Don’t marry a Single Child?

I was reading the Aug 10 to Aug 16, 2020 issue of The Edge Singapore recently, when I came across this article titled “Fullerton’s Chan worries for your retirement as Singapore’s population ages”.

The article is basically an interview with veteran fund manager, Vincent Chan.

Chan is the head of multi asset at Fullerton Fund management. In the article, he urged young singles when choosing a life partner to avoid those who are single child. That is because the financial burden of supporting elderly parents and rearing children will fall disproportionately more on the shoulders of those belonging to this particular demographic.

He mentioned that Singapore’s fast double digit growth is a distant memory, and young people are getting yearly salary increment that barely beat inflation. While at the same time, medical costs are rising at around 10% every year.

I find his views rather odd, and too one dimensional.

By the way, that statement was altered in the online version (read here). I guess they were late in editing that portion for the physical copies before they were mass printed and distributed.

As if by coincidence, The Sunday Times (25 Oct 2020) came up with an article titled “The cost of taking care of parents”. Read here.

In this article, it stated that the going rate of the monthly allowance Singaporeans give to their parents ranges from $200 to $1000 (depending on how much the children earn). A recent HSBC survey showed that 84% of Singaporeans will contribute and pay part, if not most, of their parents’ recurring cost such as living expenses and medical bills.

The money Singaporean spend on their parents is determined by how much they earn. Almost half of those in the affluent group mentioned that they would pay for most the expenses, while only 24% of the mass group would consider paying a large part of the costs.

The survey polled workers aged 40 and above with parents likely to be in their 60s to 80s. The so-called sandwiched generation, whereby they have to take care of aging parents and young children.

In the next article titled “The Cost of Being Elderly In Singapore” dated April 2020 (read here), it mentioned  from a recent study 86% of aged Singaporeans stated that they could rely on their adult children to care for financial support.

And listed the example, if you have two kids who are still in primary school who are taking tuition classes within a reasonable price range. Your elderly parents are semi-retired who are ordinarily healthy but they do require monthly medical visits at an average cost that is reasonable.

Your monthly expense could look like this:

Monthly Expenditure

Child pocket money allowance for two primary students: $200.00

Child expenditures (Shopping, Food, etc) for two: $200.00

Tuition fees for two kids: $600.00

Elderly parents allowance: $600.00

Medical Fees for parents: $300.00

Grand Total: $1,900.00

The average salary in Singapore being S$5.783 per month, and for full time employed Singapore residents, the median gross monthly income from work including CPF employer contribution being S$4,563. (Read here)

So considering that one need to spend S$900 (Elderly parents allowance + Medical fees for parents), and the median monthly income being S$4,563, that is close to 20% of the income monthly. Without a doubt, the financial burden would be lighter if there is another sibling to share the load.

Personally, I find it peculiar to see this statement “Don’t marry a single child” in a finance / business focused magazine. I feel that it belongs more to the social or lifestyle section. We can quantify a lot of things using numbers / money. However, to use that to gauge a future spouse… It is kind of stretching it and too limited.

If I am dating an only child, I would probably be more concerned about that person’s character. Did the parents spoil her when she was young (as after all, there is no other siblings vying for attention).

Ultimately I am looking for a life partner to be with for the rest of the life… and I probably can only survive a month (max) with a spoiled princess who is used to having everything at her beck and call and have a warped sense of entitlement ingrained since young.

Having said that, most of the people I knew who are single child turned out pretty alright.

Character is of the most importance.

And from a financial aspect, it really depends on how financially stable the family is in… well, if her dad is a gambling or alcoholic addict who owe the loan sharks large sum of money. Then no matter how many siblings to share the burden, it would never be enough.

Or if her parents failed to purchase adequate insurance, and they suffer from some major illnesses which require large sum of money for their medical bills.

Actually, perhaps my perception is distorted.. as the people I know who are the only child, seem to have best of both worlds. Probably because in quite a number of cases, it is because the parents who are already relatively well off.

It is kind of a double-edged sword actually. When you have many siblings, what is passed down from your parents are often divided among your siblings and you. However, if you are the only child, there isn’t much competition on the inheritance.
Also when the parents have only one child, they may not necessary need to spend more time or money (as compared to having many kids), leaving them more time to focus on their career, etc.

I knew of a single child whereby her parents literally gave her a condo shortly after she is married. Well, she now has two kids and is a stay at home mom. And her husband does not really earn much.

And another who failed to complete his A levels, did not hold down a full time job after many tries, and is now in his 30s (and married), He still gets a monthly allowance of $2,000 from his parents. His parents stay in a landed property and are still working. I guess he is fully aware that his life is kind of taken care of — knowing how well-off his parents are.

For me personally, I have two kids. I don’t think I thought about this question ever, when we were considering having a second child. Eg. Would my first child have a problem of finding a life partner if he is an only child.

The main reason is probably because we worried that he would get lonely without a sibling, and if we are financially able to support two kids.

As parents, we should also not view our kids as our retirement fund.

Your kid is not your retirement plan (read here).

Back to the title, should one marry a single child? I reckon one must view the person and his/her family in totality. Does not mean a single child is a bad choice. The person’s character is of the most importance.

This is after all a person whom you are going to be with for the rest of your life.

And we can’t really quantify love.

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The 2 tales of $20k per month

I came across two recent articles online pertaining to 2 people who has the privilege of having an income of $20,000 per month.

I would consider the income to be passive in both cases.

1) Case 1: The Slow and Steady Dividend Cash flow millionaire

In the first article: How A Janitor Became A Millionaire (read here), it talks about Ronald Read, a former janitor and gas station attendant in Vermont, who died in 2015. He surprised everyone by leaving an $8 million fortune to his local library and hospital.

How did he amassed so much wealth? Well pretty basic, besides being industrious and frugal, which you may have guessed, he had invested in the stock market throughout the years.

Looking at the top ten stocks in Read’s portfolio, they are simply basic stocks and businesses. And every one of them is a dividend paying stock. By the time he passed away in 2015, at age 92, his entire portfolio was paying him around $20,000 a month in dividends. That’s $240,000 a year in income.  

The irony is while he is alive, nobody knew he was that rich. From the way he dress, to what he eats and where he frequent – people thought he was poor.

He drove a used Toyota Yaris, tailored his own coat with safety pins, and chopped his own firewood. He maintained this frugality well up into his 90’s.

2) Case 2: The Tai Tai

In the next article: I took my wealth for granted – then my husband told me we were bankrupt (read here), we have a 40 years old lady who married a wealthy businessman husband 15 years ago.

Her husband had inherited a lot of money from his late father and also owned several businesses, so compared to the average Singaporean, they were relatively well off.

The family (her husband, her and their 12 years old son) lived the high life: Staying in a landed property in a prestigious district, drove luxury cars, and had holidays thrice a year at exotic resorts.

She did not work, as she there is no need to. Simply said she was a lady of leisure.

She didn’t think twice before splurging on designer goods or had no qualms spending thousands on catering whenever they entertained at home.

However, in 2018 her husband’s businesses began to suffer. A lucrative deal he was working on fell through.

Eventually, they lost much of their wealth.

They had to vacate their home and sell most of their high-value possessions within months – vintage watches, artworks, designer bags and jewellery. They also had to let go of their luxury cars and make do with a standard family vehicle. 

She used to spend about $20,000 a month on herself alone but now it is down to $1,500, sometimes less, and she tries to save most of it because she does not know how long it’ll take for them to get their finances back on track.

Well, like I mentioned earlier, I view her income as passive, as it is from her hubby.

In gist

2 different persons with two different lifestyle but one common amount per month. And two different endings.

For me, I am not sure if I will ever get to see an income of $20,000 a month. I am taking little steps towards it.

I reckon even if I do have that income (passive or active), I would put most of it into my stock portfolio. Hopefully generate even more passive income. Even with a mountain of wealth, with a high expense life -style, wealth will quickly be depleted. And it can always be suddenly taken away from us if we take it for granted (like in the case of the tai tai).

With more passive income, I hope to do more of what I love. And frankly I don’t think I will splurge on luxury goods or live a high life. I reckon frugality has kind of become part of my life.

I guess to me basically wealth translates to a better aspect of the two H (Health and Happiness). Living a healthy lifestyle (both mentally and physically) and doing things that bring me and others around me joy, while spending more time with my loved ones.

It does not necessarily mean a high life.

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Why I dread going to a Property Showflat

There was a time when I do enjoy going to property showflats. I guess if I am single, with more free time during the weekends, I would probably make this a regular weekend thingy.

