Tag: t_w1r1

a currency=stocks of a national economy

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resource-rich .. countries like Australia, Canada and oil nations have their “stocks” backed by the natural resource. An A$ is a claim on a part of that resource.

In contrast, U.S. is home to the largest concentration of tech companies, who create value from technology, rather than resources underground.

A tourist-dominated economy like Thailand or Macau would issue new “stocks” when their tourist economy expands.

— proven reserve of resources .. new discovery (or depletion) of aggregate reserve in a national economy can directly affect the “book value” of its national stock, leading to appreciation (depreciation)
— foreign reserve .. a national gov can stash away the stocks of other nations, as backing for its own stocks.
Best example .. gold is the standard foreign reserve.

Trade surplus .. if a country enjoys trade surplus for years, it could accumulate a lot of foreign reserve and see its national stock appreciating. A nation’s private exporters deposit foreign currency into local banks. They transfer the currency to the central bank. These exporters typically need to convert the foreign currency in order pay their expenses.
— issuing new stocks or printing money .. I think many governments issue 0.1% new money only when the (national) economy expands by a similar amount.
U.S. government prints money by issuing Fed debts. Japanese? Perhaps similar.

Issuing new stocks during economic decline .. leads to depreciation of the national stock. Even during economic expansion, (excessive) new stock issue can lead to depreciation, when the expansion is not sufficient to support the massive new issue. Investors would realize that a share of this national stock is now diluted.
— demand by foreign investors .. US as an “issuer” has many weaknesses but its “stock” the USD is highly in-demand.
— depreciation due to economic decline.. Even in the absence of new “stock issue”, a stock can lose value if the company is perceived as losing competitiveness.

personal credit, financially responsible

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The free availability of credit is similar to the freedom with sex, driving, firearm, gambling, leverage in futures trading (1997), drugs, alcohol and junk food. The availability is alluring, seductive and dangerous.

A young person exposed to these without adequate guidance (or a grown-up at any age) would inevitably shoot herself in the foot. That’s why I want to be with my son when he is studying in the U.S. Some Chinse families send their kids to the U.S. at age 16 !

In the U.S. every adult is assume to be a responsible person, until proven otherwise. Even though a large percentage of adults are not that responsible and will eventually shoot themselves in the foot, the system seems to exploit it rather than adopting a pre-emptive, more selective provision of access. It could be perceived as racial profiling.

You don’t need to demonstrate responsibility before you are given /access/. But this freedom is a /hazard/ (I didn’t say “risk”). Way too many people abuse that freedom either to damage their health, family (harmony), career, or harm other people. The latter is a bigger hazard to the overall “system”.

This blogpost is about responsible use of personal credit. https://www.investopedia.com/articles/pf/09/financial-responsibility.asp has a good summary — “To be financially responsible, you need to live within your means. And to live within your means, you must spend less than you make.” (There are many similar web pages, but this web page is not associated with any commercial organization, and hopefully more stable.)

Other countries are similar, but personal credit is more integrated into the U.S. system than other countries’ systems.

My reputation among BGC and Cambodia investors ….

— some stats on personal debt, based on https://www.ramseysolutions.com/debt/average-american-debt

Student loan is an investment in yourself. I feel mortgage is a reasonable use of personal credit, partly because the asset tends to appreciate, at least matching CPI. All other forms of credits tend to be “spending more than you make”, esp. auto loans.

  • ccard .. 45% of American households carry a cCard balance (meaning they don’t pay their credit cards down to zero each month, so they have credit card debt).6,7,8 Over 55 million households have this kind of debt.9,10 Their total credit card debt is $787b. $787b/55 million = $14k/household. Those 55 million households who have credit card balances pay 17% APR.
    • The Federal Reserve shares that 48% of American credit card users pay their bill in full every month.15 The other 52% are carrying debt and adding to  that $787 billion statistic.
  • student loan .. As of 2021, the average student loan borrower carries $39k debt (from student loan)
  • car loan .. 37% of American households have auto loan. Among this 37%, the average outstanding is $31k. Among all car loans, the average monthly installment is around $500 28.
  • mtg .. Americans with a mortgage pay a median monthly payment of $1,595.34 I guess each data point in the sample is a mortgage, not a household. Many households carry multiple mortgages.
    • mortgage total outstanding is $10.44 trillion, spread over 51.57 mortgages, owed by 51.5 million households. 10.44T / 51.57M = $202k
  • HELOC (home equity line of credit) total outstanding debt is $349b, owed by 4.74 million HELOC households. 349b / 4.74M = $74k 29,30

