Tag: t_critiq77

critical, bold views against HERD instinct or conventional mainstream thinking

DRIP to build snowball@@ #w1r2

Posted on by tiger40490

Compound return fallacy is the bigger framework.

— stock DRIP… There is widespread brainwash about the miracle snowball of ECP (exponential compound return) via DRIP

  • AA) For example, with XOM (or SPY), my uncle re-invests dividends every quarter. If my aunt chooses to receive dividends but do not invest further, then yes she would get no “snowball”.
  • BB) In contrast, I choose to receive dividends, but later at my own timing[1] invest the same [2] amount into XOM or unrelated stocks [3].
  • BB^AA prognosis ….. if I invest at least the same [2] aggregate amount as my uncle, and at least once a year[1], I won’t lose out to my uncle.

[1] My frequency is sometimes higher sometimes lower than quarterly. I always prefer to time my entry. About half the times, the DRIP default timing is not ideal. If my timing decisions turn out to be inferior to the default, I won’t blame anyone, but this won’t be a valid explanation for the “snowball” or the absence thereof.

[2] The amount I invest is often bigger than my uncle’s tiny dividends. High dividend years are over, so those “snowball” stories are outdated because nowadays the smaller dividends make the snowball growth slower.

[3] Usually, my “reinvestment” amount goes into a stock different from the original stock (XOM in this example), often a stock outside SP500. This diversification is usually beneficial, though it breaks the compound return paradigm. In fact it can beat the compound return snowball.

My uncle’s robot uses market orders, which are inferior to my limit orders.

One advantage of automated (robotic) DRIP is tcost. (Tcost is a different concern in recreational investing.) In view of that, I may need to reduce trading frequency..

— splurge .. Somehow the brainwash theory assumes that most investors who opt for cash dividend would spend the payout. Suppose the typical investor Cody spends $5000/M on average. When $770 dividend received in June, how much would Cody spend in that month? The brainwash theory assumes answer is $5770, because the dividend would feel like a windfall to be spent.

Well, I think the answer for some people is $5000. They save the windfall.

Actually, some investors simply leave the dividend payout in the brokerage account to buy more stocks. If they withdraw the cash dividend, then indeed there is higher chance of spending it.

dividend safety: naysayers #T, tobacco

Posted on by tiger40490

In my Jan 2021 mail to Tanko, I wrote “https://www.fool.com/investing/2020/10/08/could-att-cut-its-dividend/ is one of many analysts preaching caution against T:US.  At any time, there will be some bulls and some bears about T:us. I don’t take U-turns due to one article. But it’s fair to say that many investors view T:US as under threat.”

Q: how reliable is an annuity like Allianz Income Protector, SocialSecurity or CPF-life?
A: There are always naysayers. They point at inflation (uncertainties grow over long horizons), international interest rate risks, national fiscal policies, even trade wars! I mean, which country on earth is forever safe?

Singapore government has the will and the way to sustain the annuity. So does U.S. government and insurers.

Q: how safe is the dividend of T:US or any stock on earth?
A: At any time, there will be bears. They point at long-term risks, evolving competitive landscape,,,

I choose to look at the track record and I choose to trust the management. They have a moat, a brand, a high ground to defend and grow their business. Why would they have no choice but become a sitting duck?

No company is free of threats. Having a threat is not the same as surrender and implosion.  Yes many iconic companies have fallen (Yahoo, Motorola, Nortel, Nokia… in tech) but many more have survived multiple threats, crises and challenges.

Eg: “With the world-wide decrease in smoking in the 21st century, shares of Philip Morris were no longer considered the ‘safe haven’ they once were.” Personally  I would say this is a long-term trend, but in the 20-year horizon, my DYOC may stay above 4%. Question is “can NAV recover?”

— moat: strengths are relative, limitations are absolute.
context: In Value Investing framework, moat protect profit and dividend

For most moats, the strength is never absolute or permanent. We can only identify relative strengths.

  • T:US is one of the biggest phone networks
  • O:US has a large portfolio and strong reputation so it can attract reputable tenants, negotiate good lease terms. It also has good cash flow to withstand economic down turns better than competitors
  • XOM?
  • GE?
  • Baba?

##[22]wise consumer: hallmarks

Posted on by tiger40490

— showcase of HallmarkA: why avoid branded colleges
If a branded top-quality middle school costs $20k/Y over 2Y, then many would be able to afford it, but could the brand give the parents esteem for decades?

