Tag: T_defense

##pff protection: powerless against SOME swans[def]

Posted on by tiger40490

Q: Why do you think Singapore among many small countries keep building their national reserve, if the reserve are powerless against so many disasters?
Q: Why does the global insurance industry has grown over centuries, with ever wider coverage, and many policies lasting 50-100 years?
Q: Why do credit unions (and banks) even exist if long-term saving and lending is actually based on shaky ground?
Same Answer: The reality is , the world will not end in 100 years, so the consistent savers do build up /formidable/ resources.

We tend to exaggerate the likelihood of various headline disasters, and then reach un-calibrated, quick, sweeping conclusions that “financial protections are often close to useless”. Such protections including

  1. gold,
  2. insurance plans
  3. government health insurance
  4. bank deposits in a resilient currency

Financial protections can be more reliable than other protections like levees, military protection, self-defense…. See also reliable shield: burnRate^wellness habits. There are rather few disasters that financial protection can’t help at all.

  1. political upheavals [looting, revolutions] that seize assets of private families. This happened to my father’s family and my mother’s family, but I won’t say financial protections were completely useless. It also happened in Cambodia (Grandpa pointed out) and perhaps Eastern Europe. I discussed this with grandpa. He said this will not happen again in China.
    • rare: armed conflicts — somewhere in your country is still “manageable”, but if it hits your city, then I hope money can buy you some travel tickets or weapons. Such things never happen out of the blue, so you have years to prepare.
    • Defining feature: anarchy including government-sanctioned anarchy
  2. hospital overrun — at national level can still be manageable, but if your city hits hospital capacity and somehow you can’t seek treatment in another city, then money can’t help. I think this happened in Wuhan, Span, Italy, NYC. Thanks to lessons from covid19, this is less likely to happen.
  3. ==== For below items , financial reserve can provide partial /relief/ or at least buy some precious time
  4. stock market boom and bust, wiping out a big chunk of your wealth. One of the most frequent disasters.
  5. government financial reform hurts my cohort. I am confident that in well-managed systems like SG or U.S. we would be given sufficient advance notice/warning.
  6. burglary .. nowadays most people keep bulk of assets offsite.
  7. — For the items below, the threats appear to be approaching from a distance. The financial cushions you built can buy you some time + some real benefits relative to the unprotected larger population.
  8. rare: high inflation more than 50% a year
  9. severe currency devaluation short of hyper inflation .. imported inflation
  10. very rare: famine — hitting somewhere in your country is still “manageable”, but if famine hits your city then money can’t help. Luckily such things always develop over decades , never suddenly like a pandemic, so your money can help you prepare. Other rare natural disasters include earth-quake, tsunami, but they affect fewer people.
  11. population aging leading to ever more people drawing from (rather than contributing to) a dwindling pool
  12. peak oil
  13. global warming and sea level rise; climate change and desertification.
    • Note sudden global-scale natural disasters including cosmic collisions happen only in sci-fi.
  14. global protein shortage but short of famine

— “Black swan” the concept .. Most writers use this term for _financial_ events. By strict definition, black swan events are so rare and unpredictable that assessing the probability will be guesswork and not based on data.

Is it simply better to put aside this theory? Well, one can study the pattern of past black-swan events and try to learn something, but I don’t know how useful that is, given that predicting similar events are by definition nearly impossible. I find it fun to read history. It doesn’t always offer any actionable insights though.

SG economy has experienced many large shocks. (These shocks could be considered white swans.) I feel the PAP leaders understand the vulnerability inherent in this system. They try to turn the vulnerability into agility.

 

qualitative 360°scorecard@ %%PFF

Posted on by tiger40490

how many percent of Singaporeans have an exp recon system with “1-decimal-precision” i.e. 0.1k i.e. $100

This is a precise question. I would guess below 5%.

k_kidnap

See also

This is a scorecard for my family financial health. A real scorecard always references some benchmark. The benchmark is usually drawn from the local [1] population. A broad-based benchmark enables us to define social strata like “lower middle-class”. It would be invalid methodology to use a biased sample excluding the rich or the huge base of the pyramid.