Each monthly wage extends Fuller wealth by2M

Posted on by tiger40490

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For the next X years in Singapore, my family burn rate is predictable (no college no mortgage) at around $4k/M excluding transfers, $5k/M total burn rate. I sometimes tell my wife “Every time we squirrel away $60k from (work/nonwork) income, we extend our Fuller Wealth by a year.” This /prognosis/ is almost too good to be true. Simplistic but motivational thought. Long-term forecast is naturally less reliable, subject to multiple upsets but still, some guesstimates can help us plan better. Just remember not to put too much trust in the guesstimate numbers.

This prognosis is a useful yardstick for comparison with other families. Some families can “add a year” quickly (a couple of paychecks), while others need a decade to “add a year”.

— going from strength to strength, from strong to stronger .. In 2018 I had a numerical projection showing barebones ffree. Then in 2020, I wrote to wife another numerical projection showing that salaries are not really needed.

So my Fuller wealth already exceeds those targets. Every new month, my nest egg is now more fortified/resilient [2], growing (by $5k+) towards a new target of “no need to flee to U.S.”

[2] Keystone of the “nest egg” idea is … defense — against hazards, missteps, contingencies, uncertainties.

How does this prognosis differentiate me from my cohort? Many people also grow their nest egg every month, but they don’t have a FIRE target amount like 25Y worth @ living expenses. I have multiple progressive targets.

— Let’s /substantiate/shore up/ some weaknesses of this prognosis.

  1. college cost will become relevant in about 8 years. Fuller Wealth is not about luxury or higher aspiration, but aiming at a basic healthy level of lifestyle.
  2. medical cost?
  3. inflation? Addressed in several blogposts. I believe SG CPI inflation is much lower than …

needed$3mil 4ffree: what changed since2015 #JL.Yuan

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In a 15 Nov 2015 mail to JL.Yuan, I wrote ..

“Financial freedom/security is the term you used. Many people ask how much bank balance would provide  the freedom/security, and our answers are usually disappointing, like 3 million… I feel it’s more healthy, more stable, and long-sighted to shift my focus to career longevity.”

In a 23 Apr 2021 follow-up mail, I observed that my position on financial freedom/security… has changed since Nov 2015. My position has become more grounded, based on real observations, less on hearsay and marketing propaganda.

  • #1 change: medical .. I now rely on medishield. In addition, I will maintain a tiny reserve ($20-50k?).
  • G3 change: CPF-life .. (paying out from 2039 till I die) can provide sufficient retirement income. In 2015, the same payout amount was dismissed as insufficient
  • G3 change: Inflation .. was a long-term concern and depends on the chosen home country. This worry has subsided for the “Singapore plan”, after witnessing Singapore inflation since 1991
  • no change: I still want to work till old age, perhaps as a developer till 70, and a lower-gear job till 85
  • change: longevity goal .. I now aim at 95
  • change: college funding .. is no big goal for me, and ironically the biggest departure from my cohort’s mainstream thinking.
  • change: NNIA .. (nonwork net income from assets) has increased. We talked about it before.
  • change: retirement destination .. Now I like the idea of roaming retirement between familiar low-cost cities (like Malaysia +  Chinese cities) to cut my monthly burn rate. Hopefully, My Singapore home can be rented out long term.
  • ^^^ bottom line: bank balance to provide financial freedom .. Given sufficient NNIA (cpf-life + Singapore HDB rental income+..), adequate healthcare, I (didn’t calculate but) guess $400k-$800k might be enough to support the family from now on, without any salary. I no longer feel enslaved by a huge savings goal of $3,000,000, presented as the price tag of “financial security”.

Tanko: strategic missteps #home upgrade

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Most SG wealth management programs require SGD 200k, so I will use this sum as a starting point.  In my mental picture, many investors start with 200k risk capital (typically in their 30’s [1]) and slowly build up to 500k. Along the way, we all make gains and mistakes.