Oh yes, ever since, property agents have been constantly spamming me with news of new launches, huge turn out on launch days and developments which managed to sell a high percentage of units during the first few weeks, etc. Basically stroking the FOMO mentality.

However, with my weekends typically spent with my family: Eg. just taking care of the kids, or bringing my kids out (for fun or for the enrichment lessons), running errors, etc…. there is usually little time to go visit showflats. Well that is just one reason.

By the way, the no. of unit sold taken from URA’s data is based on the OTP (Option to Purchase) lodged. It does not account for those OTP that has lapsed / not exercised / withdrawn. This suggests sales volumes were much lower than reported, and developers were until only recently, re-issuing Options. The recent article (see below) on new regulations whereby developers can no longer re-issue an OTP to the same buyer for the same unit for 12 months after the earlier OTP expires. – meant that more OTP will finally be not exercised. Nevertheless, there are ways to get around it (OTP by the other members in the same family eg. husband/wife, and as mentioned some of the developers have been absorbing the forfeit fees).

New guidelines to encourage prudent private home buying (read here)

Developers re-issuing options amid cooling market, launch bonanza (read here)

1) Different Points of View

You see for a very long time, me and my wife view property from two very different fundamental view points.

Ok, just to get the facts correct – for some time, I have thought about having a 2nd property, for her case not necessarily, it could be an upgrade from our current HDB apartment unit.

She views it as an upgrade in lifestyle. I view it as a form of investment (can’t do it with one property which we are staying in… unless we rent out the rooms).

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My thought for a place to stay is probably the same as Loo Cheng Chuan’s. Loo, as he prefers to be addressed by, is a big advocate of using one’s CPF in order to build up their retirement portfolio. Basically, I don’t need a million++ house to rest my butt. I am quite happy staying in my HDB, while investing to get some passive income.

2) Does not make Financial Sense

I am sure many of you reading this blog are yourself equity investors. Hence you ought to be quite familiar with the terms P/E ratios, dividend yield, ROI, etc. As someone who has many dividend income stocks yielding min 3%+… The rental yield of private residential properties in Singapore just does not appeal to me.

Property Jargon of the Day: Rental Yield (read here)

To quote the above article: “The typical rental yield for a residential property in Singapore – as of 2019 – is between two to three per cent. Most residential properties have a net rental yield of around 2.3 per cent.”

Yes, we hear a lot from property agents talking about capital price appreciation of residential properties over time (not necessary true for all developments). However, seldom do we hear about rental yields.

If we go deeper looking through a longer horizon, it would be very obvious.

The Private Residential Property Price Index which compares the recent prices to prices in Q1 2009, shows that it has increased approx. 52%. See below (basically Q1 2009 is the base 100, and 152.1 in Q1 2020 shows that it has increased by 52.1%).

However, if we look at the Private Residential Property Rental Index, we can see that rents have not been increasing as much. Q2 2016 was 103.4 (eg. 3.4% increase from Q1 2009). Basically, I see it as negligible. It literally collapsed in the financial crisis and stayed at that level.

And since I am talking about a 2nd property (and since I am currently holding a HDB unit, hence cannot decouple and buy the property as a 1st property), the ABSD Rates on/ after 6 July 2018 for a Singapore Citizen buying second residential property is 12%.

So yes factoring in that 12% on top of the purchase price drastically reduce the already meagre rental yield (and that is not even including all the other upfront / annual fees and tax involved).

Basically, I look at the nearby newer properties – get the rental rates for similar units there and divide by my expected purchase price.

When I think of AK’s Rule of 15 (read here), I just find it hilarious at this time (To buy). Or will I ever live to see it happening in Singapore.

I could hope for capital appreciation. That used to be my thought in the past. However, with the prolong recession caused by the pandemic, and travel restriction / muted response from foreigner buyers, I am not really banging on that.

In addition, there is no sight of any relaxation of the cooling measures policies by the government (eg. SSD, ABSD, TDSR). And on 8 October 2020, the government announced a further extension of temporary relief measures directed at property developers, including allowing a further extension of various project completion deadlines by six months as Covid-19 continues to disrupt the construction industry. Even with the surplus supply of units in the markets, developers will not be in a hurry to offload these at a cheaper price.

Property developers given another round of time extension for delayed projects (read here)

People say the US Stock Market is rigged…. but the way the Singapore property market is structured (on top of the loose monetary policies in the US)….I seriously doubt if any free market forces will be strong enough to sway prices drastically.

Also, I think for any investment, like my stock investments, they all need time before we can reap any substantial rewards. Although I don’t foresee any sudden upside for my stock portfolio, but I believe given time (like years), I should be able to see some results (while in the meantime still collect some dividend).

After many years of investing in stocks (with some bonds), I kind of see it as part of my lifestyle. I like the idea of slowly building up the portfolio, picking stocks, reading news, watching the passive income grow. To move all that into a property, is like taking away my hobby hahahaha. Well, I still keep some just for fun (which probably is from my SRS account, which can’t be used for the mortgage), but oh well…. it’s not the same.

True, stocks are basically just intangible tickers/numbers on a screen, unlike a property. However, I enjoy the quiet time I have, reading whenever I can find time (like while waiting for my son during his enrichment classes or late at night).

Having said that, with the anemic local stock market performance, high liquidity among many locals (and also thanks to the government fiscal supports), low interest rates… there are still some merits when considering property as an investment.

In addition, from reading the news, I am aware that a large number of HDB developments are reaching/reached the minimum occupation period (MOP). For many potential up-graders it would mean time to upgrade with no penalties.

Around 20,000 HDB Units Annually To Hit MOP Starting 2020 (read here)

Anything Is Possible Until It Is Not – The Dangers of Procrastination (read here)

Then prior to this period, 2 to 3 years back, we also witnessed a surge in enbloc sales. Meaning many cash rich sellers are probably still looking for a permanent place to call home. Among them empty nesters looking to downsize their homes.

4 reasons why Singapore’s en bloc fever has well and truly ended (read here)

3) A Home

Firstly, I think when we talk about passive income / investment… truly passive income (or coming close to it), I reckon comes from financial investments eg. equities or bonds.
For property, it is not really passive. My parents have a 2nd investment property, and they have to spend time and effort dealing with the agent and the tenants. Since the property is still very new, it is not that hard.. but it is not as passive when I compare it to investing in REITs or stocks.

How passive is your income? (read here)

Putting that aside. I think the main draw is really a better living environment for my family.

Many would argue that with the pandemic dragging on, there would be a fundamental change in how we work and live. With my company permanently removing many of our fixed desks/seats and in their places – hot desks / lockers, this WFH arrangement might be permanent. Although I do think our immediate superiors/clients still prefer us to work in the office or attend meetings physically.

So having a nice place to stay and work is important. My wife and me probably have different yard-sticks on how we define nice. There is also a certain prestige that comes with owning and staying in a private property.

There is really nothing wrong with having aspirations in bettering our living environment. A nice home (with the usual creature comforts and amenities) for the family gives one a feeling of comfort and security. The place could also be nearer to better schools, our workplace, facilities, transport nodes, better neighbourhood, better views, etc.

However, it is a fine balance between budget, wants and needs.

To be frank, I don’t consider myself a high income earner, and don’t think we are really loaded.

And don’t see how I can fit my family of 4 into something smaller than a 3 bedder unit.. so yes, we probably have to obtain a mortgage to purchase that 2nd property. After being debt free for many years, the thought of being in debt again (albeit in a low interest rate environment) does not really appeal to us (me and my wife).

Financially, it is a stretch but doable. However, why would we want to do it?… BIG question mark.

Then it also raise the question – what if one of us is jobless, or we have some emergencies down the road, when finances become tighter. Or if interest rates spike?

Well, simply said, a property is just not like other investments (stocks / bonds etc)… With the investment thesis going out of the window, we tend to view it more as a Home – which is basically unquantifiable.

So back to why I dread going to a showflat…
Well, you know that feeling – when you go into a shop to see something nice and shiny yet pricey… you would like to have, but don’t really know if it makes sense, and end up leaving the shop confused.

Yeah that’s why.

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The case of the Warehouse and the hot Stocks

Occasionally, from time to time, I would think back as to why I made certain investment decisions. Sure it is easy to look at the price run-up of certain stocks and beat ourselves over it (for not buying them earlier), crying over spilled milk so to speak. The COVID-19 pandemic has created a huge tailwind for certain sectors eg. Tech stocks and Medical stocks (eg. glove manufacturer companies).

