Tag: t_w1r1

Temasek^MAS_OFR^GIC

Posted on by tiger40490

Q: given Singapore’s oversized reserve, does Singapore’s investment/asset-mgmt talent pool have adequate calibre?
A: I think MAS and GIC allocte large portions to external managers with specific expertise, and manage the allocation with control, periodic reviews and rebalancing. I feel China government is less likely to do that. (On a footnote, Temasek is somewhat differnet. It owns stakes in many government-linked companies.)

In contrast, Private money AUM in Singapore was about SGD 5T as in Singapore assets under management up 10% to $5.4 trillion in 2023; new debt issues rise 21% | The Straits Times

— based on Ravi Menon: How Singapore manages its reserves (bis.org)

Singapore’s reserves are held and managed in three distinct pots: the MAS, GIC, and Temasek.

MAS manages the OFR [official foreign reserve, SGD 500b as of mid 2024]. MAS is the most conservative of the three investment entities, with the OFR invested mainly in safe and liquid assets. Probably low-return. Out of the 3 pots, I guess only MAS fund can help defend the Singapore dollar, due to liquidity.

The GIC (well over USD 100b, possibly many times bigger) is a sovereign fund manager, managing the government’s foreign assets.  These assets are separate from the OFR. At GIC’s inception, part of the OFR was transferred from MAS to GIC, which was tasked to invest the reserves in a globally diversified portfolio of asset classes with a higher risk profile to deliver good long-term returns. GIC’s annual (dividend?) return contributes to the revenue of the government.

Temasek (SGD 400b in Nov 2022) is another state-owned equity investor. More than a quarter of Temasek’s portfolio is invested in Singapore, with the rest invested in 1) Asia and 2) global markets.  Compared to MAS and GIC, Temasek is further out on the risk-return spectrum. I suspect that Temasek doesn’t have a statutory duty to pay annual dividends to share holder (i.e. the SG government). Such an obligation would limit the level of risk capital in the fund.

— Temasek 2022 .. based on https://www.channelnewsasia.com/business/temasek-holdings-net-portfolio-value-crosses-400-billion-first-time-annual-review-2803921

  • 63% in Asia
  • 27% in SG
  • 22% in China .. #2 country allocation
  • — by sector
  • #1 sector: 23% financial services
  • #2 sector: 18% telecommunications, media and technology
  • #3 sector is transportation and industrials (energy and resources)

Unlisted securities (52%) registered 16% IRR over 20Y. These are often the most risky, unestablished businesses.

— CPF money and GIC.. demystified and clarified in every S’pore dollar is backed by hard asset #ownership.

make every dollar work hard4u@@ #SBH

Posted on by tiger40490

See also priorities in stock trading

It is Perfectionist and unrealistic to make every dollar work hard for us. Many experienced investors (few are wise investors and even fewer are real “experts”) stay invested, having very small amount of idle/unproductive/unemployed cash, like 12x monthly expenses. See https://tanbinvest.dreamhosters.com/24728/12x-monthly-expenses/

For decades, I have lots of USD or SGD sitting in bank accounts earning below 0.5% pa. asset%allocation: imprecise snapshot=best shows my cash allocation at around 15%, much higher than equities. Used to be 50%. I have long accepted low return in exchange for “excess liquidity“.

I didn’t complain. I usually complain only when I lose capital or lose liquidity (as defined in liquidity[def]: how I gauge illiquid products) .

* memorable eg: I remember the professional analysis of AllianzIncomeProtector. The annualized return turned out to be very poor. (I think cpfLife may also show a low annualized return, despite the high DYOC.) I probably don’t mind that low return. However, I do mind the horrible liquidity[1].

* memorable eg: Buffett’s IBM “mistake” shows an embarrassing but positive return on this IBM investment. Not spectacular but no disaster either.

