Tag: t_vague

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

competitive trec≠predictor@outPerformance #pick`bet

Posted on by tiger40490

Past competitive performance is not predictor of future out-performance

Scope: wide, relevant, not highly specific

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

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

retrospective?

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

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

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

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

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

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

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

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

 

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

why $5k[2016]→ $4k/M[2020] #tax

Posted on by tiger40490

The basic limitation of longitudinal  burn rate analysis is the exclusions. A trendline requires a consistent rule on exclusions. In reality, during 5 years my exclusion rule would be different from the previous or next 5 years. If we don’t address this limitation, then trendline is meaningless and misleading.

I have been tracking family burn rate for a few years. In 2015-2016 it was above $5k/month, excluding transfers, mortgage or UChicago fees. If excluding IRAS then about $4~5k.

Note: IRAS was up to $700/M, averaged below $500/M, complicated by baby bonus rebates.
Note: transfers to grandma or wife are usually spent on household.

In 2020/21 the average is below $4k/M excluding transfers, IRAS, cigna prem. It’s useful to investigate the improvement, and hopefully strengthen it. Luckily, with financial numbers it’s easy to drill down to uncover the exact reasons. Here’s my high-level explanation.

  • ⭝MindChamps .. was $900/M.
  • ⭝flights + restaurants .. was once close to $1000/M, nowadays below $300/M. After covid19, this expense will increase.
  • ⭜insurance premium .. is  higher nowadays, perhaps by $400/M
  • ⭜piano costs ..

— In 2022, our burn rate is likely to inch up to $5k, hurting our Brbr.

In Feb 2022, I told wife about $9k/M but using different exclusion rules:

  • + I record about $4k/M as the headline burn rate
  • + $1800/M is transferred to wife and usually spent
  • + IRAS about $900/M
  • + mtg interest cost will be $500/M assuming 1.2% pa interest rate.
  • + mtg principal repayment about $2k/M

entry/exit: stick to proven rule@@

Posted on by tiger40490

I often hear authors advocate discipline — “Set your own rules and follow them consistently.” However … Q: why do we need to monitor the market rather than program a computer to do so?

More importantly… Q: how do I know when to turn on manual override and modify my rule?

I think in reality, what we can realistically do is “Follow personal rules 95% of the time” What percentage of retail investors have the discipline to achieve that? One in 10? Among this subset of (millions of) investors, their numeric rules are all different and therefore create millions of “free agents” that power the free market.

CPIx-inflation]rEstate, my CPI basket #w1r3

Posted on by tiger40490

update post on CPI^prop inflation
I repeated my rental yield reservations to Susan

Susan said HDB flat is not only a form of rental property investment, but also a family residence. Renovation “investment” is more like burn rate rather than investment. Mortgage interest is definitely burn rate.

wife has concern about “hard to sell” in 20Y. Similarly, Susan said decades ago, HDB price level was considered very high and many ordinary Singaporeans were worried about buying at the peak, but I guess they had no choice.

Jolt: This “inflation” renders rental yield decline basically inevitable whenever we upgrade or even downgrade. As I said in another blogpost, rental inflation is slower than prop inflation ….

By excluding housing, CPI is massively understated – MacroBusiness

—- Let’s put on the “red hat” and examine inflation due to …. real estate
See also inflation applies to rent not property price

Granted, if you have no family and live in a shared or tiny room, then rental will be a small cost. From 1993 to 2005 I paid around s$300/month, sometimes below $300 in Yishun (Agilent/Spherion). It didn’t rise a lot. Even if it does rise to $600, it is easily affordable to me.

(In contrast, Americans renters often spend a sizeable portion of income on rental.)

As shown above, Singapore experienced mild CPI inflation across the board. However, in relative terms my net worth shrank relative to my peers who owned private properties, because our perception of richer or inferior is dominated by FOMO (peer comparison), not inflation affecting livelihood.

This paradox is probably more obvious in Beijing or Shanghai. Your rental won’t go up much, so you don’t feel that much inflation, but relative to your ex-classmates who now own multiple properties, your net worth shrinks significantly over 10Y to 30Y.

Therefore, for both owners and tenants, property appreciation is clearly felt, even if rent inflation is slower and delayed.

Q: If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities? This answer is the OER (Owner’s Equivalent Rent), included in CPI survey of homeowners. See https://www.bloomberg.com/opinion/articles/2021-05-13/april-cpi-housing-may-be-inflation-s-hidden-danger

Spending to purchase and improve[3] houses and other housing units is investment and not consumption. Home price inflation is not consumption, therefore not part of CPI. However, for most middle-class Chinese families I know, home price inflation is one of the biggest inflations they _feel_ in their wallet, on a monthly basis…. paradox ! Well, whether it’s home inflation or food inflation, at the core, a high inflation (like 11% p.a.) means that our savings are losing purchasing power by 11% a year, as measured by a (realistic) fixed basket of things-to-purchase.

We can also remove “fixed” — high inflation means our basket shrinks 11% from last year, for the same dollars spent.

By conventional wisdom, property, stocks, gold are assets with enduring value, not consumed. But imagine you need to buy silver jewelry every year, perhaps as gifts to many kids in the extended family, as a local tradition. Silver price inflation would hit your basket and contribute to everyday inflation.