Actually, for me, I tend to be more careful and invest in what I know. For many tech stocks, I still feel that they are really beyond my circle of competence, especially if their business model is B2B (business to business). Typical mega tech stocks like Microsoft, Amazon, Alphabet (Google), Facebook, Netflix, Alibaba, Tencent etc have part or most of the business model in the B2C (business to consumer) segment, which makes it easier for me to relate to.

Cramer: Snowflake is too difficult to understand for people who bought the stock (watch here)

The Problem with Snowflake Stock (watch here)

Nikola JUST Admitted to Fraud – End of GM Partnership? (watch here)

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I always felt that being in a certain industry does give one an edge.

For example, if I am in the Tech industry, I would be the first to liquidate my Snowflake holdings (if I am vested in it), if I hear about how sucky it is (across the room).

It is something not announced in the news, financial reports or annual reports. And I don’t need to wait for the news to be out. By the time, the financial reports / figures are out, what is inside is already old news. Of course, there is always an itch to speculate in the hottest stock.

So yes, back to the topic.

Let’s go back to what I mentioned at the start.

In retrospect….

Yes, so now we are in Sept 2020, whereby many countries are still witnessing 2nd or 3rd waves of COVID-19 outbreaks, and have not fully emerged from the pandemic. For me, being in the construction industry, it has provided me a front row seat as to how the pandemic has impacted the industry here in Singapore.

The contractor in my project (which by the way, is considered big by its contract value), faced an uphill task in resuming work on site. With the prolonged lock down and out breaks in the dormitories island-wide, the contractor is starting to face cash flow problems. And there is the constant fear that smaller sub-contractors will go belly up.

One issue faced by the contractors, is the disruption to the supply chain worldwide. From Italy to China to Malaysia, they faced difficulties in getting the materials here on time. This has been a recurring theme now for many months. Let’s face it, Singapore doesn’t produce much (and for the project which I am involved in, none of the materials are from Singapore). Factories for that period of time, had difficulties in restarting, as their workers need to go for swab tests, and there are lots of glitches in the systems.

Then there is the constant fear of subsequent lock downs.

After witnessing first hand the deep financial implications caused by a lockdown in Singapore or elsewhere (eg. China), the contractor and developer are already spooked. For them, it is not just ONE project in Singapore, being MNCs, it is multiple multi-million projects all around the world that are affected. They are already seeing unprecedented losses across the board.

Malaysia to reimpose lockdown if new cases hit above 100 a day (read here)

As with any businesses, in time of crisis, people will find ways to profit (from material suppliers, logistic space suppliers, even workers themselves, etc). You hear all sorts of stories. To some enterprising workers, this is actually an opportunity…

While for many of us – life goes on as usual.

As developers and contractors, with the projects already in huge delays, a 2nd or subsequent lock-down imposed by other countries would prove disastrous to the projects and their stakeholders. With the projects already in delay and already in financial losses, what they can do is to minimise the losses moving forward. To write off 2020 from their log book.

Penalties would be imposed if buildings or spaces are not delivered on time. The government has set up rules & regulations to help mitigate in the first round of the Singapore “Circuit breaker” (and in many ways protecting the down-stream contractors), but what excuses can developers / contractors give for subsequent lock-downs? Didn’t they learn from their lessons and take pre-emptive steps to mitigate the issues?

Stakeholders will not be as forgiving for future delays and mishaps.

One way to mitigate the issue of the disruption of the supply chain is to store materials here in Singapore as soon as they are ready for shipment from overseas. Hence, the race to ship out ASAP.

However, once they ship to Singapore, they have to store it somewhere right? And the construction sites are often too small / cluttered to hold so much material.

The only winner I see from this arrangement are the logistic warehouse owners.

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The contractor has been bemoaning that logistic suppliers have been using this to their advantage and rental rates has not dropped (but increased in some areas). If one project is affected, think what would happen to all the projects in Singapore (and worldwide).

In normal times, it makes more economic sense to store the materials overseas (eg. in China), rather than in land scarce Singapore where rents are more expensive. But these are unprecedented times (ok, yes I know… I heard/read this line like a zillion times).

Would they (contractors) quibble on the amount they pay in warehouse rental or risk suffering a bigger loss if materials are not delivered on time later when another wave of outbreak hits … hard decision. Take it or risk it.

It is like buying insurance. I hate to pay for it (life insurance), but having witness the financial destruction cancer treatment would do to me, I think it would make better sense to buy some.

Or put it in another way, every time the local news announce that the Singapore PM will be live on TV later that day, hoards of people will rush down to buy the essentials / necessities from the supermarkets. Leading to a shortage of rice, toilet paper, instant noodles, etc… empty supermarket shelves. Suddenly for the normal people like you and me, that empty shelf in the fridge or the unused corner in the storeroom becomes valuable ‘real estate’ in the house, which is now used to store all these hoarded goods. In normal times, we can be assured of buying these necessities as and when we want them, from the nearby 24/7 supermarket… but with the pandemic raging, we are now not so sure.

Now multiple that hoarding mentality hundred-fold, thousand-fold or a gzillion-fold.

Prior to the market crash, I actually had a ‘shopping list’ or sort, of the stocks I wanted to purchase during a market crash. And I was glad that I managed to purchased some during the recent crash early this year.

Mapletree Logistic Trust was not in that list. However, it is one of the stocks in my portfolio now.

Looking back, I was rather late in purchasing MLT – only sometime in mid April 2020. I reckon my thesis then was base on what I have encountered at work.

It wasn’t that difficult to see the link. It is also not hard to comprehend MLT business model as well. A check on their properties’ tenants reveal a number of contractor companies.

And it beats reading the IPO Prospectus of Snowflake or understand the intricacy of Tesla business model.

I will probably freak out thinking why Tesla stocks will still soar even after oil prices crash to negative… wondering why would people still find it economically viable to purchase an electric car when it cost cheaper to run a petrol car. To put it in another way, it is like marketing an electric car to an Emirati – where petrol is literally cheaper than water in their country. Burning petrol in a Lamborghini supercar is cheaper there than here.

Then again, one can always argue that Tesla is not just about electric cars, it is a tech company and a forerunner in AI and self driving technology. But ask myself, how much in depth knowledge do I have in that?

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6 things I learned from the 2020 Mapletree Logistics Trust AGM (read here)

3 REITs That Grew Their Dividends (read here)

So far, the stock price of MLT has been on an uptrend. It is one of the very few Singapore listed Reits that managed to grow its DPU and increased its dividend payout during this recession; swimming against the flow. And reading the news today, I can see that Warehouse rents in Asia Pacific is holding steady (though not entirely due to construction material storage :p).

Warehouse rents in Asia-Pacific hold steady on e-commerce demand: Knight Frank (read here)

To quote the article above:

“Prime warehouse rents in Singapore generally held steady in H1 2020, declining only 0.6 per cent to S$1.80 per square foot per month from H2 2019, Knight Frank said.

This came despite economic activity grinding to a halt as a result of the April to June “circuit breaker” and the economy entering a recession during the same period.

The performance was supported not only from increased appetite for space from the e-commerce sector, but also the production and storage of essential commodities such as medical and hygiene related products, the report said.”

Covid-19: Travel won’t return to pre-crisis level before 2024: IATA (read here)

With this pandemic dragging out longer than expected, I don’t see this changing anytime soon. For warehouse owners who are negotiating the lease renewals with their tenants (as their leases near expiry), this could be an opportunity to raise the rental rates.

These days, the hype is on the hottest stock like Snowflake, a cloud based digital / data warehouse. While I am still stuck in the pre-historic age of physical warehouses (old industry stock) :p…

Sure I would have made more unrealised profit by betting on Tesla or Top Glove… but well, personally, I would not have the conviction to hold on to them.

Having say that, things are always evolving (and more so, nowadays). Am always keeping an open mind. The fun part is always trying to widen one’s circle of competence and know more about other companies / stocks… Another opportunity or hot stock will present itself when the time comes.

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My unbalanced bar-bell portfolio

The concept of barbell investing as mentioned by DBS is not new.

To quote the below DBS article:

“Barbell – the winning strategy

Build barbell portfolios with exposures at two ends of the risk spectrum. Seek secular growth themes like Digitalisation and Millennial consumption on one end; income-generating assets like REITs and corporate bonds on the other.

Maintain a barbell strategy

In 1Q19’s CIO Insights “Tug of War”, we advised investors to adopt a barbell strategy in the way a portfolio should be constructed. We reaffirm this approach.