In contrast, a branded college does make the parents proud for decades, and makes the graduate stand out in over-crowded dating markets, but look at the price tag. If the 70k/Y price tag is clearly /affordable/ to you, then you won’t need to be a “wise consumer”. For most families, however, 300k over 4Y is too high, so these families need to assess the benefit/cost.

Those with insider info often realize the benefit is not so high.

— (hallmarkA) At a fancy restaurant you taste something very nice (and expensive) . Later you find out it is similar to a cheap supermarket item that you have never tried.

The fancy restaurant version is subtly different (therefore expensive) but to the first time taster, the supermarket version is equally delicious. Even if company pays, I would still prefer the cheaper version.

— (hallmarkI) mass market .. How relevant (to me) are mass market statistics? Many mass market surveys are increasingly irrelevant to me, as they reflect ordinary people’s
* commute conditions
* work hours
* reported work stress, burn-out
* workout, nutrition, BMI
* savings, retirement plann, mtg, rental burden

These so-called “mass market profiles” are increasingly different from my profile. Therefore my buying priorities are different, too. Am in an exclub defined by myself, not based on FOMO.

— (hallmarkI) exclub/miswanting..

Property agents, car salesmen, college admission offices, luxury product sales/marketing teams … make huge efforts to impress on us the differences between the haves vs the the have-nots.

Some of them in their unspoken hint are careful to position you, the prospective buyer, as above average in the local market but somewhere below average among “my clients”. They like to describe their existing clients as filthy rich, indirectly setting role models for the rest of us.

That’s a form of mental manipulation and brainwash. However rich you are, there are always some “existing clients” who are better off! Exclub.

Now in my late 40s it’s becoming increasingly clear that those “haves” have acquired a lot of white elephants. For example,

  • car is not an asset.
  • wines, fancy electronics are not always good for their children’s wellbeing
  • branded college is not necessary, but a conducive environment is.

— Two hallmarks of a wise consumer

  1. hallmarkI (vague): knowing what things are truly important to yourself.
  2. hallmarkA: knowing what unpopular/unconventional Alternatives are Actually Acceptable to yourself

Some examples that help explain the hallmarks

  • [AI] eg: free books
  • [A] eg: refuse to buy sports merchandize. Use simple substitutes instead.
  • [AI] eg: avoid branded sports shoes. Try the low-cost shoes and trust your own feeling of comfort
  • [A] eg: slightly dented fruits

infatuated rEstate investor #leveraged

Posted on by tiger40490

 

  1. I have invested most of wife’s usd 70k
  2. I have invested about sgd 40k + usd 16k of grandpa’s money
  3. luckily I have not invested any fund from grandma

I probably need more buffer and more contingency reserve now that my reserve is almost depleted. See Need to rebuild OPM reserve#NOT another shop

Many people seem to invest with over-sized optimism, and possibly over-zealousness and over-commitment:

  • Many Bridge/Peak investors choose to buy $X when they only have half that amount on that day, planning to tap into future income… Me too if buying a 4th shop unit.
  • Most property investors take loans, including Youwei. I know a few buyers who avoided loans and I admire them — Yinghui, XiaRong
  • Raymond bought 2 units, more than he could afford
  • Genn took such a huge loan
  • Genn tends to borrow from me
  • some invest the year-end bonus, even in advance

The Overzealous behavior is largely driven by hot money herd instinct, fear of getting left behind, irrational and emotional, very likely to /crash and burn/ (i.e. burn your finger).

— decisive .. rEstate investing involves checklists, and lots of boring, painstaking homework to do, but many buyers have no time for due diligence. They feel they need to be decisive when buying a hot unit. They are pressured by sales pitch like “last 2 units” or “price rising soon”.

— case: MIH .. I resisted the pressure of “last unit at this price level“. I visited showroom on-site and took a few days. I think I returned to Singapore to send the deposit check. Even though I missed a smaller unit, my decision-making was prudent.

[21]Gabbar: no right or wrong@@

Posted on by tiger40490

 

See also

In my Dec 2021 year-end dinner with 3 colleagues, once again I noticed my breakaway from middle-class, in terms of priorities, blindFOMO

They talked about condo (1.2M was what they discussed), big mtg (like 900k), maid, private internaitonal schools as if there is no choice (They are foreigner in SG. Later I brought up college funding and SDXQ.) They also talked about car ownership… in a well-connected Singapore!