I guess many (90%?) of us become too aggressive too confident too complacent and take on too much risks, almost like gamblers (rather than prudent investors), and hit over-sized losses.

I feel I have been less unlucky so far, but how long can my luck last? I remind myself that my SEA properties may get into trouble.

[1] When I paid $180k for my first HDB, Tanko and ML.J were both surprised. Also, the 2020 OC survey found 2/3 of Singaporeans has savings insufficient for 6M. But this side question is a distraction on the current blogpost.

— Tanko on huge mistakes .. When I described wq.l’s low burn rate with 5 kids, and my $4k/M carefree life, Tanko felt that cash flow can *become* a stressor for himself and esp. for his brothers with modest-incomes, even though they both seem to be as frugal as Tanko. Tanko said they really need to be careful and avoid huge mistakes. I feel it’s very likely (more than many think) to commit huge mistakes due to strategic miscalculation (like a military mis-judgement).

Q1: what big mistakes have I experienced or seen in my family?
A: 1997 trading loss
A: Majestic Village
A: sister’s high personal debt
A: lawsuits like https://1330152open.wordpress.com/wp-admin/post.php?post=15308&action=edit&classic-editor and sister’s ccard debt

Q2: any potential, hidden, missed pitfalls on my path ahead of behind ?

  • buy a luxury car (like 100k), which has no investment value and purely a consumption asset
  • How about my UChicago MSFM investment?
  • buy a luxury residence with low rental yield and high maintenance cost including pTax
  • career change of no-return. I think many techies become managers, unable to come back to hands-on jobs due to age, churn, IV-moat etc. This item is not directly relevant to net-asset, but career longevity is the real bedrock of my ffree, security of family livelihood

— free cash .. is breeding ground for strategic missteps. When you receive a windfall cash payout (inheritance, or selling a website like getrichslowly.org), the free cash is an example. But there are more common examples like bonus…

Many investment advisors start by asking how much free cash you have.

cash -> OA -> SA “top-up” actually prevents Singaporeans from wasting their hard-earned savings on wrong investments, including top schools and luxury private properties.

— pattern: big mistakes are often related to unreasonable desires

  • eg: if you have a 3k/m burn rate, but buy a 2M luxury residence (as in HK, Beijing or SG), it wipes out 50Y Fuller wealth in one go. This one mistake can sink you into low ground, and end your peaceful ezlife.
  • eg: a branded college would cost 300k. Two kids would cost USD 600k or about 20Y Fuller wealth.
  • eg: a school district home also costs a lot more than a regular home by $300k, but the extra $300k is often seen as investment.
  • eg: if you start taking drugs it could ruin your life
  • eg: if a married person starts having affairs, it could ruin a peaceful life, though many stories seem to present it as non-consequential.

Chn A^B shares #common nlg

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oth risk .. This knowledge is like general knowledge, not for interview, not for personal investment, but can help my education effort for my kids.

https://www.ubs.com/global/en/asset-management/insights/china/2019/stock-connect-china-a-shares-faqs-equity-investing.html is a FAQ. https://research.ftserussell.com/products/downloads/Guide_to_Chinese_Share_Classes.pdf is a pdf showing a table.

China A-shares trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Historically, China A-shares were only available for purchase by mainland citizens due to China’s restrictions on foreign investment.

Gary believed China ADR stocks are correlated with China index much more than SP500.

— Chn A-share ETF .. I think the exchange fee and broker commission on both entry and exit is likely higher than the FSM fee.

Also need to find out how to use interactive brokers…

— currency and other defining features
China A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, and are more widely available to foreign investors. On the Shanghai Exchange, B-shares trade in U.S. dollars. On the Shenzhen Exchange, B-shares trade in Hong Kong dollars.

Some companies opt to have their stock listed on both the A-shares and B-shares market. Due to the limited access of Chinese investors to B-shares, the stock of the same company often trades at much higher valuations on the A-shares market than on the B-shares market.

— retail vs institutional investors
China A-share markets are dominated by retail investors. Therefore, China’s A-share markets can be volatile.

SSE and SZSE are both more retail-driven than HKEX.

