Tag: t_academic

bpost features some theory, either realistic or impractical

q[property_income]钱生钱: diverging preferences

Posted on by tiger40490

In economics, property_income is an umbrella term for cash cow income i.e. 钱生钱. It is a subset of passive income and nonwork income.  https://en.wikipedia.org/wiki/Property_income lists 3 common types of property income:

  • RR) rent .. main risk is political, legal, physical risks
  • II) interest (+dividend) .. usually periodic [1].
  • PP) realized profit
  • —-
  • aa) realized rEstate appreciation .. is not property_income IMO. This profit is similar to buy/sell of paintings.

Company profit can become unrealized gain for a small partnership, but in stock market, profit shows up as either dividend payout (or buyback) or stock rally.

[1] 1 in 20 credible stocks have a history of random dividend that is utterly unreliable. In all other stocks, either there’s no expectation of dividends, or management has the responsibility to meet shareholder expectation of non-zero dividend every year.

— I am different from peer investors in my attitudes towards property_income
Many of my U.S. peers favor PP, like a windfall
Many of my Singapore and China peers favor aa over PP (denoted “aa > PP”)
I am different. I favor RR > II > PP

— credit risk .. affects II most, also RR
— market risk .. affects PP most, and also dividends

G5 real essentials 2fend off hardship #Khmer

Posted on by tiger40490

See also: livelihood[def2] x-class #S.Liu describes a higher standard of livelihood, closer to the standard of my peers.

Trigger 1: The Mr Money Mustache’s blogposts like the reason he is NOT selling the website highlight the wrong priorities of many high-income individuals… reminds me of My inferiority against the Managing directors, the rat race, the race to top schools and branded colleges…

Trigger 2: As described in burn rate: 80%@median family income: wbank^BT #Khmer, the Khmer villagers lead truly happy lives without high education or healthcare. So that begs the question — just what are “important” (essential and beyond) to these villagers and their happiness?

Q: what are the top 5 “provisions” important to an individual’s livelihood, that constitute my level of bare-bones ffree? The MMM’s ffree is presumably similar, but not MY criteria.
— priority: healthcare
— priority: adequate education for the young — at least 9 years. Ideally provided free for the poor
— priority: retirement — cash flow to last 25Y, to prevent the retiree falling into hardship
Note low inflation is a pre-requisite.
— priority: basic housing — in safe, sustainable environment, free of hazards. Housing is the most elastic item in this list
— All these priorities are taken care of in the case of MMM, ERE author and other early retirees. Are there other financial needs?

recreation? Free recreations require resourcefulness and imagination. You can cycle (most sustainable) to nearby places or take public transport.

In https://www.getrichslowly.org/early-retirement-extreme/ ERE author Jacob said “We consider spending money a failure to solve our problems by smarter means.”

— PAP government .. I think SG government has the right priorities in terms of the most important livelihood provisions for the citizens.
CPF is related to most of the priorities below
— “African Americans must want to be successful” .. In this Jared Kushner comment “success” is undefined but has many overlaps with the priorities in this blogpost.
— life chances .. Most of these priorities below are related to “life-chances”, which is the missing ingredient in most impoverished communities, including inner cities and the Khmer village.

validating 炒股 books

Posted on by tiger40490

Nobel laureates are peer-reviewed experts. Most investment books are not so theoretical.

For all of these books, peer review is the best validation, better than popularity. Many best-selling book with lots of media coverage can be proven invalid by the market a few decades later.

In contrast, sometimes a theory is actually validated over a long horizon … like 200 years! This is basically Fama’s criticism of Shiller.

A peer-reviewed investment theory is more validated than a “popular” book, but not as validated as a chemistry theory. Asset pricing theories are hard to validate, esp. compared to phy/che/med theories. Very limited data available to use for validation.

intelligence and 炒股perf

Posted on by tiger40490

Focus of this bpost is eq-investing performance

[[Irrational Exuberance]] has a brief debate on “smarter people will, in the long run, tend to do better at (stock) investing“. True over the very long term, but in reality, there are many complicating factors.