Varun reiterated that there’s no right or wrong, but I do have an opinion. I think some of those items are the wrong priorities for me (and probably for them too), because I have better self-knowledge. I think in old age some of these individuals would regret when they re-evaluate their past decisions in total honesty. Other eg of personal priority where there is no right or wrong:

  • To them, short commute is a good-to-have but low priority.
  • To them, healthy longevity is presumably low priority, and pleasure is high priority. Well, look at Grandpa’s experience after 85.
  • To them, my diet struggle, hazards, availability … are clearly a low priority. I feel some of their waistlines represent their growing income.
  • To many of my peers in their 30s and 40s, more time with kids is a priority, but for me, I don’t want too much time or too little time with kids. I know what I want.

I don’t want to spend on commercially popularized priorities like car, luxury housing, top SDXQ, branded colleges,,,

I’m willing to spend on my personal priorities such as family reunion trips, low-stress/low-pay jobs (like Mvea, Citi…) I think the issue of maid is similar.

— creep vs savings .. I think for some of these colleagues, their savings rate might be decent. However, their burn rate is probably higher than mine due to 1)housing 2)car 3)maid. I remember one Sonic guy used cheap credit to finance private school fees. Even without kids, some of them spend more than I do, perhaps spending 80% of salary.

Their lifestyle creep is probably higher than mine, influenced by peer pressure. Actually I don’t have enough insight. My lifestyle creep is non-trivial.

— high ground .. I feel they won’t reach my level of cashflow high ground any time soon.
I think their burn rate would be 80% of income including mtg P+I.
Their FullerWealth would be much low than mine.

Mtg .. They basically assume that a 30Y loan is “fine”, even though it would impose an extremely stringent obligation to pay $2k-3k/M non-stop.  Well, that’s Not “fine” to me, not a minor thing to me.

I enjoy a high brbr and FullerWealth (my priorities), but to them, those priorities may look like saving money for nothing.

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.

[17]long commute iWt tiny home #BBC

Posted on by tiger40490

 

On 2 Oct, 2017, a BBC Why-factor program on “How to live small” had one final expert commenting on the (long-term) benefit of bigger home vs shorter commute. If you can’t afford a big home close to your workplace, you can choose one of..

  1. move further out to a big enough home and … hope to get adjusted to the longer commute
  2. move to a smaller home close to work and … hope to get adjusted to the reduced /living space/

His research measures the short and long term effect on people’s well-being. In the long term, the long commute is far more detrimental than smaller living space.

The /uplift/ is short-lived when we moved to a bigger home, but the benefits of shorter commute last much much longer.

Hongkong and Japan residents live comfortable, satisfied lives with (way) below 100 sqm of living space for a family of 4. On the other hand, NY commuters readily cope with 1Hr+ door-to-door commutes. I think folks who grow up in NY(or Japan) learn from (majority of) other people to accept long commute (or tiny homes). Some individuals in NY(or Japan) would struggle against the commute (or home size). These voices might dominate the internet, so each person has to decide for herself “priorities” and “tolerance”.

People (as in affluent Hongkong and Japan) can get used to living in smaller space, but it’s much harder [2] adapting to long commute, according to the researcher. They said over 20Y you will still hate the long commute the same as on Day 1. I see and feel that long commute eats into family time, rest time, study time, exercise time, hobby time, outing time…

Our adaptability to smaller living space is much higher than our adaptability to longer commute.

[2] remember Rahul and see my bposts.

— [[Thinking, fast and slow]] says something similar. Before a big purchase (a car or house) we hit the Focusing Illusion and exaggerate the lifetime boost to our experienced well-being (xpSelf). However, a few years after the purchase, we seldom think of it. Our U-index ( or hedonimeter ) would show that long-term “boost” is rare.

In contrast, a shorter commute would improve our U-index for decades, because the commute continues to be a “focus” every morning and every evening. It draws attention everyday.

— eg: Shuisheng’s mansion .. (Serangoon Garden) requires a car (or more) as commute pain relief, but how about parking, ERP? If he has to park at office then that’s another huge $cost.

His 8 family members would all need a car to go anywhere, since there’s no amenities within walking distance.