My informal scorecard below is unscientific and biased, as it relies on a small sample of peers + casual observations of the local community. I don’t even know my peers’ actual incomes or expenses. Based on my subjective and vague benchmark, I think my family is/has ..

  1. A [h] good long-term sustainable burn rate; excellent data collection
  2. .. B [j] excellent long-term Fuller wealth .. based on Singapore recorded burn rate.
  3. .. A [h] excellent current brbr. Note I only remember the past 5Y to 10Y brbr.
  4. C [h] middle income per-capita, benchmarked to population
  5. B [h] good savings rate; good savings habit, resisting some lifestyle creeps .. In the U.S. we would cope with lower savings rate, lower living standard, higher stress ..
  7. — minor scores on the “back of the scorecard”
  8. C [j] decent net asset, still growing thanks to above-mentioned savings rate
  9. B [j] reasonable contingency reserve .. largely based on Medishield
  10. B [j] reasonable retirement plan .. based on Medishield + CPF-life etc
  11. C [h] reasonable investment return .. Let’s ignore the HDB
  12. D [j] * concentration-risk .. insufficiently addressed, considering CPF, 401k, Beijing property
  13. [j] unconventional insurances portfolio, hopefully adequate .. This item is unrated
  14. C [j] reasonable inflation protection .. for the low-inflation Singapore context
  15. AA [h] excellent exp recon and tracking .. basis of my monitoring, planning, forecast and this self-assessment
  16. [j =an accumulation item, 积累]
  17. [h=a current cash flow item, 花销]

Q: which items are neglected so far or deserve more sunshine?
A: maybe those marked with a *… Rather few.

— Defense, weather-proof … is the biggest theme in this scorecard, and presumably my cohort’s scorecard, too.
Singapore government provides more comprehensive protection than U.S. government.

Health is harder to accumulate or protect than wealth is. See reliable Shields@@ (burnRate^wellness) habits #w1r2 and other blogposts about “batteries”.

— [1] I have spent many years in U.S. and Singapore. Cost differences between countries are underestimated, and sometimes invisible until your entire family live in each location for a few years. See

growth ptf +income ptf +.. #w1r3

Posted on by tiger40490

Many investors maintain multiple portfolios (for whatever reasons). I wish to keep separate portfolios so that only my growth portfolio is benchmarked against SP500. It’s unfair to benchmark the other portfolios that way.

  • income + stability ptf .. Note income stocks without stability is useless
  • .. aka defensive ptf .. for down turns.
  • international ptf .. probably not worthwhile
  • blue-chip growth ptf .. including TRBCX + a few ETFs. Benchmarked to sp500 [1]
  • speculative ptf .. mostly hot assets including ARK funds. I do (rather than “did”)  hand-pick a few speculative stocks but not exactly to beat SP500.
    • mrna
    • tourism stocks

Some stock picks would be homeless [i.e. hard to classify].

Some stock picks would be multi-homed, like both defensive and high-yield. Don’t bother. Instead, it’s more important to have sufficient allocation to meet the various needs [for income, for protection]

Q: how do I go about creating a “muti-portfolio view” from the combined portfolio?
A: No easy way. So this discussion is kinda academic

— [1] to beat SP500 you have no choice but trade hot stocks. You really need market timing. It requires more analysis, more babysitting (for exit timing). I don’t want to play that game, so I use ETFs as the bulk of my growth ptf.

— DYOC .. My income prt should have dyoc > 5%. Aggregate dyoc doesn’t make sense.

The growth prt would dilute aggregate dyoc.

 

price buffer build-up: effective@@ #w1r3

Posted on by tiger40490

In use multiple parking funds in FSM sub-accounts, I wrote that

For a few slightly-volatile parking funds, X months after buy, when the position has accumulated a 2% margin of safety, then the entire position is unlikely to go underwater. This asset thus becomes liquid i.e. At any time I would feel free to liquidate the entire position.