To recollect, a barbell strategy refers to being heavily-weighted at both ends of the risk spectrum. This means overweighting high-growth stocks on one end of the portfolio, while loading the other end with stable and income-generating ones.”

2Q19 Outlook: Lift to Win (read here)

Personally, for me, mine has not been a ‘balanced’ portfolio in that sense. Being more defensive in nature, my portfolio is mainly loaded with more stable income-generating ones such as REITs, banks, aerospace & defense, consumer discretionary, utility stocks, bonds, etc.

To make it simpler, by default, the growth end of the portfolio consists of 3 stocks listed on the US markets (namely Alphabet, Mastercard and Pinduoduo). So basically the below chart would make the low weightage of these stocks more evident. So yeah, the US Growth stock end of the portfolio is heavily underweight.

The current strategy moving forward is to slowly add to the growth end, through DCA funded by both my active income and from the passive income from the dividend generating stocks.

The recent correction in the US markets has allowed me the opportunity to nibble into a bit of the Alphabet stocks.

Stocks appear to be experiencing a textbook correction as payback for an August overshoot rally (read here)

I am wary of stepping too far away from my circle of competence. And I must admit that the sense of FOMO (Fear of Missing Out) is always present given the huge run-up in tech stocks. If I do not understand the business well enough, and if I sense that the valuation is way too high.. I will stay out of it.

Why Valuation Matters for Snowflake Investors (read here)

Is the electric car company named after Nikola Tesla a fraud? Not that one, the other one (read here)

While US tech stocks seem to be having correction, a number of SG Reits are powering ahead (eg. Parkwaylife Reit, Mapletree Industrial Trust, Ascendas Reit, etc). In addition, a number of lower yield Reits have taken the opportunity to expand their portfolio with the expectation that the transactions will be yield accretive (not difficult considering their current low yield).

FCT to pay $1.06b for remaining 63.1% stake in AsiaRetail Fund (read here)

Singapore’s Ascendas Reit to acquire Sydney property for $122m (read here)


Business Time 19-20 Sept 2020 (Reits (September 19-20, 2020))

Nevertheless, historically when income investing is considered, the odds are really on my side. In the today’s article titled “The income edge in the stock market” by David Kuo (read here), he mentioned the following:

“If we invest with a 10-year time horizon in mind, the chances of losing money after a decade is 25 percent. When dividends are included, it is cut to just 2 percent.To put that into perspective, if we put our money into shares every month for 10 years, we would be making 120 separate deposits. Of those discrete investments, only two would be lower after a decade. With the odds so overwhelmingly in our favour, why would we want to miss out. Additionally, the more often we invest, the greater could be our chances of success.”

I personally don’t consider my take home pay as high. With the Covid-19 pandemic, my company has taken the step to implement wage freeze across the board (actually even prior to the pandemic, the company has already been not doing well financially). Hence, while I can do my best at work or look for better opportunities, financially what I can do now for my income, is to take little steps to build up the passive side of it.

Do like my post if you have enjoyed it!

Posted in Portfolio, REITS | Leave a comment

FOMO: Before chasing, let’s see the price first…


First a bit of a context where valuations are now at.

Let’s start with the US Stock Markets.

S&P 500

The mean and median PE ratio for the S&P 500 is 15.82 & 14.83 respectively. On 2 Sept 2020, the PE ratio is 30.78. That is almost double the mean/median PE. 

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Then we look at Nasdaq. Looking at Nasdaq PE Ratio range over the past 13 years, the median PE was 19.24. On 3 Sept 2020, the TTM PE ratio is 24.075. Much higher than the median PE.

Market cap to GDP ratio

Another way to look at valuation, is via the market cap to GDP ratio. This ratio compares the total market cap of all U.S. publicly traded stocks with GDP. More specifically, it calculates the total value of the outstanding shares of all U.S. domiciled, publicly traded companies (the numerator), and divides that number by total GDP.

As per the article below, the U.S. stock market, collectively, is about 77.0% overvalued.

U.S. Stock Market Hits Record 77% Overvalued (read here)

The following chart will provide more clarity. The top graph shows the market cap to GDP ratio; the middle graph is the level of the S&P 500 Index; and the graph at the bottom represents the annualized growth rate of GDP (after inflation). The bottom lists each president from Jimmy Carter to Donald Trump for quick reference. The grey-shaded, vertical areas represent recessions. 

Note the top right of the graph. Currently, the degree of overvaluation is around 77.6% (177.6% – 100% = 77.6%). The previous record high was 49.3% on January 26, 2018. Prior to that, the highest reading was 49.0% overvalued in March 2000, just as the Tech Bubble burst. So yes, now it is significantly overvalued base on this chart.

Schiller PE Ratio

The cyclically-adjusted price-to-earnings (CAPE) ratio of a stock market or the Schiller PE ratio, is one of the standard metrics used to evaluate whether a market is overvalued, undervalued, or fairly-valued.

The way it works is that you take the average of the last ten years of earnings, adjust them for inflation, and divide the current index price by that adjusted earnings. This makes it so that the current price is divided by the average earnings over the latest business cycle rather than just one recent year of bad or good earnings.

The Shiller PE ratio for S&P 500 on 2 Sept 2020 is 32.89 which is much higher than the mean and median PE ratios of 16.74 and 15.80 respectively.

Singapore Stock Market

On the other hand….If you have been a long term investor of the STI Index ETF, you would have been keenly aware of the under-performance of the Singapore stock market in comparison to the US stock markets (esp. Nasdaq).

What is happening to the STI Index? (read here)

Are Investors Overlooking Singapore’s Straits Times Index? (read here)

To quote the above article: “Over the past five years, the S&P 500 index (as represented by the green line) has increased by 51% but the STI has gone the other way — to negative 19%.”

Over the past 10 years, its average PE ratio of the STI was around 12x. On 2 Sept 2020, the PE ratio of SPDR Straits Times Index ETF (ES3.SI) is 10.51, even lower than the average PE ratio.

The STI’s major components are the three banks, taking up close to 40% of the index. Other stocks that make up the top 10 companies include Singapore Telecommunications (SGX: Z74), Ascendas Real Estate Investment Trust (SGX: A17U), and Thai Beverage Public Company (SGX: Y92). Basically the ‘old industry’ stocks. Which could probably explain its underperformance to other markets such as the tech heavy Nasdaq.

Nevertheless, 30 companies of the STI provide some 44% exposure to the Asia-Pacific region, with Singapore taking up 49%. And investors get to partake in the growth in the region here.

However, Singapore being an open market, any drastic changes or crash in the US stock markets would inevitably affect the stock market here.

Will markets stay elevated?

To be frank, your guess is as good as mine. However, back to the market cap to GDP ratio chart. During this pandemic, GDP has fallen while stocks (and market cap) have risen, creating the highest level of overvaluation since the ratio began in January 1971.

There are a few factors that are commonly acknowledged for the rise in market cap.

We are aware that the markets ‘bottomed’ on 23 March 2020 (now on hindsight).

During the Federal Open Market Committee’s emergency session held in mid-March 2020, central bankers lowered interest rates to near-zero levels and eventually committing to buying more than $1 trillion in assets.

In April, Fed chair Jerome Powell made clear the U.S. central bank had no plans to raise interest rates anytime soon and expects the economy to need monetary assistance for some time. And we are all aware that Federal Reserve is doing whatever it takes to keep the economy afloat.

The Fed has set short-term interest rates near zero and is pledging to keep buying government bonds and other assets indefinitely. 

Federal Reserve Doing ‘Whatever It Takes’ to Keep Economy Afloat Amid Coronavirus (read here)

Indeed with low interest rates, very few investment categories offer a good alternative to the stock market. Cash is paying next to nothing and bond yields are at historic lows. You could invest in gold and silver and some high-flying tech stocks but buying these after such an increase could prove risky. With a lack of alternatives, you might say stocks are the only game in town. Moreover, suppressing interest rates helps to “steer” investors into stocks – a technique known as financial repression. 

So back to the question: Will the (US) Stock Markets stay elevated?

However, at some point, stocks will fall (or GDP will rise), and the ratio will decline. My argument is that it will be the former – stocks will fall. Why? Simply because the Fed and the US Government cannot keep the economy afloat indefinitely (despite Fed’s pledge).

As of late Aug 2020, the Fed balance sheet is close to $7 trillion.

A $10 Trillion Fed Balance Sheet Is Coming (read here)

A glance at what other notable investors are doing

Besides reading or listening to the notable investors, it might be more worthwhile to see what are their recent trades (and try to understand).