  • muddy: For the independent variable, researchers would want to use IQ, or high-school test scores in math + mother-tongue-reasoning (universal subjects), but I know that many Asian teenage students are better-trained in taking tests than non-Asians.
  • muddy: Most people use some N-year total return of individual’s eq portfolio as the dependent-variable. I think liquidity is crucial but not captured in total return. MOETF is more liquid than an ETF.

The most convincing argument for passive (kind of dumb) investing is that SP500 ETFs outperform many (not “most”) professional portfolios, assuming minimal expRatio. Q: Does it mean that smarter people like professionals don’t outperform the average passive investor? No. That would be a very flawed argument.

SP500 is among a handful of indices that are very hard to beat. The SP500 index committee is an active professional team.. smart people.

Beside US broad indices like SP500, the other regional indices are easier to beat. However, most regional indices consist of leading stocks (high-performance, high quality, blue chips) of the region. The timing of addition/removal of constituent stocks often reflects buy-good-sell-bad, a form of market timing. So investing in such a “leading index fund” is different from DCA-buying the entire market.

A smart investor actually can outperform now and underperform later compared to SP500. Over the long run, she might outperform.

A smart investor often has more advisors and have access to training or data that help her spot opportunities and avoid missteps/swans. Slightly lower chance of loss.

safe withdrawal rate: 4%rule #U.S.only

Posted on by tiger40490

update: ffree^carefree^ezlife #horizon explains that ffree analysis is dominated by big shocks and hazzards

—

https://en.wikipedia.org/wiki/Trinity_study , https://www.investopedia.com/terms/f/four-percent-rule.asp describe an influential 1998 paper by three professors of finance at Trinity University, using U.S. data on stock, bond and inflation. However, the 4% rule was actually proposed by a 1994 paper by Bill Bengen.

It illustrates the long-term strength and volatility of the U.S. stock+bond market. It is relevant to me as well as the majority of U.S. retirees.

In Oct 2020 Bill Bengen updated 4% to a higher, more aggressive max_withdrawal_rate.

This blogpost is mostly based on https://www.getrichslowly.org/four-percent-rule/.

— safe …. from running out of money within 30Y. It is assumed that the portfolio needs to last thirty years. The withdrawal schedule is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period.

Capital preservation was not a primary goal, but the “terminal value” of portfolios was considered for those investors who may wish to leave bequests.

— CPF-life and the U.S. stock/bond market
I guess the 4% rule was created based on US market. In contrast, CPF-life invests globally and pays out in SGD.
— alternative nonwork income: The original researchers are very confident about their safe withdrawal rate, but I’m not. I need more cushion, more buffer, like my rental income, CPF-life
— inflation: It is assumed that the portion withdrawn in subsequent years (after 1st year) will increase with the consumer price index (CPI) to keep pace with the cost of living
I have reason to believe SGD inflation is better controlled.
— black swan disasters? Researches used historical black swan events to back-test the withdrawal schedule and vindicated the 4% rule.
I tend to worry about unprecedented, imagined disasters.
— key clarification on 4%: Note that the 4% is calculated against the balance of the account only in the first year: withdrawal amounts in subsequent years are calculated by adding inflation to the previous year’s amount, and not 4% of account balance in later years.
— stable burn rate: https://www.getrichslowly.org/four-percent-rule/ points out that for many retirees, burn rate is nowhere near “level” i.e. consistent and stable.

In my case, I expect my crbr (couple retirement burn rate) to be stable. I have better control of my burn rate than those American young retirees.

I track my monthly burn rate consistently. It gives me confidence and insight. One variable is my wife’s personal burn rate, invisible to me, but I have some observations of this rate.

a currency=stocks of a national economy

Posted on by tiger40490

resource-rich .. countries like Australia, Canada and oil nations have their “stocks” backed by the natural resource. An A$ is a claim on a part of that resource.