That is the first asset class of this blogpost.

In what stocks to sell, I wrote

Also, the price increment provides a buffer against a down turn.

However, for a highly volatile low-yield stock (like NOK, GE, MRNA,, a second asset class) even a 100% m@s [margin of safety] can evaporate overnight, or over a month [1]. Suppose bought at $1k, rose to $2k and back to below $1k.

The buffer build-up is like the vulnerable levees along Yellow river giving people a false sense of protection.

That’s why I prefer stable utility stocks or defensive consumer staples  (a third asset class). I do feel protected by a m@s [margin@safety] build-up  after my purchased stock rises by 50% and …. maintains dividend. The dividend stability is more reassuring than the price rise. Dividend stability often reflects healthy cash flow. Price rise reflects SnD, often irrational demand.

— market momentum .. can favor the buffer build-up
When the buffer gets eroded we can ask why. Suppose the stock has no real bad news. Then it’s likely “broad market”. This would be good news for the believers of the buffer. Broad market usually recovers in months or years.

In the short term, many investors would see that this stock has reasonable fundamentals, and has fallen a lot and is now a bargain. Some bargain hunters would buy at least a small quantity, like a fractional share. The key reason for the appearance of “bargain” is the $1k->$2k price buffer build-up.

Note blue-chip stocks with long history have a visibility advantage and command a high investor mindshare.

— [1] realized return to protect a position from going underwater
The “evaporation” scenario described above is real. In my CRBP case, I bought around $5 and had a 80% profit, when the free fall (to $2) wiped out that buffer. For my twin brother who bought at $8, the free fall would be more devastating. Therefore, a free fall probably wipes out 9 out of 10 investors, but the “evaporation” is not the same simple end for every one —  Size of the previous buffer still makes a real difference:

  • trough duration depends on the previous buffer
  • depth of the trough depends on the previous buffer. 95% drawdown vs a 40% drawdown are very different when forced to liquidate.

For free-fall there is a preemptive protection — realized profit. With CRBP I had no realized profit or dividend. Here’s a simpler illustration. In our previous example, you invested $1k and now it’s worth $2k, so you have an unrealized profit of 100%, but this buffer can evaporate. Now what if you cash out $300? So the price must fall from $1700 to below $700 to become “underwater”.

##[19]ffree derailers rated #resilience

Posted on by tiger40490

See also

To have any chance of lasting value, this blogpost need a _scope_ and must not become /indiscriminate/. In this personal finance blog, I won’t say too much about livelihood risks. Now let us shift our focus to ffree derailers.

This bpost is at least “w1r10”.

— intro .. Insurance and emigration companies put out subtle marketing messages portraying their “products” as the main protections in a person’s life, but that’s 喧宾夺主

  • 1) health and 2) cash flow are the twin primary livelihood risks in our lives.
  • Family stability (and harmony) .. is the third risk factor, a distant third in some traditional families, perhaps decades ago.
  • PIP, (kids’) grades … are two big derailers in some lives.

In contrast, some of the adversities listed below are outlier (black swan or missteps?) events i.e. highly unlikely. They are nevertheless worth knowing. If you don’t pay attention, they are more likely to hit you.

— ffree derailers .. All of these adversities demand financial resources and can drain my reserve. In some of them, a single misjudgment/misstep on my part could threaten to weaken or break a pillar beneath my lifelong foundation..