Warren Buffett

Over the years, a number of Warren Buffett’s Berkshire Hathaway’s trades contradicted with his earlier statements. From the purchase of IBM stocks in 2011 then Apple stocks to the purchase of airline stocks (and subsequent sale), and the recent purchase of stocks of a gold mining company, Barrick Gold Corp.

Buffett has in the past said he doesn’t like investing in gold. Unlike dividend-paying stocks or high-quality bonds, buying and holding the metal in an investment portfolio generates no income.

Surprisingly, Buffett opened a stake in Barrick Gold (GOLD) in the second quarter this year, while exiting Goldman Sachs (GS). Berkshire bought nearly 21 million shares of gold mining giant Barrick Gold, valued at more than $563 million. 

In addition to exiting Goldman Sachs, Buffett also slashed stakes in JPMorgan Chase (JPM) by 61%, but made recent purchases of Bank of America (BAC) stock (its second biggest portfolio position). So technically, he did dump all bank stocks.

Basically, my thought is that JPM and GS have much bigger exposure to derivatives, as compared to BAC. And Buffett once famously mentioned in 2002 that he viewed derivatives as time bombs. To quote: “In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal”.

And yes, it will not end well if there is a systematic collapse of the financial system. Well, this recent move to move away from banks with big exposure to derivatives, plus the tiny stake in a gold mining company (whose earnings by the way are heavily dependent on the price of gold) – seem to point to a not so rosy near future.

Ray Dalio

Ray, who famously said that ‘cash is trash’ prior to the market crash early this year, also mentioned “a bit of gold is a diversifier”.

Cash is trash; hold some gold – billionaire investor Ray Dalio (read here)

Well, in his recent Q2 2020 13F filing, we can see that approx. 20% of his Bridgewater $5.96 billion portfolio is in gold ETF. Ray Dalio’s hedge fund poured more than $400 million into gold in the second quarter of this year. That is a very significant increase in a very short time despite his earlier comments prior to the market crash to just hold ‘a bit’ of gold in the portfolio.

Billionaire Ray Dalio’s Bridgewater fund poured almost half a billion dollars into gold in Q2 (read here)

In gist

Well, nobody knows when the market will crash, and I don’t believe in staying out of the markets totally. Nevertheless, the above are just broad valuations of the overall markets, and if you invest in individual stocks, it is more important to understand the fundamentals and narratives of the companies themselves.

Just make sure when it does, you have a war-chest ready, and perhaps now is not the time to continue chasing some of the stocks with lofty valuations.

Some people are comfortable staying fully 100% invested. For me, I would like to have some at the side (for the rainy days).

Ultimately our worst enemy is ourselves.

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What’s next? The Grind….

I try to pen down some of my thoughts on a monthly basis. With the on-going Covid-19 induced recession and many companies which have recently released their half yearly financial report, there are many items to mull about.

Singapore reported its first case of Covid-19 case in 23 Jan 2020, and we are now coming to the end of Aug 2020. On hindsight, I can safely say I have fully under-estimated the extend of the Covid-19 outbreak and its impact to the global economy.

Nevertheless, it does help by having a diversified portfolio. In general, my Singapore & US portfolios are doing well, with many in the green. In contrast, my HK portfolio is still underwater. Among the better performers are from 2 separate spectrum. On one hand, I have the tech stocks doing well (such as Mastercard & Alphabet), while on the other hand, there is the safe defensive yield plays outperforming (such as Parkwaylife Reit & Ascendas Reit), and not forgetting International Housewares Retail (basically retailing of essential housewares products).

Recent transactions for the month of July / Aug include:

1) Purchased HSBC, Pinduoduo, Parkwaylife Reit, Mapletree Logistic Trust & Lam Soon;

2) Sold entire Colex holding.

My thought now is where can I place my money in. Or just hold on and build up the warchest.

On one hand, you have the tech stocks which are reporting stellar earnings (of the big US Techs FAANG, I reckon only Alphabet has an earning call which is not within analysts’ expectations) – but I think too much attention has been paid to them, and prices are a bit high for my liking. Still it is worth to have a portion of my portfolio in mega tech (now less than 2% of the overall portfolio value).

  • US big tech dominates stock market after monster rally, leaving investors on edge (read here)

Beyond the mega Techs, there seem to be a trend in 2020, in making capital gains by buying loss making (or hardly profitable) tech companies: Shopify, Nikola, Nio, Zoom, Pinduoduo, Tesla (negative profit if we strip away the $428 million from regulatory credits).

My tiny dip into Pinduoduo is probably an itch I need to scratch, and one of the very few stock whereby I am looking at its narrative more than the numbers. I find that its e-commerce model much different from the more established e-commerce giants like Alibaba, JD, Ebay or Amazon. In addition, it managed to hitch hiked onto WeChat with Tencent being a major investor, makes it harder for would be competitors.

Still I would much rather stay with the more established mega techs (HK or US listed). I have my fair share of fails where I dip into speculative tech stocks believing into the narrative (Creative being one of them).

  • Creative sinks into the red with US$9.1m H2 loss (read here)

Moving on… On the other hand, you have the other sectors, which are underperforming: Reits/Property counters, Consumer Staples, Utilities, Financial companies/banks. The so called old industry stocks. That is where the majority of my portfolio lies (dividend cash cows).

The trend towards tech is not surprising given that the pandemic induced social distancing & stay-at-home work arrangement. However, my feel is that it is overdone. Many I feel are situational plays. A parallel thought comes to mind when I think of the sudden price crash in glove stocks when a vaccine is announced. Nevertheless, I do feel that for some mega techs they are not really that overpriced, and when the pandemic is over, they will grow stronger.



I do agree with the narratives of many of the smaller tech stocks… but people are willing to stretch to decades and raised valuations to levels way ahead. On the other hand, traditional value stocks are punished, and many are not willing to see what’s beyond 1 or 2 yrs.

2 extremes.

The recent rally in US tech stocks kind of pushed me towards safe boring Sg dividend Reits & building up more on my warchest.


So here I am grinding my teeth, twirling my hair, thumb sucking, staring at the wall waiting for the paint to dry :p


Around me, within my small social circle, I can already feel the change in the wind (so to speak).

1) Retrenchment / Pay freeze and pay cut:

– A relative (in her mid 40s) getting retrenched early during the Circuit Breaker period (and has yet to find a new job yet).

– A work friend of mine and my uni mate in the past, from another company (who used to be involved in the same project as me) got retrenched. She gave birth not long ago (probably a year or 2).

– And yes, pay freeze (and no promotion) for everyone in the company. Other companies as well (from those whom I meet at work) – Pay freeze. Pay cut for those higher in the ranks. Guess next will be more pay cuts down the rank.

– On a side note (and brighter note), my wife (a civil servant) got promoted and had a pay rise this year.

2) Workplace (New work culture)

– My colleagues and I have been working remotely from home since the start of the Circuit Breaker, and recent news seem to point that this might become a permanent situation. Eg. Our company will reducing the office space and hence reducing the no. of permanent desks. In place, there will be more ‘hot desks and lockers’.

It will lower the overhead rental expenses and with the leases renewal coming up, bosses are also questioning when will the things go back to the past or will the new normal stay.

Personally, as for my company, it is hard to say as to what will happen by year end. Management has been dropping hints of financial difficulties ahead. It is always good to keep a lookout for new opportunities and find chances to learn and move on.

– From what I read and heard (being not from the finance sector), many banks are holding off retrenchment this year. Next year will be a different story.

3) Losses

Being in the construction industry, and being in a project which involved many many small stakeholders / sub-contractors… We are starting to hear news of losses from many small players and even the main contractor (into to the tens of millions).

The main contractor has been requesting for many rounds of financial help (ex-gratia) from the developer.

4) Recurring Passive income affected

– Well, if you are a long term dividend stock investor, you would have felt the impact this year. Many companies are either withholding payouts, slashing payouts or letting you have the option to subscribe to scrip (in lieu of cash dividend).

– My parents own an investment condo. Recently, the tenant (tenanted to a company for its employee) has decided to cancel the 2 year lease abruptly after 6 mths (as the occupant / employee is leaving Singapore).

So with all the above, it makes the most difficult part in investing even harder. The most difficut part in stock investing is always the waiting.

Back in 2017, when I decided to sell most of my stocks, I heaved a sigh of relief, and also a ominous thought of what might come next (I recalled I sighed again).

