Tag: t_inflation

##assets2designate as legacy @65

Posted on by tiger40490

At 65, when I set aside ERS for cpf-life, I would confront an essential question:

Q: as I grow more fragile and risk-averse, which assets are best suitable as legacy for my children, knowing that they may need to liquidate or manage these assets?

Will the heirs be too young to manage some assets (either too liquid or too complicated)? When I pass on my kids would be mature enough.

— inflation .. Even though SGD inflation has been well managed, legacy planning needs more caution against long-term inflation. My kids may live in another country. Even SGD inflation may worsen in 50Y.
— commercial_annuity .. inflation sensitive 🙁
🙂 payout is reliable
🙂 surrender value grows
— cash is the easiest but inflation-sensitive
— stocks — relatively easy to manage
— gold: physical coins or bars
My kids need to know how to store them. Perhaps use a gold vault.

Long-term appreciation is more proven.
— gold: structured products backed by some companies
— HDB unit
I trust the Singapore system. However, make sure the remaining lease is adequate unless location is excellent.

If remaining lease is, say, 30Y when I pass on at age 96, I think my kids (in their 50’s) can still liquidate it or rent it out for decades.
— U.S. properties
The U.S. system is also fairly mature and efficient.
— SEA properties — hopefully my kids will be old enough to manage them through/despite the imperfect local “systems”.

CPIx-inflation fear: discrediting high-saving (minimalist)lifestyle

Posted on by tiger40490

Since my 20’s, many people around me have drilled into me notions like “your $1000 /squirrel/ away will be worth $500 in 10Y (or 20Y), so saving 60% of your income every month is less advantageous than spending 90%”.

(The same people also say that “If you can invest profitably, then it’s a different story”, but we always stopped there because none of us has that skill.)

This is the mainstream view. Well, since my 20’s I have gradually increased my savings rate. I guess it was 2-3k when I was earning s$5k. Now it’s touching s$10k.

Q: Was I unwise and regretful maintaining high saving rate?
— A: On the contrary, I think I am insightful and incredulous, with a healthy dose of skepticism. Luck is a secondary factor.
— A: No. SG government squrrels away some amount in every term, to build up the past reserve. The purchasing power didn’t drop to below half over the years. In fact, I think it has grown.
— A: No. ERE author and MMM each saved up enough and retired early. Apparently, their savings didn’t lose value due to inflation.
MMM has a blog proclaiming — once you save up 30Y worth of living expenses you will be able to retire.
— A: No because I have managed to leverage my savings to invest profitably not in traditional stocks, mutual funds, insurance products but in overseas and local properties.
— A: No because I don’t know where I could have spent more. I can look at my peers’ burn rate breakdown
— A: most important, inflation rate in my personal experience has not been half as high as predicted (by those pundits). My best-effort analysis is 30Y SG inflation: personal xp.

Only a small portion of my personal “basket” has doubled in price over 30Y.

##SG medical inflation: Cushions #JL.Yuan

Posted on by tiger40490

See also latency无底洞 for an example of medical inflation as CPIx inflation.

— My multiple layers of financial protection against medical costs.

  • first layer — employee health insurance. Most Singapore employers cover major hospitalization + some outpatient
  • [u] 2nd layer — shield plans for hospitalization. My own shield plan has SGD 400k/year max payout, with some minor limitations. It costs me about SGD 2k to protect my entire family.

Main complaint from Zeng Sheng — annual deductible in shield plans. This was introduced by government to /deter/ mindless overconsumption of medical resources. For example,

– unnecessary tests is a common waste in Singapore and U.S., contributing to medical cost inflation.
– hospital ward have discharge criteria to stop insured patients overstaying

Both of these layers are reimbursement-based. Additionally, I also have a small insurance paying a small lump sum without needing a receipt:

  • [u] 3rd layer — early critical illness, covering cancers, heart + 30 other major diseases.