I think these are some of the key reasons I don’t see myself as an “aggressive investor”. So not every dollar (sometimes not even half the dollars) in my possession is working hard. When my cash “productivity rate” did hit 90% (i.e. 90% of my spare cash deployed into /productive/ assets), I sometimes had my fingers burned:

  • In 2021 I deployed all my spare cash to FSM bond funds. About 80k is currently stuck.
  • I had a 150k position in the supposedly safe Allianz HY fund. Stuck for years. I lost liquidity and lost capital, but in terms of e2etr [end-to-end total return], probably up to 1 to 5% loss only.
  • I only invested about 40k with Jill, in contrast to 6-figure commitment of other investors. We lost capital.

— If I carry a 250k mtg at 2.5 ppa, but have 250k idle cash, then I would feel the pressure to make the idle cash more productive.

— Jolt: SBH in HDB.. why I can easily save 100k but won’t spend 100k on a new HDB? I wanted the 100k to be more productive, working harder to generate returns.

After Susan’s discussion, I feel 100k invested in a SlightlyBetterHome is different from “excess liquidity” mentioned above. This 100k will be non-productive for decades 🙁 In fact, part of it is cost (reno/fees), rather than investments. The rmSelf tends to neglect the xpSelf.

  • Investments are the focus of the evaluative rmSelf;
  • Those costs were incurred to provide experienced wellbeing of the xpSelf.

## AUM: custody,misuse,,

Posted on by tiger40490

AssetUnderManagement usually refers to fund management (mutual funds, hedge funds), but in this blog, it also means “fund under custody”

Q1: how much risk (including liquidity risk) is accepted by the depositor?

— eg: AUM by FTX .. depositors’ fund should stay in some custodian account, but FTX transferred part of it to some affiliate company.
A1: zero risk. Depositors don’t want and don’t agree to take on any risk. They want to have real time access to their funds, with no question asked.

— eg: AUM by land lord = rent deposits .. landlord ought to keep tenant’s security deposit in a custodian account. Owner of the fund is the tenant not the landlord.
A1: liquidity constraints. Depositor (tenant) can only demand their money after they move out.

— eg: AUM by CPF = members’ money.. CPFB should not invest members’ money in risky schemes. CPFB invests it with  GIC rather than keeping it in some custodian account.
A1: severe liquidity restrictions. CPF members can only withdraw for specific purposes or at some specific age. A.k.a compulsory saving.

Many pension funds are similar.

— eg: AUM by retail bank = your deposits .. your deposit amount=bank’s risk capital #ownership
A1: zero risk for savings accounts, and some small liquidity risk for time-deposits. If a bank uses depositor’s money recklessly, depositors would queue up to withdraw, causing a run on the bank.

— eg: AUM by husband = wife’s money under my care. She wants to feel confident and reassured that her money is not invested in anything illiquid.
A1: my wife may feel she is taking on too much liquidity risk when she lets me manage her money. She often wants more liquidity.

buy small,learn fast: adv@stocks+ETF #Zeng #w1r2

Posted on by tiger40490

The trigger : a stock coach compared properties, gold, mutual fund,, and pointed out a unique advantage of stock as an asset class. I’m even luckier, due to Robinhood.

When buying small, the Impact of missing latest news is proportionally small.

— update

if you want to gradually develop a personal stock-picking “system”, then you need to make a large number of small but real decision, over different times. A few big trades won’t grow your confidence fast enough.

To become an experienced stock investor, you also need to make many informed decisions and learn from that experience.

Q: how much retrospective analysis needed?
A: not about how many hours but how much real traction you gain (not wheel-spinning). You should cut down the review when you notice diminishing return.

Quick learning is an advantage of stock vis-a-vis other investments.

— buy bigger .. When we have some confidence and experience then we can put in bigger trades up to $5k. Even at this level the impact of missing some news is not huge.

After you learn the art and grow in confidence, you may need to bet bigger, or ROTI remains low. But it’s not a harm in itself as explained below

Nevertheless, Low ROTI is no real problem for recreational investing.

— I always favor small trades below $1000, like $500. This way, we don’t need so much due diligence.
My learning comes after I hold the name in my portfolio and I get to monitor it in my portfolio, just as you monitor the stocks of you past employers, the stocks behind the brands you buy. A bitcoin researcher, an economist by profession, bought some coins just to motivate himself to monitor it.

This is a benefit of investing in individual stocks rather than ETF.