A sigh of relief – Holding stocks is not without its worries (and it is not for everyone). The volatility of stock prices and the constant onslaught of news whereby things change quickly – could mean huge changes to the portfolio value on a monthly, weekly or even daily basis (esp. when a huge chunk of your savings are in stocks). Hence, by exiting, I sort of left that behind…. In addition, back then, when I left, I had 2 beliefs. One is that I felt that in general, the markets were fairly valued (or overpriced) and that there were no major crisis then. I couldn’t see more upsides, not in terms of stock prices, but rather how companies will grow or if there will be more fiscal or Fed economic stimulus.


A ominous thought of what might come next – Yes, back to the last sentence. When I choose to leave while things are rosy, it will also mean that I will be back when shits happen.

To invest in a crisis (and stay invested). Or to put it simply, I wait, so as to wait again (waiting for the crash, invest and stay invested). That was the ominous thought (and still is). That is harder said then done (and to stay invested through the recession and through the ever increasing bad news). However, since that is my belief (for the reason why I left and why I got back again), it is something that is inevitable.

As of today, if I do not consider the worst performing stock (which is Golden Agri – forced to hold for many many years) – the overall portfolio performance is at a slight gain.

Almost all my stocks in my Singapore Portfolio is in green (excluding Golden Agri & SATs). Even Ascott Residence Trust turned green (on and off – borderline). And I managed to sold off Colex at a profit (after its recent massive dividend announcement). Colex has been underwater since end 2018.

All the stocks in US Portfolio is in green (typically the 3 tech stocks – Mastercard, Alphabet & Pinduoduo).

The single stock (Heineken) in my Malaysia portfolio is still in losses.

Most of the stocks in the Hong Kong portfolio are still in losses, with the exception of International Housewares Retail (with its good run up in recent weeks). I consider HK Land and Dairy Farm as stocks in the HK portfolio. I probably bought them (eg. stocks in the HK portfolio) too early (eg. late last year). Nevertheless, they are contributing dividends on a monthly basis. Even with the losses, I see better performance with IH Retail and CK Asset (earnings wise and stock price performance).

Nevertheless, for this year, the growth in my dividend income has been phenomenon (even with the payout reduction) relatively speaking, since I have opted to invest during this crisis year. Hopefully, the payout next year will be even better… just keep waiting.

The worst is staying out of the market totally, and not having a stand. So is this a good time to be invested? The million dollar question.

For me, it is just inevitable.111


Posted in Personal Finance, Portfolio | 4 Comments

Unexpected passive cash flow from Colex

During this period with the Covid-19 pandemic on-going, it is not surprising to find many companies either slashing their dividend or suspending their dividend.

Shallow Focus Photo of Man Reading Newspaper

Among my holdings, I was pleasantly surprised by the recent announcement of Colex to issue a Special dividend of 10 cents on 4 August 2020. This company is bucking the trend. :p

On 3 Aug 2020, Colex shares were trading at $0.20 per share. A $0.10 special dividend is almost half that share price, and on 6 Aug 2020, Colex share price has rose to $0.33. A 65% increase.

Figures from

Colex’s annual dividend payout is fairly consistent (see above), ranging from $0.005 to $0.006 (once in 2017 it was $0.011). Kind of predictable and boring. So yeah, $0.10 is a big jump. And the resultant dividend yield (inclusive of the other dividend payouts so far) is a whooping 31.67% (in the midst of a recession).

I am surprised from another angle, given that the earnings reports of Colex have been lacklustre for many quarters, given the rising operating expenses and staff costs, etc. Also the big kicker was the unsuccessful tender for public waste collection in Jurong sector (Colex’s 7-year contract expired on 31 March 2020). Colex was the lowest bidder, but the contract was awarded to Alba.

Their subsequent tender for public waste collection in Clementi-Bukit Merah sector in 2020 was also unsuccessful. Colex was the 2nd lowest bidder, contract was awarded to SembWaste.

Subsequently, these will be the tenders upcoming.

Expiry for the other 4 sectors:

1) City-Punggol – Jun 2021 (Existing operator: SembWaste; Tenders opened on 24 June 2020)
2) Woodlands-Yishun – Dec 2021 (Existing operator: SembWaste)
3) Ang Mo Kio-Toa Payoh – Dec 2021 (Existing operator: 800 Super)
4) Pasir Ris-Bedok – Oct 2025 (Existing operator: 800 Super)

Ok, to be fair, there are listed companies increasing their dividend payout during this period (such as SGX), but that is mainly because they are doing well.

However, in Colex’s case, given the loss of the Jurong Sector public waste collection, Colex’s revenue for HY2020 has decreased by 21.8% to S$26.359 million from S$33.725 million in HY2019.

From their recent 2019 Annual Report (below), Waste disposal revenue takes up approximately 57% of the overall revenue. With the loss of the Jurong Sector that could mean a substantial loss in the revenue (I am not sure if there is a further breakdown in this waste disposal revenue, but I am assuming most if not all came from the Jurong Sector public waste collection). So that is a permanent loss of around 60% revenue in the coming years, unless Colex managed to successfully bid for a PWC tender.

I would have expected Colex to be conserving cash at this period, given the global pandemic and uncertain economic outcome, as well as its own foreseeable revenue/income drop. Personally, to me, Colex is the typically boring company with an easy to understand business. In addition to these, it is also known to have a strong balance sheet (minimal debt and a cash hoard).

Colex latest annual report shows that it has $22.5 mil in cash and cash equivalent. A bit of context here, Colex has a market capitalisation of $43.733 mil. Colex’s cash is approx. 52% of its market capitalisation.

That is a lot of cash for a small company.

An off the envelope calculation: Given that Colex total share count is 132.52 mil. The special dividend is an outflow of approx. $13.25 mil.
As mentioned earlier, Colex latest annual report shows that it has $22.5 mil in cash and cash equivalent. With the above dividend outflow it is now left with $9.25 mil (not considering the other interim dividend payout this year).

The management has stated that the special dividend was issued as it was unsuccessful in the last two PWC tenders and is unable to invest its surplus cash during this uncertain period.

However, many others think otherwise.

You see, Bonvest Holdings Limited owns 78.94% of Colex or 104,611,560 Colex shares. And Colex Chairman, Mr Henry Ngo has substantial stake in both Bonvest and Colex (BTW the relationship of Henry Ngo, Bonvest, Colex and Goldvein Holdings is very complicated).

With the special dividend Bonvest is getting $10.461 mil from Colex.

It reminds me of the relationship between Comfortdelgro and Vicom. FYI, in Feb 2019, Vicom declared a Special dividend or 8.62 cents; there was no special dividend payout a year ago. Comfortdelgro is a direct beneficiary of that payout, since Vicom is two-thirds owned by ComfortDelgro. However, as compared to the current situation now with Colex, it is a different story. Vicom then, posted a 30.9 per cent rise in net profit for its full year ended Dec 31, 2018.

Vicom posts FY18 profit rise, announces special dividend (read here)

Bonvest as a company has 3 main core business: Property, Hotel and Waste Management (Colex).

Bonvest’s main revenue comes from Hotel (around 60.6%), followed by Rental (around 9.7%).

Given the Covid-19 induced global recession, it is without doubt that Bonvest’s main revenue generators are impacted. Hospitality is like ground zero in this pandemic devastation (next to the aviation sector & cruise lines). In its 8 June 2020 announcement (below), Bonvest has already mentioned that. As for the magnitude, we would have to wait for its earning report.

Nevertheless, Bonvest has stated that it has sufficient cash holdings and undrawn credit facilities and may further leverage on unencumbered hotel properties for new credit facilities.

Well the group does have a cash balance of $46.4 mil in 2019. However, it also has total liability of $460 mil. Current liabilities (due to be paid in 12 months) stands at $237 mil.

The Group has a gearing ratio of 27.71% and total borrowing of $339.5 mil.

So yes, the cash balance does pale in comparison to the liabilities and borrowings.

In additional, there are also other risks such as a downgrade of their property valuations at the end of 2020, etc (which will adversely impact their balance sheet and ability to obtain better / higher loans from banks).

Cash flow wise, they are lumpy (Bonvest being a property counter). 2019 Operating Cash flow was around $29mil, while CAPEX was around $24 mil.

I am not sure how 2020 Operating Cash flow will pan out. However, looking at the CAPEX it can fluctuate wildly from around $24 mil to around $54 mil. If we take a 50% cut from operating cash flow (of $29 mil), the free cash flow would be around negative $9.5 to $10 mil, provided CAPEX remain around the same as in 2019 (and that is a big IF).