In my case, the two perceived likely killers are heart disease and cancer (but based on questionable evidence)

  • [u] 4th layer  — if I’m incapacitated (aging or chronically ill) and can’t live my daily life by myself, then I need full time outpatient nursing care — cost is not covered by hospitalization plans, so I bought an eldercare supplement that pays $5k/M
  • [u] 5th and last layer — any other hospitalization cost is payable using CPF Medisave account, either my own, my wife’s or my children’s. In contrast, the U.S. Medicare system doesn’t offer a personal pool of fund… too much /legwork/ before you get covered.
  • ZengSheng suggested PA insurance, but too complicated in my experience.

The above are the layers of protections for major medical. In addition, there are also low-cost outpatient options:

  1. [u] TCM (Traditional Chinese Medical) doctors are available everywhere in Singapore, and cheaper than GP doctors. My dad used them frequently in Singapore and China. So did I in NY, but only in Chinatown. When I retire in Singapore I will rely on TCM for many types of minor or chronic conditions.
  2. [u] Singapore polyclinics are subsidized community hospitals catering to low-income citizens. If and when I retired in Singapore, I will rely on polyclinics a lot more. In recent years, they charged me $6.80 per visit. This is not a charity. Doctors are fully certified, often graduates from NUS medical school.

[u = limited reliability, affordability or availability in the U.S. system]

— U.S. vs Singapore
Compared to the tiny red dot Singapore, U.S. is a more resourceful, rich and advanced country with economic of scale. Yet, paradoxically U.S. residents have reasons to worry about the long-term reliability of their healthcare “cushions”.

I think the U.S. (public+private) healthcare is unsustainable, fragile and afflicted with excessive waste and inefficiency. See why U.S.medical cost higher

[20]松一口气65^end@college #U.S. #w1r2

Posted on by tiger40490

Q: At what age would you feel relieved in terms of livelihood pressure? I think most of us have yet to give this question a critical analysis.

— common Answer …. age 65
For the middle-class Singaporeans with FRS, age 65 means about $1300/M/person. Assuming reasonable inflation and healthcare taken care of, this monthly payout can match retiree’s burn rate, IFF burn rate is well controlled.

In contrast, US burn rate would likely exceed SGD 1300/M/person, partly due to Melvin3++ (car ownership + rEstate tax + med bx… )

If you have no kids in school by then, you may wish to start receiving this payout earlier (like 62) so you retire at an earlier age. You would need non-CPF solutions such as SRS, which can start paying out at 62.

— common Answer …. when my kids complete formal education and start working
This typical Chinese parent’s answer (LZ.Yu?) assumes the college cost is a major burden on the parents. Most middle-class Chinese parents I know seem to voluntarily take up the job to bankroll the children’s education.

I don’t plan to take it up as full responsibility. I want my kids to start saving up, take a student loan, and repay it after graduation.

— My answer …… when my NNIA can match my U.S. burn rate (USD 7k excluding housing?), which is much higher than SG burn rate (SGD 6k?)
Now (2020) I’m very comfortable on my cash flow high ground, thanks to my brbr + Fuller wealth + …

Paradoxically, I foresee worsening livelihood pressure relocating to the U.S. but still want to go.

无底洞: latency,med inflation.. #w1r5

Posted on by tiger40490

Update:

See also conserver family disposable income

MLP hosted a latency presentation by Martin Thompson. One MLP audience asked a question. Here’s what I  vaguely recall:
Q: we spent lots of time to tune a system and achieved a few microsec of latency improvement, but someone points at another system (perhaps at a competitor) and say our system can be faster. What’s your view?

Case in point — I told a Goldman Hong Kong interviewer that my orderbook at Rebus can handle 700k mps. He said array-based orderbook can easily handle 1000k mps. Well, 700k mps on Rebus was more than enough for the business needs at RTS 🙂

Answer from Martin : To improve latency, the most important thing is time including developer’s time. Look at the requirement of the system. If your latency meets the requirement, then spending more time tuning is not effective (and not necessary, IMO). A few microsec further saving could be meaningless.