— downside of this “buy-small” advantage

  • Low entry barrier means too many small retail investors … herd instinct
  • low ROTI
  • hard to find bargains

— Fractional shares are a great training tool, though there are some limitations.
— Buy without fear if below $50.
— Compared to mutual funds, PE etc, I feel ETF/REIT/Stocks support faster, safer learning curve.
You get to climb the curve faster thanks to the cushioned training outfit.
— mutual funds learning by small trades, as compared to ETF

  • 🙁 annual fee
  • 🙁 no limit order
  • 🙁 you can’t learn by buying one share as in stocks

Both mufu and ETF offer

  1. 🙂 less distraction at work
  2. 🙂 pre-clearance exemption

— email to fellow investor Zeng
Q1: Is there anything harmful in buying very small quantities of a stock?
I don’t know any. I believe lower profit is not a harm in itself. Likewise, keeping money in time deposits is no harm.).

Q2: Is there anything harmful in buying “too many” stocks?
I don’t see any.

Q3: is it ok to buy-n-forget? Many people say “you need to monitor your portfolio once a while and have a plan when to sell”.

  • I think it’s OK. Buffett once said something like ” Our Favorite Holding Period Is Forever“, so I think it’s entirely possible to make a decent profit with buy-n-forget.
  • If I must babysit my positions, it would affect my sleep, my work, my mental energy for workouts, and parenting… all of them bigger than stocks. As busy fathers, we all understand that our total mental energy per day is a limited resource. I don’t think it’s worthwhile to spend my precious mental energy on babysitting my positions.

Q4: is it wiser, healthier to focus on a smaller number of (say 10) stocks or 100+ stocks? You gave a valid argument that since I can only allocate up to 10 minutes, and invest small amounts on each stock, I won’t make big gains.

  • my stock picking is recreational, perhaps with $15-20k risk capital. Am not aiming for big gains[3]. For each stock XYZ, I’m OK with XYZ if over 10 years XYZ temporarily rises above my initial purchase price. “Temporary” so as to give me a chance to exit. Even if I exit with 2.2% return over 3 years, I’m fine.
  • I have learned from experience that more time spent on analysis doesn’t lead to better trades. Sometimes I spend only 3 minutes on an unfamiliar stock, before buying. No major mistake so far. Some of the regrettable stocks were bought after longer due diligence.

[3] If you want big gains, just buy SP500. I do that too, but doing that is too boring and not recreational. (If some investors want to beat SP500, I wish them good luck.)

For my investment to remain recreational, it must not create undue stress. Therefore, diversification helps. Meaningful diversification is not easy, and my 100+ stocks represent a wide spectrum, with superficial diversification. Concentrating on 10 stocks would be even less diversified and more stressful.

Q5: Just what have I learned from so many stock-picking decisions? Here’s a random list of answers, half-ranked by unique/specific value

  • I am learning how to read news, and I learned how much to trust analyst ratings. Now I know there is a validity period, a target price, and a rating in each analysis. I have very limited time and must zero in on the key points.
  • I learned about various zero-commission brokers. Robinhood is a poster boy among them. There are many limitations to the platform. I learned many of those limitations.
  • I learned a lot about how to assess dividend history and dividend safety. I also learned about share buy-backs.
  • I am learning how to group my 100+ stock positions into categories… crucial for the purpose of benchmarking
  • I learned about (sector) concentration risk within my portfolio.
  • I learned about risks in REIT, utility/telecom, pharma, cars, oil majors, energy mid-streams, tourism/airline sector, banking/insurance, mining .. among other sectors.
  • I learned a bit about Russia, India, Canada, Japan, China… Many of these stocks trade OTC .. low liquidity
  • I learned some of the limitations of country-specific ETF or mutual fund. I pick my own stocks for exposure to specific geographies.
  • I learned about withholding tax implications for Canadian (+other) stocks
  • I learned that more time spent on analysis doesn’t lead to better trades, as explained earlier
  • I learned about the risks of fractional shares vs big-quantum stocks (above $200/share), and also market- vs limit-orders
  • I learned about emotions, impulsive trading, over-buying, obsessive trading, distractions from work…
  • [v] I read about legendary investors’ styles including Buffett. They make mistakes too and they seldom can beat SP500.
  • [v] I learned about why the U.S. index beat all regional market indices hands down.
  • I am learning about blue chips vs small caps. Most people seem to favor large caps if they only buy a few names.
  • I learned a bit about leveraged REITs. I think you need to invest in many REITs before you start seeing the differences in leverage.