Well the special dividend payout ($10.461 mil) from Colex this year as mentioned earlier would come in useful.

This move by Colex does raise some doubts (despite Bonvest stating that they have sufficient financial resources).

In the meantime, I am sure for retail investors, the special dividend announcement is a welcome news. This dividend payout or shall I say, transfer of cash, has benefitted the minority passive retail investors. This is especially so for this thinly traded stock, whose stock price has been on a down trend since the start of 2017. For me, my Colex stock holdings has turned green (unrealised profit). It has been underwater for quite a while.

However, I don’t think this Special dividend payout would last (the most another year), unless Colex’s financial performance pick up (with the successful bidding of a public waste collection tender).

Despite being cash rich, Colex with a market capitalisation of $43.733 mil is still small fry. Big brother – Bonvest with a market capitalisation of $355.343 mil, would need much more cash injection than Colex’s special dividend if the pandemic drags on (and Bonvest cash burn gets bigger).

It might have been a wonderful symbiotic relationship between the 2 companies, a bigger ‘brother’ (Bonvest) in charge of the more glamorous side of business, with world class hospitality real estate, while little ‘brother’ (Colex) stays in the shadow and play it safe with a super unglamorous smelly but stable business of waste collection, with a strong warchest to boot. What could go wrong? However, even prior to the Covid-19 pandemic, little brother’s business has already started to encounter hiccups, and a black swan event like this pandemic resulted in an unprecedented crisis for big brother’s business. It is like a candle with both ends burning (question is: which end has a bigger fire).

However, in the meantime, for the current retail investors who are vested in Colex stock, just enjoy the moment. I do doubt the intention of this Special dividend is to reward long time shareholders of Colex… they are just an accidental beneficiary (though minor) of this transfer. Cash after all, in this low interest (close to zero, and in some cases negative), is better used for other means as compared to being left in a fixed deposits.

For some, it is a good time to cash out. Perhaps that is how Mr Henry Ngo views it- as a warchest, which is to be opened in times or need. For others, it is a welcome change from the downward trend of the stock price.

Disclaimer: I am vested in Colex Holdings Limited stocks.

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To Speculate or Invest?

The month of June 2020 so far has been ok. It wasn’t as volatile as the previous months (but not as good – trending upwards). The US Markets were pretty much range-bound and Singapore markets did not outperform as well.

In terms of dividend, the month of June is a drought as I receive no dividend for this month. They do come in useful in helping me buy stuff for the household or for paying bills.

  • Dividends by Month (read here)

I have purchased some Sun Hung Kai properties stocks at the start of this month after the drop in HK equities prices due to announcement of the proposed national security law which would allow Beijing to override Hong Kong’s independent legal system and collect intelligence in the territory.

I am not particularly into politics, but my feeling is that HK is becoming more and more like Singapore in many ways. More sterile, a more authoritative top-down government, etc. Sometimes I reckon HK need some form of control to function. For many people on the ground, the riots and protest obstruct more to their freedom (rather than contribute). I like Daniel Dumbrill’s video on this (see below). Nevertheless being an outsider, I would never fully understand.

  • Why Hong Kong Needs National Security (Watch here)

Who knows maybe the Hong Kong Exchange will end up like the Singapore Exchange with the Index consisting mainly of government linked entities…(There is a trend there, if you have noticed).

Overall, my HK equities portfolio still underperform as compared to my US and SG equities portfolio.

So this comes at a time when I am contemplating what to do next… probably for next month (July). As Singapore moves into Phase 2 of its reopening strategy, for my portfolio I have already slowly moved into it.



Phase 1: To accumulate stable dividend-paying stocks.

I think to some extend ‘volume’ plays a part. Beyond a certain amount, the annual/monthly dividend payout becomes more meaningful. With an average dividend yield of 4%, a portfolio of $1,000 pays a minute amount of $40 a year (or $3.33 a month) – tax-free. Snowball that to a portfolio of $10,000, and we get $400 a year (or $33.33 a month). Still a small amount, but with $33.33 you can start to purchase some things (perhaps Kopi money for the month), pay the HP/Internet bills, etc. And when we manage to increase the portfolio to $100,000, we will get $4,000 a year (or $333.33 a month). Now that amount starts to make more sense.

I can go on, but you get the picture.

There is a reason why I like Joseph Carlson’s Youtube videos, cause he kinda drums it into my head.

Income such as dividend payouts or Bond interest payouts is probably the next best thing to having rental income investment property (or better). Anyway, lots of debate on that.

However, with interest rates going to be near zero for a long time, sticking with bonds may not be a wise choice. Leaving me focussing more on stocks… for now.

In general, I would think many of the dividend stocks in my portfolio are pretty stable. Sure, the Covid-19 outbreak has revealed the flaws of REITs and many other businesses. However, I am sure in the long term, many of these companies will survive and perhaps grow stronger (over their competitors).

However, when I dig into the financial metrics, they aren’t exactly the top of the league. ROE not in the 20s, balance sheets not exactly debt-free, profit margin aren’t very high, earning growth not high etc….Peter Lynch probably term many of them as Slow growers or Cyclical stocks.

Kind of like investment properties —- I probably won’t expect much innovations or high ROE/Earning growth when thinking about them, but rather the stability of the income and assets.

I think this interview (see below) with Guy Spier kinds of sum it up, pertaining to the investing environment now.

  • You need to adjust your valuation models in this market: Guy Spier (read here)

To quote the article:
“Buffett famously says interest rates act like gravity and they bring stock prices down. Now we are in a world where interest rates will remain low for a long time. There is a lot of liquidity, there is a compulsion to invest. If you do not invest now, and you will be stupid to invest in the bond market, so equity perhaps is the only game in the town?
The simple answer is what Charlie Munger says: this is not supposed to be easy. So you are actually right. You just presented the conundrum and how do you deal with that conundrum? Do you go in cash and miss out when equity market rises from here? Do you go to bonds that seem to be a termite here? Or do you stay invested in some extraordinarily inflated stock markets? Even within equities, you have the question do you invest in the market darlings, which just seem to be going from strength to strength? Or do you say dive in the whole classic value investor, where all your stocks continue to go down? It’s a very tough time……

How can you be a value investor when all the businesses that seem to be doing really well are ones that appear to have very high valuations? I will just give you a couple of simple adjustments so if you are in the software space, you will have a marketing expenditure that you would spend to grow the size of your business. The moment the marketing expenditure goes away, the minute you go into a steady state, you have to make that adjustment and look at the earnings of the company without the growth capex. Making those kinds of adjustments, some very smart value investors come to the conclusion that some of the FAANGs are actually great value investments.”


Phase 2: To accumulate growth stocks.

With the recent V shape recovery in the US stock market, you start to read and hear of people with success in stocks capital gains.

I am sure many would have found out about Chicken Genius Singapore‘s videos. With a video title like this “$440,000 gains in 2020“, I am sure many would be interested.

Or Adam Khoo’s video – 5 Reasons the Stock Market Can Go Much Higher

Or Dave Portney’s – Barstool Sports founder believes he’s a better investor than Warren Buffett and has determined day trading is ‘the easiest game’ there is 

Going back to what Guy Spier said – It is a tough time.

Well, I find Phase 2 of my investing journey hard. Adjustments had to be made when I think of these growth stocks. Nevertheless, looking at the forward PE ratios of the FAANG stocks – some are not outrageously high (not cheap also).

  • FAANG Stocks: Analyzing Their Valuations (read here)

Forward PE Ratio – Source from Yahoo on 21 June 2020

  1. Facebook: 32.68
  2. Apple: 22.57
  3. Amazon: 103.09
  4. Netflix: 71.43
  5. Alphabet Inc: 34.13

Then again, these are not the Tech stocks at the super growth stage. .. Mega Techs.

  • One chart puts mega tech’s trillions of market value into eye-popping perspective (read here)

There are arguments to stick with tech companies in the steady-state beyond the high growth Capex stage. And beyond these mega techs, I am sure we can find many more growth companies with stellar financials.


We often read and hear about the winners but not the losers.

My fear is probably towards senseless speculation. Not understanding what I am investing in or having no conviction in my investment over the long term. I am sure some of us would have read about the young man who committed suicide after seeing a negative $730k balance in his Robinhood trading account.

  • 20-year-old Illinois man commits suicide after seeing -$730,000 balance on app, family says (read here)
  • Robinhood’s stuck-at-home millennial day traders ignore danger signs to push US stock benchmarks to new highs (read here)
  • Leon Cooperman says speculation by Robinhood traders in stocks like airlines will ‘end in tears’ (read here)

Ah yes, Robinhood, the app-based pioneer of zero fee trading in the US.