Q2: what if the requirement is to beat the competitor?
A: I think the project could become never-ending. The MLP latency-critical networking team shared personal experiences on the proper approach to network latency engineering. Network engineers would work closely with latency-sensitive traders to implement incremental latency improvements and within 72 hours assess the PnL impact. Invest more time and resources only if justified by PnL. If your trades are already beating the competition in terms of PnL, then having a faster or slower network may be irrelevant. Focus on the end goal (PnL) and stop worrying about secondary yardsticks like latency. Latency is not always the dominant factor in the game.

So that wraps up my three separate examples on latency. Now let’s turn to the other (wide-ranging ) topic of this blogpost — FOMO vs livelihood.

Q4: how much disposable income is enough for an (slightly above) average life, not a life in comfort and style? In terms of brbr (burn rate buffer ratio), how plentiful is enough? ffree^FOMO #9K/M asked a similar but more specific question.

I have achieved bare-bones ffree at a “conserver” level, So one of my two major pains now looks like the rich feeling outpaced by a tycoon… endless greed, mindless peer comparison like Rajat Gupta

— Rajat Gupta was the CEO of McKinsey, after earning IIT and Harvard degrees. (https://en.wikipedia.org/wiki/Rajat_Gupta) He was a multi-millionaire but reportedly wanted to join the billionaire club. Wikipedia said … Gupta reportedly began to express a certain resentment about money, as his peers in Silicon Valley and Wall Street (including McKinsey’s private equity clients) at the time “raking in staggering amounts of money while Gupta soldiered on with a mere senior partner’s millions”

His “mere millions” is more than enough for livelihood, but he was presumably driven by endless peer comparison. This endless FOMO may or may not be related to his disgrace.

— LuckyPlaza .. I envy the LuckyPlaza early investor who made perhaps a million dollar paper profit, but hey, he also envies me for
* my high annual salary. Total salary would exceed his paper profit in a few years. Over a few more years, my total would far exceed his paper profit.
* my wellness + family harmony

He would also envy the bigger investors who made $3M .. low-latency arms race! What’s enough? Perhaps half a million.

— Some cultures (and ethic groups) may be lukewarm about the latency arms race. As stated in some Americans must want to be successful,  some Singaporeans must want to be successful.

— In ffree]US=unrealistic4many 华裔 middle-class Henry.Yin said RMB 500k/Y is insufficient for an unmarried tech worker.
What’s his “latency requirement”? I think a standard requirement for this class is owning a home in Shanghai or Beijing, which typically costs RMB 6,000k to USD 1M. Kevin.Chen said RMB 3,000k would buy a very small house in Shanghai. So I guess 99% of Chinese population is too poor by this standard. This standard is probably an affluence or luxury standard, for an exclusive club of rich people.

By this requirement, most low-latency systems are too slow…

— Dating competition .. is similar to the latency arms race. The attractive young ladies would demand “top 0.1% of bachelors” meaning more properties, more fancy cars, more branded degrees. My father told me that nowadays, it’s not enough for a bachelor to have a home in a Tier 1 city as the girl demands a 100 sqm home  .. arms race.

— healthcare inflation.. my parents once said that they need a RMB 400k medical fund. If some treatment exceeds that then they would give up and say No to the 无底洞.

China consumers (like my mother) often favor imported products and newer products, often for valid reasons:

  • imported products are sometimes superior in some ways, but often not much or not relevant
  • older products sometimes hit drug resistance

For some common conditions (like cancer), I think there is “always” more fancy, more expensive, newer solutions, just like the new techniques in latency arms race. Some of these solutions cost a bomb but offer marginal benefits (some observers may say diminishing return). My mom gave examples about extending life by months. If those extra few months cost $1M, then it’s rational to ask “Where can this million dollars have more impact?” These /advanced/fancy/elective/ solutions contribute to medical inflation, but this is CPIx inflation and often driven by exclub, not livelihood.

eg: Nursing home is no “medical” facility but /healthcare/ facility. The minimum cost is very low, as proven in many Singapore community nursing homes. However, my parents in Beijing seem to want something much better. Indeed there are very fancy nursing homes asking RMB 10k/M or more…. smells like arms race.

eg: medishield coverage for private ward.. costs a lot more than the basic insurance that covers B2 ward. Many in my cohort prefer the more luxury insurance, sometimes without due diligence. Some of them probably think they can afford the more expensive insurance, and perceive private ward as important. I think this mentality contributes to medical inflation, driven by exclub, not livelihood.