[v=Note some of the things above can be learned without buying 100+ stocks (thought more trades would speed up learning). I have marked these items with v]

1998bachelor’s fin-health #tuxedo

Posted on by tiger40490

update:

The trigger/inspiration — discussion with Jun.Z’s son, and other recent graduates.

In 1997 or 1998, I met an NUS EEE graduate one year above me. In his sleeveless tuxedo, he was running his own tiny company with a young employee. He had been doing that since graduation, and had never worked for any employer. In hindsight I assume he was unmarried and staying with his parents.

He was the first among my peers to make this breakaway observation:

“In this place and at this time, NUS engineering graduates like us can always find a job as long as we aren’t picky. But In this place and at this time,  we don’t really need to worry about livelihood, so why do we need a salary in the first place?”

His words were backed by his action, which left a lasting impression on me. (Among other things, I started watching my Fuller Wealth growing progressively towards 20Y, and later quit my job.)

On the bright side, my cash flow self-assurance in my 20’s was not based on exclub but based on FullerWealth, brbr, benchmark to median household income.. all valid criteria in the 2020s.

On the less-bright side, there was a pervasive [1] but largely unfounded, hearsay /apprehension/ among my cohort of recent graduates.

  • mate selection .. is ALL about exclub
  • home purchase .. 3BR needed, according to peer pressure .. “2BR won’t be enough for a growing family”.
  • .. In Chinese cities, this pressure was/is even worse than Singapore
  • parenthood .. SGD 1M/child according to peer pressure, including some $300k “needed” for college
  • .. In U.S. middle-class, the college price tag is even worse than Singapore
  • medical .. my mom said something like $100k (四十万)
  • inflation (+retirement) .. threatened to shrink each (saved) dollar by half every 20Y or so.
  • — my career worries as a young techie
  • “My income is not rising as fast as my cohort” .. but based on what data?
  • “My skillset is not broad enough. I’m boxed in and have a single narrow skillset compared to my cohort…” but who?
  • not learning enough, not competent enough
  • short runway .. by age 30 I am expected to be competent, independent, possibly a team lead
  • long struggle ahead, over 40Y
  • too many career choices… “Is this domain right for me? Will I regret?”

Q: how has my idea of livelihood changed since?
A: first hand experience convinced me how little I actually need in each area, in terms of livelihood. I now see those second-hand beliefs are absurd and illogical. This is MY breakaway from the conventional wisdom on livelihood. In terms of livelihood, it’s somewhat similar to that tuxedo guy’s breakaway observation.

As I told Jun.Z’s son, At that time I had basically no savings (before I started saving like crazy.)

Q: how has my livelihood (cash flow high/low ground) changed since?
A: My living standard has increased with a growing family size, but my brbr has remained healthy. Beside having a family and growing old, my #1 biggest change since 1998 is my career longevity [including a projection of lifelong cumulative salary].

You may say “Hey, you have limited evidence of your career longevity projection. Countless derailers could pop-up.” I think differently. Rather than naming some achievement, some milestone as the “#1 change since 1998”, I pick career longevity. The future is more important than the past.

[1] So widespread and profound that it was impossible to stand firm and unaffected… 三人成虎. Even today, I need to stand resolute against a similar brainwash about branded college, SDXQ, home upsizing. As discussed with Tanko, one major misstep (mis-punch on my punch card) would cost my current comfortable ezlife on my cash flow high ground.

bccy: decentralized@@

Posted on by tiger40490

A few “leading figures” have huge influence over bccy.  Vitalik, CZ, Armstrong etc. When they take a position on some important issue, they can block a proposed change.  I think this is similar to c++ standardization being a decentralized process. Big companies influence the process while individuals have basically no voice.