In contrast, U.S. is home to the largest concentration of tech companies, who create value from technology, rather than resources underground.

A tourist-dominated economy like Thailand or Macau would issue new “stocks” when their tourist economy expands.

— proven reserve of resources .. new discovery (or depletion) of aggregate reserve in a national economy can directly affect the “book value” of its national stock, leading to appreciation (depreciation)
— foreign reserve .. a national gov can stash away the stocks of other nations, as backing for its own stocks.
Best example .. gold is the standard foreign reserve.

Trade surplus .. if a country enjoys trade surplus for years, it could accumulate a lot of foreign reserve and see its national stock appreciating. A nation’s private exporters deposit foreign currency into local banks. They transfer the currency to the central bank. These exporters typically need to convert the foreign currency in order pay their expenses.
— issuing new stocks or printing money .. I think many governments issue 0.1% new money only when the (national) economy expands by a similar amount.
U.S. government prints money by issuing Fed debts. Japanese? Perhaps similar.

Issuing new stocks during economic decline .. leads to depreciation of the national stock. Even during economic expansion, (excessive) new stock issue can lead to depreciation, when the expansion is not sufficient to support the massive new issue. Investors would realize that a share of this national stock is now diluted.
— demand by foreign investors .. US as an “issuer” has many weaknesses but its “stock” the USD is highly in-demand.
— depreciation due to economic decline.. Even in the absence of new “stock issue”, a stock can lose value if the company is perceived as losing competitiveness.

SnD(supply-n-demand): stocks,rEstate,,

Posted on by tiger40490

SND stands for “supply-and-demand”. As a universal framework for investment analysis, it has limitations in some markets. In this blogpost I will focus on my asset classes.

— PE/HY-bond — I bought a few times. I think in this case supply is tightly controlled by the issuers and demand is dominated by credit risk and coupon rate.
Investor mind share is very low. No herd anything.

— commercial properties — Probably less retail influence than in residential market, and less herd sentiment.

  • supply is mostly institutions including the builder. There may be retail sellers.
  • demand is mixed. Most retail buyers prefer residential.

— residential properties — high Demand from retail investors.
I think retail investors often value comfort and luxury in additional to total return. These are rational considerations for consumption assets.
— penny stocks on SGX or U.S. — investor mind share is much lower than blue-chips. However, herd mentality can still affect some retail sellers.

  • Supply side is the existing shareholders, probably much fewer than for well-known stocks esp. from the U.S.
  • Demand is also lower

— well-known stocks — are the extreme case of sky-high SND. Both supply and demand sides have large institutional investors, but price is often driven by retail investors. Retail investors can be irrational and mis-informed, and can ignore the fundamental and mostly follow herd sentiment.

Therefore, to make money in these stocks, fundamental analysis may not help (may be relevant in the long-run) and sentiment/timing may be the dominant factor. I generally avoid these stocks.
— physical gold .. kinda similar to well-known stocks, but bid-ask spread is much worse because an institution is usually the other side of a retail buyer or seller. The institution would demand a bigger bid/ask spread.

Two retail traders directly interacting is only possible on the futures market.

PFF compare 2 families: per-capita%household

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Q1: For meaningful cashflow (income and expenses) comparison between households, should we use per-household or per-capita?
A: Most economists, policy makers, marketing teams,,, prefer per-household. For a household size up to 5, I agree the per-household metric is better. I think this yardstick is invalid if a special household has “unusual” size.

Level of (resource) provision is determined by per-household (not capita) cash flow. Most of the “provisions” are shared within a household — shelter/utilities, car, nutrition, healthcare, vacations, gadgets+toys, parenting as a “benefit”

Q2: why do I bother with this theoretical question?
A: for example, see PAP’s tilt towards the vulnerable #per-capita

Other examples:

 

theoretical-min (自理)Retirement burn rate: food+transport+bx

Posted on by tiger40490

Roaming retirement in cheaper cities would reduce my food + transport burn rate.