  • [v = too vague.. Can be more specific]
  • [3 := Pr(hit in my lifetime) ≈ 10^-3 =0.001 (three leading zeros). This numerical estimate depends critically on the qualifying criteria. Many criteria below are vague 🙁 and does not deserve this numerical estimate]
  • [0 := Pr(hit in my lifetime) >> 10%]
  • [$ or $$ = level of livelihood/financial impact. Within a given item like injury, there are many levels of financial impact. Here we try to give a (highly imprecise) estimate of the upper limit. No $$$ please]
  • [F = the later we hit the derailer, the Fwd Hazard Rate improves i.e. less impact ]
  • — half ranked by severity, and logically grouped .. Heaviest derailers sinking down (No precise composite sort key please.)
  • [5 $] natural disaster hitting my properties esp. BGC [criteria: $100k cost]
  • [5 $$v]Misstep: juvenile delinquency… before age 18 [criteria: criminal record]
  • [3 $$] Misstep: criminal offense …… often due to 一念之差 (misstep) [eg trespass, Genn’s fraud?] [aa]
  • ..[F] The later it hits in my career, the less financial impact it would have on my remaining career 🙂
  • ..[4 $$] Misstep: Immigration offense -> GC implication? I think you won’t get a chance to explain or appeal. Luckily I can always work in Singapore. This can only happen when you are in U.S. before receiving GC. Staying in SG, you reduce Pr(hit).
  • [3F $] minor misstep: personal trading breaches contributing to job instability .. In the grand scheme of things, this disaster is much smaller than criminal offense or immigration offense
  • [1F $$] minor swan:/oversized/ loss …. (100k) on property investments. I have already hit 10k losses.
  • —- accidents + illness, where medBx is crucial
  • [3 $] misstep: driving mistake injuring SomeoneElse….. need liability insurance [criteria: financial liability. A much lower (severity) criteria than above]
  • [2 $$] misstep or swan: injury (partly) due to driving mistake ….. [criteria: hospitalization within my family, in my lifetime]
  • .. Can I minimize driving? I guess I need heavy practice to improve, before I reduce driving !
  • [3v] minor swan: kids’ injury …….. before age 18 [criteria? how serious? Let’s be vague]
  • [1] misstep/swan: bike accidents …. or personal accidents. [criteria? hospitalization within my family, in my lifetime] Handicap is rare but more likely at an older age.
  • [3 $$v] swan: major medical …….. what if a family member needs a lot of acute medical help but not hospitalized and not due to aging? Very vague:( [criteria: 200k out of pocket]
  • [0 v]  swan: minor medical ……. kids’ health, wife’s health, my health.. [criteria? out-of-pocket 20->40-50k cumulative cost for a given condition, in my lifetime] These minor health issues are multiple times more likely than accidents of equivalent severity.
  • ^^^^^
  • [0 $] issue like sis’s where father had to put in all his savings for rescue 
  • [2 $] Misstep: drug addiction …….. [criteria? need professional including medical intervention by age 30 ]. More widespread than juvenile delinquency or minor medical!
  • [F $$$] disastrous Misstep: divorce …. high probability + huge impact. The later it hits in my life, the less financial impact.
  • [0F] salary instability …………. remains the #1 derailer, even though (paradoxically)  ffree is defined for zero dependency on salary. [Criteria: drop by half and half again before 70.]
    • age discrimination, churn/evolution
    • PIP? Usually doesn’t lead to salary instability if you are in-demand.

[aa] For the minor offenses, hopefully I get a chance to defend myself in front of employers, but sometimes the background check could immediately get you  disqualified without a chance to explain. Sounds scary, but Pr(hit) is below 10^-5.

The big list demonstrates that the most likely missteps/swans are less severe whereas the most severe missteps/swans are rare. 

There are other /uninsurable/ disasters to derail my ffree “dream”. How much more money would you need for those? 10M? Forget it! Below are some of my practical “defenses”. “Resilience” is my favorite word here rather than “protection” which sounds more lazy, passive and more reliant on external protection.

There is some overlap with random list@protections and other lists, but the below list is focused on resilience against disasters, and more about cashflow.