Instead of one government in control of a fiat currency, a bccy is largely controlled by a few big companies[bccy exchanges, ETF exchanges,,].

— governance of open source codebase

Q: who exercise control over linux kernel codebase?
A: it’s not by counting votes. It’s mostly controlled by the creator. Counting votes is very prone to manipulation. I don’t know about BTC or Ethereum codebases, but presumably similar.

In the big picture, there’s always some /governance/ in any open source codebase. When programmers disagree, they fork the codebase. So the Ethereum codebase could be forked thousands of times a year, but perhaps only a few forks had a following.

cryptos are supposed to remove the central authority (like a government), replaced with the network consensus mechanism. However, the software is still controlled by an elite group of programmers.

Some say that the BTC algorithm is unbiased and not subject to market forces. I am suspicious. Programmers are humans and market players.

Eth TheMerge in Sep 2022 .. was centrally coordinated, by a small number of code committers.

 

Is it(income+asset) inflation || improving` livingStandard

Posted on by tiger40490

See also globalization reduc`min cost@ BasicHealthy Food

In China over 40Y salary went up 100~1000 times, rEstate appreciated as much (if not more). CPI inflation also stayed high for years, but probably less than salary. That’s why living standard improved for ordinary wage earners.

Fancy food, branded clothing, residential property, luxury car, branded college [3] … inflation largely driven by exclub. Xiaosheng.Liang (梁晓声) is the first to point out — As exclub demand increases, vendors increase prices. I think governments can’t do much about this demand, except property cooling measures.

Consider this semi-realistic scenario —

  • your salary has grown by 100%+ (i.e. more than doubled) over 10Y, but may gradually plateau or decline.
  • your equity asset portfolio has appreciated by almost 100% over 3Y, though you worry about crash. See Shiller: live more like millionaires
  • your rEstate asset portfolio has appreciated by (weighted) average 100% over 20Y, though you are not sure about bubble

Q: is your burn rate rising along?
A: it depends on the individual lifestyle (creep), and savings habits. So in some cases, burn rate would not rise as much as salary and investments. Look at my friend AshS.

Q: Compared to the China experience, is the above scenario evidence of currency depreciation (i.e. falling purchasing power)?
A: income and asset inflation perhaps, but I think CPI basket (your own, not the official basket) of goods in Singapore may show a modest inflation like 1-2%. You can easily verify that using your own food basket price, transportation price etc

Q: is rEstate and housing inflation ignored by CPI?
A: basically yes, but rental inflation is a major component of CPI. A home is classified as an investment asset rather than a consumption. See consumption inflation: inapplicable@realEstate

Based on these answers, the scenario can be very lucky, something like carefree easy life, provided AA) you maintain low burn rate and high brbr like 2.5 , and BB) the bulk (not a tiny portion) of your savings go into those high-growth investments exemplified above.

Actually, I choose to avoid BB in favor of current income.

Q: if you are “lucky” as explained, then how relevant is your own effort?
A: tricky. See blogpost on internal locus of control. Effort is part of each element. 1) Many people (me included) dare not touch U.S. stocks, so their mutual funds or Asia stocks are possibly less spectacular. 2) rEstate portfolio requires cash flow and (if overseas) active management

[3] U.S. elite private universities raise tuition fees at around 5% per year, based on my UChicago experience. This is clearly a luxury. This is the highest inflation in my personal experience.

— A paradox
(This scenario is fairly realistic. For tcost, I won’t explain the evidence.) I would say many of my peers enjoy salary and rEstate asset growth, but still complain. They complain about work-life balance, job insecurity, technology churn, parenting cost, housing cost, …. and their mediocre salary, but their income is in the top 5% nationally. Paradox !

I guess the paradox has to do with exclub and FOMO. See my “dream job” mail to CSY.

A similar paradox is FOMO^livelihood.

feeling richer^inferior @unchanged income #FOMO^livelihood explains “People feel richer when they rise relative to perceived peers, regardless of inflation/deflation, or income rise/fall.”

Therefore, these peers (XR, Deepak, CSY,,,) are actually much richer than before and much richer than their fellow countrymen, thanks to income and asset inflation, but they choose to benchmark with high flyers, spend like them, and therefore feel poor.