In many cases, if a consumer doesn’t exercise critical thinking, then her worry about healthcare inflation boils down to blind_FOMO, not livelihood.

brbr^FullerWealth: 2 barometers@PFF, !!ffree #w1r3

Posted on by tiger40490

I feel Brbr and Fuller Wealth are two related gauges/indicators/barometers of

  • household financial health .. I have recently devised a scorecard.
  • household financial strength
  • family survival capability
  • high ground vs low ground

— ffree analysis .. is dominated by big shocks. Fuller Wealth and brbr have a limited /relevance/.

— black-swan disaster (and resilience)
As a “buffer” ratio, Brbr (winner) is very relevant to disaster coping. Fuller wealth basically assumes loss of salary (perhaps in a livelihood disaster)… also relevant to disaster coping.

Insurers? I am biased against insurance products as a reliable protection against disasters. I’m heavily self-reliant in my outlook.

I prefer the word “disaster”. Resilience operates at the physical, health, attitude, network levels. Financial resilience is a at most half the package of overall resilience.

Compared to brbr, Fuller wealth is more well-known, more discussed, but Fuller wealth assumes a stable operating environment over a long horizon, free of black swan events. History seems to show otherwise, so brbr is more down-to-earth, i.e. closer to reality.

Witnessing the mass layoff during covid19, I hold on tight to my brbr buffer. I might lose my job after a few years, so every month I get paid, I put away 66% as reserve. If and when the salary stops, I would rely on my Fuller wealth.
— inflation as a realistic macro risk (not a crash)
Brbr (winner) and dev-till-70 are more inflation-proof than Fuller wealth.

Fuller wealth would rely on rental or dividend income to beat inflation, they are more unstable but more inflation-resistant than annuity products.
— FOMO or livelihood?
These concepts are all about livelihood. FOMO is kinda naïve in this context.
— low burn rate, high savings rate
Brbr and Fuller Wealth both depend critically on low burn rate high savings rate, where I have a definite advantage.
— Am I anti-growth (rather than pro-growth), backward looking, ultra-conservative, 复古, pessimistic about economic expansion?
Not entirely. I like cautious optimism, cautious expansion. Fuller wealth (winner) is less anti-growth …
— a Toa Payoh barber’s 压力 is presumably brbr. If they earn 2k and spend only $500, then no ground for complaint.
FOMO is probably another factor. The essential needs are probably $500/M

gold^bccy^U.S.eq^rEstate: long-term strength #w1r4

Posted on by tiger40490

For the purpose of legacy planning (including inflation hedge), this blogpost is 51% about gold, 30% about stocks.

  • I see the strength in gold over a 200Y horizon. It has proven its strength over 2000Y. CB (Central banks) slowly build up and carefully transport gold reserve precisely because gold provides time-honored, enduring, strength to the respective currencies.
  • I see the strength in properties over a 70Y horizon, but this strength is location-specific. Discussed below.
  • I see the strength in U.S. stocks over a 30Y horizon, considering numerous regime changes.

— large holders of gold tend to be central banks. In comparison, here are the largest holders of other asset classes:

  • gov bonds — similiarly held by governments, banks, insurers, corporations. gov bonds provide strength and stabilization.
  • Commercial and large rental buildings — held usually by corporations and governments .
  • individual residential properties — held by individuals + corporations.
  • stocks — bought and sold by individual investors, buy-side institutions

Boom-n-bust … describes stock and residential property bubbles, not gold. However, gold can become overvalued.
— typical holding period

  • stocks — months, up to 5Y for retail investors
  • residential properties and long bonds — decades
  • gold — generations. I believe most large holders of gold don’t sell often. Say price is now $2k/oz. If a CB decides to sell 1% of its holdings, it would probably impact the market right away. Therefore, I suspect the large movement is due to small investors.