  • #1 resilience strategy — career longevity=Bedrock@ %%fledgling ffree
    • Better keep learning and keep applying your skills. If you retire for a while then forced by a disaster to /unretire/ (i.e. come out of retirement and rejoin the workforce), you will hit an uphill worse than the uphill facing those loyal employees
  • resilience strategy — invest in the “Singapore_hedge” to hedge the risks of rejection_by_US_job_market
  • resilience strategy — buy time, slow down and blunt the impact of the disaster. Some situations would improve gradually as my family adjusts to the situation
  • resilience strategy — bx? continue to spend some time on review
  • resilience strategy — diversify “productive” investments generating regular income + increase contingency reserve
  • resilience strategy — identify retirement destinations with reliable, low-cost health care such as MYS

career_longevity= bedrock@ %%fledgling ffree

Posted on by tiger40490

See also

Paradox — Fuller wealth and ffree are defined in the context of zero salary, but my ffree is fragile. So, paradoxically, the bedrock of my fledgling ffree is my career longevity, such as but not limited to dev-till-70, health and vitality. Look at LKY and my dad in their 80’s.

More than a “shield“, this is a bedrock and a foundation. I like the vivid imagery of shield and bedrock.

I think many of peers (such as Jason Fu) are very pessimistic about dev-till-70 (not career longevity). I feel sad for them.

Both missteps and swans (external disasters) are “covered” by this shield.

— non-monetary benefit of career longevity are extremely important.
I want a purpose, engagement, interaction
— nonwork income? Much less reliable than career longevity. I’m more skeptical than pessimistic
— medical cost cushions? mostly I rely on my SG citizenship
Am I a cautious optimist? I think it’s better than pessimist.
— citizenship is the 2nd bedrock, providing multiple benefits
— my burn rate control is the soil around the bedrocks, almost invisible but always there.

[21]S$900k: CpfLife^college reserve 鱼与熊掌

Posted on by tiger40490

 

This sum is just a symbolic sum, not an accurate forecast

  • CPF-Life ERS (enhanced retirement sum) may grow to SGD 450k when my wife or when I turn 65.
  • typical top college fees may grow to USD 400k/student when my kids enroll, which will happen before I turn 65.

Q: since I can’t save enough for both purposes, which one would I sacrifice? I like this type of sharp questions that focus our mind on the real priorities.

A: short answer — sacrifice college funding. Top U.S. college is like branded products, catering to the affluent.  There are many high-quality but inexpensive colleges including NUS. If your focus is quality of education (rather than FOMO, halo, vanity…), I don’t think my kids would receive the very best educatio only in a prestigious college. As explained in many blogposts, prestige is based on research not quality of education.
A: college cost is consumption whereas CPF-life is buying an annuity.
A: My sis and Zeng Sheg both agree to let the kids stand on their own feet at that age…

— liquidity

CPF-life money is committed i.e. locked in. For better liquidity, I may need to consider leaving part of the 700k in my rental properties

College funding is zero liquidity — not an investment with a liquidation value.

— student loan

In Singapore, my kids can get interest-free loans. It’s best to let the kids repay the loan, with whatever partial assistance I can provide.

— bare-bones ffree

Q: looks like I am not really financially free?
A: my earlier analysis of bare-bones ffree was based on $0 college funding. In reality, I may earmark some SGD 200k for college. Zeng

As stated elsewhere, there are some macro risks to derail my ffree, esp. risks affecting my properties. We have to live with them.

Therefore, bedrock of my financial planning is career longevity including dev-till-70.

preClearance +comparable missteps@job

Posted on by tiger40490

I decided to group this gz-theme blogpost with related blogposts, so as to have a single tag. Not purist, I prioritize cross-linking.

I also put a link-only blogpost in the gz blog, so as to apply the categories and tags of the gz blog.

— other observed missteps on the job

  • [dv] zed — One in a few hundred system alerts happened to be an important alert. I missed one. There’s a financial loss.
  • [dv] zed — My Manila young colleague had a bigger mistake
  • [v] Agilent — a Singaporean guy stormed out of the office after a heated argument with team lead
  • [v] Agilent — 2 India-nationality contractors made a mistake and then deleted the logs. Both fired.
  • [v] PWM — my technical oversight at month-end release causing some amount of commission payout to be delayed by a month
  • [v] PWM — time bomb in my ErrorMemos code
  • [v] PWM — Eric accidentally deleted a table in production
  • [v=highly visible]
  • [d=disaster in terms of (opportunity) cost]

— letter to an outside friend Zeng

This week I had a second breach of company compliance regarding personal stock trading. The first time was Q1 2020, slightly more serious, but perhaps compliance took a small part of the blame as they took too long to approve my account. On both occasions, my violation was reported (via email-cc) 5 levels up … from my manager to CTO.