[3] Consider property renovation. Suppose you own several commercial/residential properties so every year something would need upgrading. Renovation inflation would hit your basket and contribute to a clearly felt inflation. Renovation is investment… Paradox!

Therefore, in reality we don’t need to hang on to the investment^consumption theoretical dichotomy.

Now consider the middle-class Chinese families. Many [2] of them carry a heavy mortgage. Once the mortgage is halved, (family) free cash grows, and they would want to buy a better home, esp. in the Singapore context[3]. Not every year, but perhaps every decade. The home price inflation hits their basket real hard, because .. hold your breadth… because higher down-payment and higher monthly commitment dry up their free cash flow. As a result, the family has far less free cash to spend on vacations, dining, enrichment and other /discretionary/ spends. Their living standard suffers due to that expensive home. In Tier 1 Chinese cities, one expensive home could dry up the cashflow of 3 generations.

[3] The new home often offers about the same rental income and resale value as the old home. That translates to lower investment returns. I told my wife that

“If we spend additional $300k on a more comfortable home but consequently earn an inferior investment return, then we kiss goodbye to our carefree easy life, and cashflow high ground.”

Q: [2] Is this common behavior? Does it affect majority of the middle-class Chinese families? I would say yes.

Q: why do these families allocate such /disproportionate/ amount of (ultimately limited) resources to such luxury homes?
A: I can see it in my wife. The desire for better home seems insatiable.

In the U.S. we will experience the same “upgrading” process. Perhaps in most U.S. locations appreciation is not much more than CPI inflation.

— Paradox: Property price rises and falls more like stocks and gold, while rent and most CPI items experience slow and one-way movement i.e. inflation?

  • property, stocks, gold can be sold by individuals, so price fluctuation is higher than “supplied” goods and services.
  • Property, gold, stocks are driven by investor sentiment such as greed (hot money) and fear.

Q: When valuation drops 9% in a year, why does rent stay basically unchanged?
A: I feel most owners would rather leave the unit vacant than reducing the monthly rate. I am more “flexible” than them.

— home ownership is not a necessity, more like an investment, though the middle-class Chinese don’t feel that way.

Everyone needs housing as a basic need just as food, transport, entertainment, but not everyone needs to BUY a house, esp. in a volatile property market. Note a volatile market is usually too risky for consumers, and possibly more suitable for long-term investors.

In Beijing, the residential rental market is underutilized and only acceptable to the migrant workers. Most long-term residents prefer to buy, despite the volatile and extremely overpriced market.

Fundamentally, the middle-class Chinese sacrifices current spending in order to save/invest for the future, including future generations. Singapore government’s Past Reserve is the most institutionalized example. At the individual level, the most visible and significant save/invest item is home-purchase.

I think many consumers in western society spend more than the stereotypical middle-class Chinese, even at the same income. One of the biggest reasons is renting vs buying.  Suppose the westerner (renter) and the Chinese (buyer) live in two neighboring identical homes . I bet the renter’s housing outlay is much lower than the buyer’s, on a monthly basis.  If (a big if) both families have the same household outlay of $5000/M, then a bigger portion of that outlay goes towards housing for the Chinese than the renter. As a consequence, the Chinese family have less to spend on other things. Home price inflation shrinks their basket.

[21]long trough: Nsdq(17Y), SP500(7Y),gold,,

Posted on by tiger40490

 

Xp: equity mutual funds — about 3 out of 10 funds get stuck for 5Y+
Xp: Majestic Village

Q: how long was the longest trough in the Nasdaq100?
A: 17Y according to https://www.investopedia.com/timeline-of-stock-market-crashes-5217820 and https://www.macrotrends.net/1320/nasdaq-historical-chart. Corresponding trough was 7Y in SP500.

On the basis laid out in big-ticket items pre55, here’s a follow-up question:

Q: if the amount of money is not-neded (i.e. I don’t have a need for the amount sunk in), then Why did I hate long trough in a liquid asset like stocks and gold?

This quesiton underlies my deep-rooted subconscious resistance to long-term commitments such as endowments.

A: I need the sunk-in fund to provide more current disposable income (for better commute, enrichment programs etc), higher brbr buffer, exclub(?), windfall profit(?). I hate to have my fund locked up while giving up these optial but “nice” things

Reality check — most of the time the “not-needed” condition is not 100% satisfied i.e. I do have something of a “need” for the amount. This reminder is very relevant for gold, and also (not for long-trough) HDB home upgrade.

safe working-class neighborhoods #Bayonne++

Posted on by tiger40490

Many of my Chinese, Indian .. immigrant friends are willing to pay a premium for

  • AA) good public school
  • BB) safe , clean, well-maintained (not dilapidated) neighborhood

Bayonne and South Edison are examples of safe working-class neighborhoods. Schools are average.

For me, BB is a real priority, so Bayonne is good enough for me.

— Working-class, Middle-class, Upper-class,,, neighborhoods in the U.S.
I feel the distinction is real and driven by family economic disparity

The middle-class prefer better schools, cleaner streets, bigger, (newer?) better-built homes. Some younger middle-class couples prefer rental apartments at cleaner, trendier/more fashionable, more “interesting” locations.

The richer families out-bid the working class families and take over such neighborhoods.

Beside the higher cost on bigger homes, pTax also squeeze out the working class families.

Paradoxically, Bayonne has high pTax. Some parts of this working class town are definitely higher standard, closer to the county park.