— Since the invention of money, gold has held its strength, so what could derail gold’s strength?
Disruptive technologies threaten to destroy the special position of petrol, but is there a disruptive technology against gold? I don’t see any sign.

gold offers inflation hedge only over the long term. https://www.cnbc.com/2021/06/08/gold-as-an-inflation-hedge-history-suggests-otherwise.html “If you look at the very long term, gold should hold its value against inflation. But in any shorter period, it may or may not be a good hedge”

==== other inflation hedges
Actually, I don’t worry too much about SG inflation.
— bccy

How about bccy as a long-term inflation hedge? Any proven inflation hedge must be stable. Gold is much more stable than BTC.

https://www.channelnewsasia.com/commentary/crypto-ftx-sbf-bankrupt-crash-binance-3068201 says
The value proposition of crypto was supposed to be a hedge to the dollar or more conventional parts of the market.

Or that it would hold up in value if everything else fell. But an asset that offers that kind of hedge is rare; most assets are somewhat correlated, especially when the market drops. Rareness normally means an expensive asset that offers a lower return, possibly negative yield. You pay a big price for that kind of safety and it’s hard to find. The fact that crypto offered such high returns indicated it was never a good hedge.

— “real asset”.. Some investment salesmen (or economists?) use “real asset” to refer to precious metals + rEstate. They find something in common between those asset classes — anti-inflation, and not based on a paper document like stocks and bonds.

Actually, I think SP500 ETF is also anti-inflation, but for a different reason. The Achilles’ heel of stocks as long-term inflation hedge (bold claim) is the short history of stock market .. 50Y vs 2000Y for gold. Regime change is rather frequent.
* I feel the price chart before 1945 is largely irrelevant.
* Due to high inflation high interest,, the price chart before 1980 is also largely irrelevant.

— property market is extremely location specific.
Eg: Beijing/Shanghai growth has been exceptional and unreasonable.

If your location is not a tier 1 city or attractive to the property-loving Chinese investors, then long-term capital protection is questionable.

[22]midclass livelihood ]Chn as well-off as SG@@ #w1r4

Posted on by tiger40490

My concept of Chn’s middle class is mostly-urban, white-collar, usually college-educated. A concept confirmed in a book by XS.L (梁晓声 Xiaosheng.Liang).

When I interact with my relatives, ex-classmates, /repatriated/ ex-colleagues, repatriated young graduates (acquaintances) …   I often have a vague, unfounded livelihood assumption that the Chinese middle-class has some advantages + some disadvantages[2] vis-a-vis SG middle-class counterpart, but on balance equally well-off. This assumption has a theoretical cornerstone — the middle-class’s definition. This definition implies that the middle-class in any country is well-off (小康富足) although the numerical criteria depend on location. Those criteria are vastly different in Bayonne vs 天津 vs 建德 vs Cambodia vs Manila due to PPP-FX.

[2] A lot of times, I could feel a strange sense of inferiority. Highly distorted and irrational. This is the same illusion as (not similar-to)

  • my distorted illusion that HwaChong JC and NUS were possibly perceived as inferior to 实验 and Tsinghua.
  • my distorted illusion that 实验 was somehow inferior to 四中, when both high schools produce top graduates on par with each other
  • my distorted illusion that Singapore was a /backwater/ compared to Hongkong or Shanghai

In this blogpost, I want to point out some of the hidden but crucial differences between SG and Chn middle class livelihood. Not a Chn-watcher, I won’t go in-depth. Mostly based on hearsays, but from trusted sources such as serious intellectuals.