The breach is about pre-clearance — For some stocks bought, I either forgot to seek approval or traded more than the approved limit. I didn’t feel like a convict. The amount this time round is below $100, but it’s a second offense. Receiving the compliance email, my recently promoted team lead called me and pointed out

  • I am taking it too lightly.
  • The compliance email briefly mentioned possible “monetary and non-monetary” disciplinary actions including bonus impact, but, as my team lead said, offenders could get fired for offenses like
  • .. sending out source code
  • .. sending out client information

I agreed with him 100% — if within 3Y my company has a cost reduction, then my compliance issues could be a perfect justification to single me out (severance not obligatory). Imagine if everyone has comparable performance and value-add, then this is an acceptable selection criterion. What a wake-up call. I will analyze it in terms of SWOT (Strength / Weakness / Opportunity / Threat).

Weakness: am not a star player, not even above average in my team. I see myself as vulnerable in a “cost reduction” situation.
.. Opportunity (minor): I can improve my value-add progressively. Even if it doesn’t really improve my vulnerability, it would build my self-esteem and reputation in the team. This kind of effort is often considered meaningless as in 内卷 (involution).

Weakness (minor): am older and slightly less in-demand on the job market, if I were forced to seek a new job, as Sachin.K was.
.. Strength: still confident about tech interviews. My skills are still relatively in-demand.
.. Strength (minor): I often forget that my degrees are well-recognized.
.. Opportunity: go back to the U.S. earlier (German.C), if the Singapore job market is unwelcoming or age-unfriendly.
.. Opportunity: convert this experience into motivation to improve IV competence

Weakness (minor): my wife has been a full-time mom. Am the sole breadwinner.
.. Strength: I have a cash reserve + low burn rate at the family level

Weakness: my trading style relies on many small trades, prone to this kind of breach. Also I don’t know any trading platform with limit check, but Rbh doesn’t.
.. Strength (minor): my trading style, on the flip side, tends to reduce amount of breach or trading loss

Threat: relying on the employer or particular managers … is always fragile and dicey 如履薄冰 — my long-standing perception of the reality. My compliance violations are minor in dollar amount and not a criminal offense, so I feel losing $10k of bonus (quite likely! Even $20k is possible.) or losing my job sounds like a gross overreaction, but those outcomes are not unthinkable because .. because the employer/manager is not caring and forgiving like our parents. On the global level, U.S. employers face fewer constraints than European employers in terms of layoff, but there are still many regulations protecting employees. (That’s why contract jobs are popular.) That’s why compliance violation provides a perfect justification for layoff without compensation. Now I come to the ultimate

Strength and Opportunity — build up self-reliance and  fortify it for the next 20Y, including interview competitiveness, wellness (stamina, stress-coping), strong family … Together they provide the ultimate protection for family livelihood. Any external support from the government, employer, charity (including friends) is valuable and “good-to-have” but not to be relied on in this case.

( In cases of systemic disasters, government support is the bedrock, such as pandemic, inflation … See ##fin protection: powerless against SOME blackSwans )

Since our last meet-up, my life has been too peaceful too comfortable, not sustainable. With a false sense of security, I have assumed I would stay in this company for 3Y-5Y. /Alas/, easy life always comes to an abrupt end. We always notice some worrying weaknesses, find new stressors, new threats… An easy life without challenges would be unrealistic and unhealthy, almost wasted (Burn/Rot). I have lived in a dream for a year, and this is a small but rude awakening.. 一盆冷水浇醒.