— issuing entity .. A/B/H shares can be issued by the same entity. I think N shares too (on New York exchanges including OTC), but am not 100% sure.

Most of my China stocks are N-shares including the OTC  stocks.

Due to access control, I think the onshore market has some kind of correlation among the stocks, driven by China retail investor[1] herd instinct. The H-shares and N-shares have correlation among them, driven by the investors [2] on these (more open) markets. [1] and [2] are probably two distinct groups.

There’s also some correlation between 2 market segments.

— indices.. There are many indices for the various market segments. JustEtf.com compares index performance figures over 1Y (or 3Y). You can see the indices are quite different.

best China index? You can collect the count of tracking ETFs for each index. The most popular index is MSCI China.

Gary singled out FTSE A50.

##[19] best Spends@100k windfall

Posted on by tiger40490

to Genn: G3 specific goals@investment effort #commute is an introspective. In line with that if I receive $1m windfall, I would use it to strengthen my shields and relieve my anxieties.

Q: what’s your best use of additional 100k, assuming you can’t invest it?

  • I didn’t choose a very small sum — not enough of an interesting question, and not engaging
  • I didn’t choose a very big sum — unrealistic and not engaging

Specific items I can spend on … are the best answers.

  • lower-paying (probably contract) job with more satisfaction. Respect is the #1 satisfaction.
  • .. In contrast, My answer to Genn is more about work-life balance (free time …)
  • commute — See my answer to Genn. Note For commute current income is more effective than a $100k windfall far out.
  • more frequent visits with grandparents, but business-class ticket would be un-affordable luxury.
  • vacations to nearby locations. There are plenty of world class yet low-cost destinations in SEA, China and India.
    • No Japan no Korea please — luxury and unnecessary. Our family life isn’t less complete if without them.
  • — smaller, “lifestyle” items that I could spend part of this 100k on
  • more yoga classes, and possibly other classes
  • more packaged, washed raw veg and fruits
  • more frequent buying of salads
  • — less specific items:
  • spend to create more spare time for kids, family and myself

For Mr Money Mustache, apparently such a windfall doesn’t mean anything, but I doubt it.

Some of These are among the G10 most important lifestyle changes after I achieve bare-bones ffree.

 

 

39%Americans have enough savings for $1k emergency

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As of 2019, the typical Black or Hispanic family has up to $2,000 in liquid savings, the typical White family has more than four times that amount.

https://www.bankrate.com/banking/savings/financial-security-0118/  is a 2018 article, quoted in CNBC. ( https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-cover-a-1000-emergency-expense-with-savings.html is a 2022 update) Bankrate.com conducts numerous surveys every year. I decide to believe in this survey. The question posed:

Q: How would you deal with a major expected expense, such as $1000 for an emergency room visit or car repair? Each respondent can only choose one option below

  • 39% would pay the whole bill from savings…. Personally, I think some of the other 61% may have $1k savings but somehow would not fork out this amount, so they chose other options
  • 19% would pay with a credit card … (high interest) and finance the balance over time
  • 12% would borrow from family or friends
  • 5% would use a personal loan.
  • 13% would count on reducing spending from other parts of their budget. I believe this option means “use some combination of the above, without increasing aggregate debt level”
  • 6% would resort to something else and 6% simply don’t know or refused

Lower wage earners, those making less than $30,000 a year, were twice as likely to use some form of borrowing than savings, while households making more than $50,000 were more apt to use cash.

This result dovetails with a recent Federal Reserve report that found 44 percent of Americans couldn’t cover a $400 emergency expense out of their pocket.

19% of Americans also report that they have $0 set aside to cover an unexpected financial emergency, according to another survey.

— an exemplary saver featured at the end of the article:
Timothy Wiedman had around $25,000 in his emergency fund in September 2016 when he slipped on wet grass in poor visibility, and ended up in the hospital. The recently retired Doane University associate professor shelled out around $1,700. He was able to cover the hospital bills out of savings rather easily. Amassing such a large cache (25k) is no easy feat, especially as health care and college costs rise dramatically.

Personally, I will be targeting a similar amount of liquid cash reserve.

— Now I have more appreciation that large portions of the American families can’t afford the expensive colleges, even though colleges provide financial aid to ensure every admitted student can afford it. Many of the struggling families would not be able to support their kids adequately during the 12 years before college

Luxury education, big homes are priced out of reach for more than half the population.