2FH: adaptable to%%financial needs

Posted on by tiger40490

Standard suburb home is a SFH. But consider buying a 2FH family home:

  1. In our conserver phase, we can rent out one unit. In a well-connected location, there would be low-income renters hoping to save commute cost and car cost.
  2. When we are more well-off, we can use both units. More privacy for me. We can merge the two units with an internal staircase.
  3. When kids grow up and move out we can rent out one unit.

— As renters, there are advantages in taking up a 2FH .. Many landlords much prefer dealing with a long-term single tenant so I can ask for a quantity discount like 15%, esp. if long term.

When I rent out I can select the tenant. I can also sublease individual rooms, but is delinquency more serious?

##[19]y U.S.medical cost higher #blackSwan

Posted on by tiger40490
  • #1 reason: excessively commercialized/market-driven/… but healthcare (like education) is more humanitarian than publishing, music, sports, journalism,
    • hospital performance is measured and ranked in terms of profit, efficiency, like any commercial business
    • In other countries the gov negotiates with insurers to bring down premium but in U.S. the “free market” seems to be dominated by insurers and service providers.
  • Healthcare spending is driven by utilization (the number of services used) and price (the amount charged per service). Utilization is similar between U.S. and other rich countries. Price is the main differentiation.
  • reason: admin cost — The number one reason U.S. healthcare costs are so high, says Harvard economist David Cutler, is administration cost.
    • Administrative costs accounted for 8 percent of total national health expenditures in the U.S. For the other 10 rich countries, they ranged from 1 percent to 3 percent.
    • Eg: 1,300 billing clerks at Duke University Hospital, which has only 900 beds. Those billing specialists are needed to determine how to bill to meet the varying requirements of multiple insurers.
    • Doctors spend too much time (cf other countries) on coding/billing so they have less time to see patients, driving up the cost per patient.
    • xp: Boston hospital visit
  • reason: more tests — most U.S. providers make more money by performing more tests, perhaps more than needed
  • reason: defensive medicine – Scared by malpractice lawsuit, doctors order multiple tests even when they are certain they know what the diagnosis is. A 2019 malpractice lawsuit awarded $229M, an amount presumably calculated based on the provider’s capacity to pay.
  • reason: over-utilization of specialists — more people in the U.S. are treated by specialists, whose fees are higher than primary-care doctors when the same types of treatments are done at the primary-care level in other countries
  • reason: hospital (and insurer) mergers reduce competition
  • reason: medical education — U.S.doctors have longer education and need to earn more to compensate.

Healthcare premiums increase faster than both wages and inflation.

https://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp is a good answer.

— black swan (i.e. the time when we need insurance) .. I have never had a major medical event in the U.S. When (not IF) it hits my family, it would be a huge impact, financially and psychologically. It could change my long-term plan for the family.

Note The low-income American families can’t afford the insurance.

— overall medical spending compared to other rich countries

https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-start has good comparative trend lines.

Per capita, the U.S. spent $10,600/Y. That’s nearly double the level in Canada, Germany, Australia, the U.K,. Japan, Sweden, France, the Netherlands, Switzerland, Denmark.

Per capita, U.S. spent $1,443  on pharmaceuticals vs $749 for the 11 countries (including U.S.)

https://www.channelnewsasia.com/news/commentary/us-coronavirus-covid-19-healthcare-system-public-funding-staff-12555738  is an explanation why U.S. response to covid19 had a poor start. It claims

“The US is spending more than any other country for a system that is significantly under-performing… Yet, the system is highly profitable for all players involved… To maximize income, both for- and nonprofits have consistently pushed for greater privatization”

This explanation is mostly focused on public health (rather than private health system), the system needed by ordinary people, including most non-working Americans. As soon as I stop working, I would rely on this infrastructure. I remember the dilapidated Woodhull hospital at Flushing Avenue.

## durability@升值[appreciation] #holding power

Posted on by tiger40490

Experience shows that our estimate of the downside is usually an underestimate.
Therefore, some risk-averse investors dare not or refuse to trust the conventional wisdom about long-term strength of equity asset class.
They would prefer cash or safe asset classes like soverign bonds.

