cpf > eq > pp (SG) > 0 > gold .
  • A related yardstick is dependability of payout. cpf >> eq (DYOC) > pp

So CPF-SA is not overvalued and a very safe choice, but you can only take it out at age 55.