  • :(▼healthcare .. different people in Chn and SG give me very different descriptions. I feel well taken care of in SG. XS.L said for many lower middle-class families, a medical event could sink the family to cashflow low ground, and grandpa agreed.
  • 🙁 long-term inflation .. hurts the retirement livelihood. I feel confident about SG esp. the medium term.
  • :(▲precarious .. worry about drop-out from middle-class exclub , as XS.L described. I feel secure. Overall, in SG there is some level of safety net, perhaps not as strong as in the western welfare states.
  • 🙁 full-time nursing .. this cost is relatively affordable in SG (thanks to foreign workers) but very high according to my parents’ earnest market research.
  • 👍 food, transport, outpatient medical .. probably cheaper in Chn.
  • difference: CRBR .. My parents have adequate pension. Not sure about the 20Y prospect for current cohort of middle-class. I feel most of the middle-class in Chn or SG don’t feel very safe about retirement income. However, CPF-life is better than nothing.
  • 🙁 environment .. PAP government has a reputation for tackling long-term environmental challenges
  • 🙁 caring society .. (for the /vulnerable/, but hey folks do drop out of middle-class, as XS.L pointed out.) I feel Singapore is overall a slightly more caring society than the Chinese cities I know. Vague feeling. If I have to be specific, then most of the reasons are related to government services; some nonprofit organizations and individuals also play a part.
  • 👍▼Chn’s economy will keep growing at a speed higher than SG. However, in the foreseeable future, living standard will remain lower than SG. Chn is decelerating more rapidly than SG which has reached maturity decades ago. It remains to be seen if faster growth translates to better livelihood for Chn’s expanding middle-class.
  • — Some differences are not exactly about “livelihood”:
  • 🙁 aspiration for branded degree .. harder to achieve for the Chn middleclass, partly due to lower absolute income. Large portions of the urban middleclass aspire to an overseas education/experience.
  • 👍 gap from median .. Suppose we compare the ratio of middle-class household income to the national median. Somehow, I feel the Chn counterparts “enjoy” a higher ratio than the SG counterparts.  If (a big if) that’s the case then the Chn middle class feel more self-conceived superiority and satisfaction (Shuo.L) than SG middle class would. How important is this self-esteem?

— 🙁 Difference: housing … The most intriguing difference. If a Chn middle class family of 3 could avoid buying a 2BR home [3] in a tier-1 city, then livelihood pressure can be tolerable. I just don’t know how many of the urban middle-class can avoid it. They are drawn into it by some invisible force, unable to free themselves.

[3] XS.L specified 70 sqm 居住面积 for an a stereotypical white-collar young couple planning to have kids, but XS.L didn’t say Tier-1 city.

Tier-1 city’s home price is comparable to, if not above, SG condo (at least 100% above HDB flats) but typical Tier-1 city salary is still lower than SG. The price tag is so large as to require contributions from 3 generations of a middle-class family, as XS.L confirmed. When we compare livelihood, this price tag is the elephant in the room.

I used to feel this peer pressure was exaggerated by the media, but XS.L, my parents, and my Chn bachelor colleagues all confirmed that this peer pressure is both pervasive and entrenched.

A major factor is mate selection, which affects entire families! Girls often demands not only a tier-1 city dowry home, but a 100 sqm [grandpa said, 建筑面积] home. So if you have a bachelor son, can your family avoid “it”?

— personal medical reserve .. This is not a SG^Chn difference per see, but quite relevant.

In the late 2000s, my mom said CNY 400k (si4shi2wan4) was a good-enough medical reserve for each retiree, on top of public health insurance (reimbursement-based). Such insurance has coinsurance, and numerous exclusions such as elective treatments [imported medication, supplements,,].

In early 2022 my dad recalled that consensus figure among retirees of that time — regardless of the medical condition, if CNY 500k is spent over and on top of insurance, and still the life can’t be saved, then it’s reasonable to give up. As such CNY 500k was a reasonable last-resort personal medical reserve, for millions of well-informed Chinese retirees.

Fast forward to 2022, CNY 500k-1000k of family savings is common according to my dad, living in Beijing. I think this improvement in savings reflects (medical++) inflation, rising income, rising wealth esp. in rEstate.