They suspect that, in general, high-risk-high-return assets may turn out to be high-risk without a real alpha [i.e. without significant likelihood of excess return].

I see long-term strength only in U.S. equity. I consider all other markets highly unstable, but that is probably simplistic and over-generalized.

Q: Pick a random 10Y window some time into the near future (within your lifetime). What is your estimated probability that SP500 (or another stock market) would show a positive return?

The skeptics would probably say slighly above 50%. Some would say that a fairly priced SP500 could, in theory, shoot up 100 times (above fair value) over a year shortly before that window, and then it would be precarious and could collapse any time. However, such a scenario is unlikely because SP500 is hard to manipulate. The buyers would put themselves at grave risk by bidding up the price.

( In contrast, Beijing rEstate valuataion is possibly 5 times above fair value, and could collapse any time. )

How about insurers? I think they invest some 10-20% in eq, the rest in bonds. Appreciation in their portfolio tends to be durable.

How about CPF (and pension funds)? For decades they have relied on eq to provide the required return. They have been fairly reliable, despite many swan events.

Temasek’s 400b is invested mostly in equities, with 62% allocation to Asia. Apparently, there is long-term strength in Asia equities, but I think this is misleading, because the retail investor would lack the resources of a gigantic fund, and unable to limit numerous losses that add up.

Some would predict an eq hedge fund could hit “positive returns for a few years, then give all up in one bad year”. Well, MLP is one of the biggest hedge funds and we count some pension funds and insurers as investors. We are mostly equities but rather stable over the last 3 decades.

Now I feel Nsdq (or another U.S. index) is susceptible to “fast_window” of 500% appreciation. That would precede a very long trough.

past title: durability of asset appreciation

Q: after an asset appreciates by 100%, how confident are we about its stability? Note cpf and bonds won’t show such high appreciation.

  • eg: appreciation of a racing horse .. won’t last long
  • eg: One 92s27 classmate (水生？) bought a recreational club membership nearby. The membership is lifetime and transferrable, with a market price. My classmate felt confident that the price has held steady. If it shows an appreciation, how much confidence do you have?
  • eg: gold .. a curious story. Somehow it is perceived as more stable than stocks, but still not very stable.

— holding power.. My bias: the stronger investors, the wise investors tend to allocate more to the more “durable” assets, and hold them through a trough, rather than liquidating at a loss.

Q: What if a durable asset hits a swan, and experiences a trough longer than expected? Is it really durable?
A: That scenario is non-academic; it is the reason for risk-management. We would need to reassess the 20Y prospect. Very unlikely we would need to liquidate at a loss.

— swan events .. a major source of instability. I feel U.S. stocks and some rEstate markets recover fast or don’t fall enough to wipe out 3Y of appreciation. I tend to see an economic basis for their appreciation.

In contrast, if the stock/rEstate price is in a speculative bubble, then it isn’t durable. The crash doesn’t need a swan event.

see also scenario plann`: asset devalue over50-100Y

— eg: FWD300 surrender value grows year after year, faster than FLI. The longer you hold, the sweeter.

In constrast, cpfLife has declining surrender value 🙁

— eg: bccy .. no basis for their valuations, so I feel high valuations can evaporate faster.

Binance founder CZ … over 5Y became #1 richest Chinese in the world, but how long did he last?

— eg: rEstate .. appreciation is usually more stable. We are more confident about its durability. I think rEstate have much slower price changes than stocks. The monthly count of transactions is a trickle compared to stocks.

In general but not always, the faster something appreciates, the less durable, unless it is a scarce resource without substitutes.

— eg: SP500.. no other stock index shows the same /durability/ of appreciation.

— eg: single-name stocks ..
For a growth stock, the appreciation is mostly based on projected growth, rather than declared earnings. I feel it is less stable.

Compared to traditional blue-chips, tech blue-chips have less moat, and face more frequent challengers and churn.

I feel traditional, boring stocks seldom show fast appreciation. When they do, I feel more confident about its durability.