Lookalikes? Unlike a few related blogposts, this blogpost is about Retirement burn rate, after I stop working, after kids grow up. This bpost is fundamental, but my elasticity bpost is more fundamental and more broad.

Conceptually, excluding housing + insurance + healthcare, the minimum monthly burn rate would be roughly[1] 50% allocated to nutrition. Nutrition + transport + public utilities would comprise 70% of that burn rate. These categories are elastic to some extent.

Singapore CPI “basket” (https://www.singstat.gov.sg/find-data/search-by-theme/economy/prices-and-price-indices/related-info/faq-on-cpi) allocates 24.8% weight to housing+utilities. Together with nutrition 21.1% and 17.1% transport, they represent 63.0% of the Singapore CPI basket. This 63% is comparable to the 70% above.

[1] 40% at the basic-healthy level; 55% at the “nice food” level

  • nutrition — Across developed countries, food cost is rather low relative to typical income, and possibly falling over the years if we aim at the “basic-healthy” level.
    • Home cooking and raw food reduces service costs, as I told Colin Lim.
  • transport — a rising daily cost but
    • PUBLIC transport (like utilities) — are subsidized because 50% of the households can’t afford higher cost in these essentials services.
    • bicycle cost is dropping globally, just like food cost
  • [part of 17.1%] private car — Most U.S. locations unfortunately offer limited public transport so private car (insurance, gas, repairs…) is a major monthly cost.
  • [7%] healthcare — is the wildcard. In Singapore, outpatient cost might be $50-$100/month. Some basic medical supplies are mass-produced and falling in price.
  • clothing + bedding — is a yearly consumable item. The worst component, shoes, can last a year+. The minimum yearly clothing cost is much lower than nutrition. Colin Lim agreed with me. The Singapore CPI has only 2.1% allocated to clothing!

Mass production + globalization has brought down cost of food, clothing, vehicles, basic medical supplies, electronics, stationery. I won’t spend too much time listing what items are mass-produced.

During the covid19 economic downturn, many governments had cash handouts (up to $3k per U.S. family, and a few hundred a month for retrenched Singapore workers,,,) These amounts could make a difference iFF the family deploys it to basic-healthy foods, and cut discretionary spend ,,, to the bare minimum.

— scenario planning: hardship

Q: What’s my lifetime risk that my family may /fall on hard times/ and needs belt-tightening?
A: Not zero. My parents experienced that.

Some afflulent families can’t cope with belt-tightening. My family is not really well-to-do. I feel relatively confident we can cope with a lifestyle change including

  • healthcare including bx — we can rely on polyclinics + TCM clinics.
  • nutrition — basic healthy
  • kids’ enrichment — would become a luxury to live without

— some of the non-essential spends during retirement.

  • travel and dining
  • electronics
  • reunion with family and friends
  • workout and hobbies (often expensive) to keep an active life
  • fashion and personal items, esp. for older women
  • personal care

— more reflections on the Singapore CPI basket — See SG inflation: personal xp

retirement income replace-rate: not useful2me

Posted on by tiger40490

replacementRate := income After you retire / income Before[1] you retire

[1] before means … the final year, perhaps part-time job salary  + nonwork income

https://www.dbs.com.sg/personal/articles/retirement-planning/let-time-be-your-friend-when-planning-for-retirement  says The OECD average is 63% (and presumably insufficient for many retirees, according to the marketing brainwash).

I find this percentage too high to be realistic. My salary before retirement would be 150k in today’s USD. My income after I retire would be much lower than that, but so is my burn rate.

Therefore, I find this percentage highly misleading and questionable. Therefore, I don’t want to spend too much time /dwelling/ on it. On the other hand, This concept/notion is well-defined and may become more prevalent via my (evolving) selective listening.  Therefore, it might be useful to have a view.

Instead of this replacement rate, I have many blogposts more relevant to my situation.