Therefore, I think the best commute in Singapore is “living close to public transit”.

[18]ffree=state@mind #peers diff

Posted on by tiger40490

See also ffree ^ envy+FOMO

6 levels of ffree is one of the first articles describing the liberating self-knowledge that “I can retire now if I want to”. Financial independence is based on easy elementary math — Without salary from work, match up your family burn rate against your Savings + Income.

This elementary math has to be a projection over a long horizon, but over long term there are many uncertainties. We tend to overestimate our predictive power on medical, inflation, property depreciation … We tend to underestimate the amount of uncertainty/volatility,  black/white swans. See also NAV 一辈子花不完@@ 4 factors. Therefore, for me financial independence is really a state of mind. I often feel peaceful and reassured by mathematical projections based on

  • income — rental incomes + rental spread + CPF-life .. but beware of attachment
  • income — shields
  • expenses — burn rate … due to detachment
  • asset appreciations — Beijing, Cambodia, BGC, SG .. but beware of attachment

Actually for me, “financial independence” has a modified math definition — “without the pressure to work, match up … .” Due to the modification, my peace of mind has another pillar

  • I’m capable of, and will enjoy, working till my 70’s

Q: Am I too attached?

Yes to my property assets
yes to my health, which will eventually diminish
yes to my robust career prospect, which will eventually diminish

— Q: Strip away the exaggerations, the superficial, the unfounded, what are the measurable, rock solid, real differences between me and my cohort in terms of ffree ?

  • I record/reconcile my burn rate over decades, and have higher confidence in my forecast.
  • I have a reliable nonwork income in cpfLife and HDB rental, not counting other rental properties.
  • I often feel free to (and actually did) choose lower jobs. I don’t think many in my cohort feel that same level of freedom.
  • Based on straightforward calculations and SG public data, I have no worries about medical, retirement income, long-term inflation. I think many of my cohort are not so care-free. These are big components of long-term ffree.
  • — Here are some subjective assessments:
  • I have no plan to save up USD 300k/child for college
  • I say and feel I can stop working any time .. Statement 1
  • I say both parents can stop working indefinitely and my family can live a reasonable, comfortable life .. Statement 2.
  • I sometimes say that I have more money than I need for my lifetime .. Statement 3.
  • ^^^ My circle of a few dozen friends never say these things. Am I serious? Yes. I didn’t say what kind of family lifestyle that Statement 2/3 entail.

 

hesitant: allocate $200k→ETF+stocks

Posted on by tiger40490

Q: why I don’t want to increase my US-stock-index allocation from 1% to 10%, despite the observation on many smart investors including Kun.h, Venkat, MMM
A: Main reason is current income vs windfall appreciation. See other blogposts.

The most popular and safest index ETF show very low dividend yield, below 3% if I’m not wrong. In contrast, My rental properties deliver much higher and (arguably) more consistent current income while appreciation may be higher or lower than SP500.

  • Suggestion: I might want to cherry-pick my dividend stocks, but very time consuming and won’t reach SGD 200k.
    • Actually, I have up to 10k in USD
  • Suggestion: buy some gold to hedge my equity exposure

— U.S. housing plan:
Warning: My U.S. housing plan will become dependent on U.S. stock market ! If market is down for a long time I won’t be able to liquidate my stocks for housing needs.

However, I am not among the desperate immigrants burdened with high rental burn rate [1]. Even though I have a family of four, my burn rate will remain under control, and I have nonwork incomes to sustain long-term renting.

Sugg: split the allocation into two parts, with a 30% portion invested in gold, but beware the negative current income. Remember my overseas rental properties generate current income to relieve my pressure in the high-cost NY region. Gold doesn’t help directly, but it provides some cushion/buffer for stocks.

[1] Deepak CM’s discussion came to mind, but I think his double-income-single-kid brbr is actually quite comfortable.

Let’s ask Deepak!

— literature and mainstream investor experience on US index ETF

I think majority of US retirement accounts (including mine) rely on US stock ETF (beside international stocks and U.S. bonds). I think this has been a major support for U.S. stocks esp. index constituent stocks. Self-fulfilling prophecy.

— #1 justification for allocation increase: diversification from SEA properties

I feel Beijing^SG^KHM^PH offer some diversification as these markets are not correlated.

Still, it’s good to have U.S. stocks and gold as diversification.