— https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/

Average value of liquid assets among white households was $8,100 in 2019 compared to $1,500 for Black households. (Does the negative data points go into the “average”?)

Furthermore, 72 percent of white households say they could get $3,000 from family or friends compared to 41 percent of Black households.

[19]cohort family BR=USD 6k ex.housing+med

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See also big-ticket discretionary spends4Chinese middle-class]US

I know our monthly burn rate in SG = SGD5k (6k including $700 tax), with zero rent or mtg. How about U.S. ? My estimate is USD 8k, or 6k Excluding the big 3 housing costs [pTax/mtg/rent]. Below is my quick survey.

Beware: rather few individuals would spend the time to understand the true burn rate including mtg monthly, excluding income tax. Therefore, their estimates can be 20% off the mark.
Beware: Melvin3 highlights the omission of infrequent but large repair costs.

In the job loss scenario, austerity can cut family burn rate by 20%+ but more likely I would return to Singapore, where my burn rate is roughly half the U.S. level, after FX conversion.

  • Jenny ——– said 5k minimum for 4-people family, excluding housing/pTax+medBx. This would be Melvin1. Jenny said her bank statement shows minimum 3k+
  • CSDoctor —- said $9k including mtg and pTax so I guess non-housing burn rate = 6k.
  • CSY ———- said household expenditure might be under 5k, excluding A) med insurance, B) pTax, C) mtg. If Including A+B+C, he estimated 6-9k.
  • XR ———– said he did his income taxes many times, each time summing up his total outlay as 100k+. This total used to include mortgage but now it includes 2.4k childcare + pTax and zero mortgage. By my standard, his monthly burn rate is 9k
  • Deepak —– said $9k for a family of three, including $2200 rent and $250 med insurance sponsored by employer. In 2022, he estimated their combined take-home was 160k+ and saving target was 55k
  • https://transferwise.com/us/blog/cost-of-living-in-the-usa says excluding income tax or rent, average in NY = 4k
  • median family pretax income is typically equal [1] to total burn rate including everything, so after tax total burn rate is probably 65k/Y across the country. Pretax is 79k/Y according to https://fred.stlouisfed.org/series/MEFAINUSA646N
  • https://howmuch.net/articles/how-americans-spend-money-2017 shows 57k/Y excluding income tax, for an average American family. Per month = 5k
  • https://www.valuepenguin.com/average-household-budget#nogo and https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2018/05/08/how-does-average-american-spend-paycheck/34378157/ show breakdown by expenditure category

[1] My own estimate — most American families save less than 5% over long term like 5Y+

luxury homes have poor NGRY

Posted on by tiger40490

Background — A Luxury home (including most SDXQ homes) is comfortable and built for the affluent family, not for multiple blue-collar families. Most tenants in the market are blue-collar people, not affluent families.

  • Eg: Big homes near Bayonne parks have very poor NGRY. If 43R has NGRY of 15%, then here is probably below half. To rent out at 15% of 600k, we need to charge 90k/Y.
  • Eg: big homes in top school district also suffer similarly. 15% of 800k means 120k/Y rent for a single family!
  • Eg: Big homes at Scarsdale suffer similarly. 15% of a 1000K, we need to charge 150k/Y. Note there are only up to 5 bed rooms. It’s a SFH. A single family will not want to pay 150k rental a year.
  • Eg: luxury condos at Newport also suffer similarly.

— absolute sqf size

A luxury home has slightly higher psf pricing than regular homes, but twice or even more in sqf size. A 3000 sqf home can house 4 families but only if built as a MFD. Luxury homes are not MFD, therefore very low rental yield.

— For rental yield,

  • SFH is lower than 2FH, but SFH is more comfortable for the resident.
  • Luxury condo like BGC One Uptown or Chris Ma’s is worse than SFH for rental yield, but sometimes even more comfortable than SFH.
  • 2FH has lower rental yield than 3FH, but more comfortable.
  • Multiple small rooms in a house has possibly the highest NGRY but is least comfortable with least privacy. Even in Singapore. my rental agents told me small rooms in an HDB flat generate the highest rental yield.