Looking through the Robintrack website (which keeps track of how many Robinhood users hold a particular stock over time)… I came across some very senseless speculations. Sure there are many turnarounds plays in the top 100 holdings in view of the Covid-19 induced recession (eg. Delta Airlines, Carnival, Norwegian Cruise Line, United Airlines, Boeing, Spirit Airlines. – many among the top 20 popular stocks).. which I don’t see any near term turnaround.. and I have my doubts as long term holdings (after the Covid-19 blow over).

And I wonder what is with the infatuation with medicinal cannabis companies? Yeah, sure they have sticky business models. Interest is going up while stock prices continue downward trends for many of these stocks, while the general markets recovered Eg. Aurora & Hexo with deteriorating income and EPS. Probably turnaround plays as well.

To quote the below article:

“Earnings growth, or at least the prospect of strong earnings, is a hallmark of top stocks. But the marijuana industry, broadly, is losing money. The industry’s billion-dollar valuations dwarf million-dollar quarterly sales figures.

Not surprisingly, marijuana stocks have poor Earnings Per Share Ratings. Innovative Industrial Properties leads with a 77 EPS Rating out of a best-possible 99. Cronos Group had a 38 EPS Rating.”

  • Should You Buy Marijuana Stocks In A Pandemic? Here’s What The Charts Show (read here)

However, I am not even talking about these.

At no. 49 (in terms of popularity (among Robinhood users), we have Hertz (above Nikola, Luckin Coffee, Netflix, Nvidia, Nike, etc)


For a long time, the number of users holding this stock has been very stable, until recently. The numbers shot up when Hertz started filing for bankruptcy on 22 May 2020), while its stock price spiked briefly before crumbling.

  • Looking to buy a car? Hertz is selling thousands of used cars in its fleet in bankruptcy at bargain prices (read here)
  • All bets are off as Hertz pulls plan to issue $500 million in new stock (read here)

Denver-based oil producer Whiting Petroleum which filed for bankruptcy on 1 April 2020, also saw a surge in interest from Robinhood users.


GNC, which is said to be close to filing for bankruptcy, saw its shares soar and interest among Robinhood users rise.


The whole concept of investing is thrown out of the window, replaced by speculation (eg. hoping to be not that last fool). Hertz has even tried to capitalise on this by issuing new stocks to avoid bankruptcy (but failed).

That is the other end of being extreme. Beyond having no conviction and understanding the financials of the company I am investing, and even beyond having an innovative company with Proof of Concept and the Ability to Scale. It made no sense at all.

Hmm.. as stated in the Feb 2020 article below, the median age of a Robinhood customer is 30, and half say they’re first-time investors.

  • As Morgan Stanley buys E-Trade, Robinhood preps social trading (read here)

Maybe to quote Marc Rubinstein in his article below:

But a pivot from sports is a compelling explanation. The demographic of Robinhood’s customer base is similar to that of a sports bettor. Men aged 25-34 are the segment most likely to bet on sports on a regular basis. According to Deloitte 43% of North American men aged 25-34 who watch sports also bet on sports at least once per week, and that’s the same group that has flocked to Robinhood. The median age of a Robinhood customer has drifted up from 27 in 2017 to 31 now, and 80% of them are men…..

Robinhood customers also appear to be attracted to stocks for the same reasons they are attracted to sports events. In its S-1 prospectus DraftKings, a sports betting company, says that it delivers “betting experiences designed for the ‘skin-in-the-game’ sports fan — the fan who seeks a deeper connection to the sporting events that he or she already loves.” A look inside Robinhood portfolios reveals the sorts of companies that customers no doubt have deep connections to. Outside of the ‘cheap’ stocks (Robinhood gives away a free share, priced between US$2.50 and US$10, to every new account holder) portfolios are stuffed full of Aurora Cannabis, Disney, Snapchat, Tesla, Twitter. (Very few banks and financial services companies are in there.) On the basis that their customers love sports betting, there’s something meta about DraftKings itself having worked its way into more Robinhood portfolios than practically any other stock over the past month.”

  • The Stock Market as Entertainment (read here)
  • Why So Many People Are Getting into the Stock Market (read here)

Sure perhaps it provides entertainment and adrenaline rush (that comes with gambling as well). Well, been burnt too many times to even wanna try. Actually, I don’t really lack entertainment by investing (even though I am always holding the same stocks for months – always get surprised from time to time). Just want to sleep well at night.

Sure reading the financials of the company will not ensure that I hit the big time stocks… but it does minimise my stupid and impulsive buys (won’t eliminate though). There is a certain amount of irrationality when it comes to growth stocks… that is just how it is. However, to speculate in Hertz is beyond that level. No numbers, no narratives, no future… don’t know what to cling onto.

“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” Peter Lynch

If I am to invest in Hertz now, I would probably tell my son (for the reason for investing in Hertz), is that Daddy does not love you and would like to burn your future varsity fund right before your eyes…….Muahahaha…. “p

Who knows, people probably made big money from Hertz stocks … but then again investing (or shall I say speculation) is one area whereby making a profit does not always mean you are right.

I can’t remember the exact words of Howard Marks, but as I recall, it is the ability to tilt the probability in your favour, but the final results may be still negative. He stated the example of a bowl with negative and positive lots. Even though one may choose a bowl with 70% positive lots, one can still draw a negative lot from it. However, that does not mean that the person is wrong (in the long run).

From time to time, I would look at the shared portfolios in Stockscafe. Inevitably I look at the stock holdings of the top-performing portfolios (be it 3 yrs or all-time) and get some ideas from there. However, ultimately, it still boils down to reading more about the stock/company narratives and studying the financials. I have to be convinced by at least one of them (narratives or numbers).

Oh Yeah, Tesla, Square, DataDog, Docusign, Mega Tech stocks featured quite prominently in many of the portfolios which achieved stellar gains recently. However, not too far down the list, there are portfolio consisting of Singapore Reits, banks, etc which are also doing well. I guess it has to do with a bit of timing and luck.

So moving on, I have been looking at more growth stocks. However, despite working from home, work is keeping me busy most of the time.

Anyway, the month of June is not over yet. Who knows … how things will change.

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My thoughts for the month of June

Time flies. And the month of June is around the corner.


Portfolio wise there has been some minor changes. You can check out the list of stocks in my portfolio in the articles below.

  • Plan forward for Month of May (read here)
  • Portfolio Update (read here)

For instance, I have purchased some more of Alphabet & Mapletree Logistic Trust shares and built up my war chest (from active income and dividend payouts – which is as planned.

Overall, the portfolio value dropped slightly.

My Singapore Portfolio has whipsawed in the month of May, but basically remain almost the same or slightly higher. The REITs have performed better compared to the rest. Even Ascott Residence Trust posted unrealised gains. And I am bemused by the strong performance of Mapletree Commercial Trust share price. The month of May saw more dividend income compared to previous months, having received dividends from Hongkong Land, Dairy Farm, Golden Agri, DBS, Mapletree Commercial Trust, ParkwayLife Reit and ST Engineering.

My US portfolio (consisting of just Mastercard and Alphabet) and Malaysia portfolio (consisting of just Heinkein) has been on the green side. The US portfolio, in particular, has been the out-performer. Tech seems to be lifted by the coronavirus related disruptions and global lockdown. Reading the revenues of some Taiwanese semi-conductor companies, there seemed to be an uptick in the months of March, April (compared to the same months last year). Quite a no. of tech stocks have rebounded and are reaching new highs (Facebook, Amazon, Netflix, etc).

Hong Kong (HK)

On the other hand, it is the Hong Kong Portfolio that has proved to be a let down.

I think we are all aware of the recent news. After months of Covid-19 hogging the headlines, we are now back with HK in the limelight again.

  • US move to end Hong Kong’s preferential status and cut ties with WHO ‘extreme, suicidal’: Chinese state media (read here)
  • China says U.S. action on Hong Kong ‘doomed to fail’ (read here)

I have been following the news from Hong Kong, and these days when I read the news of the actions by China (and subsequently by US), I just can’t help reflecting on the words by this British Professor to a bunch of students on rioting, and the students’ reaction to someone who mentioned that HK youngsters are destroying more than constructing. Looking at the date of the video, it was sometime back in Sept 2019 (and as what was mentioned by the Professor, it was week 17 of the protest).

The professor’s talk (like my lecturers during my Uni days) is strong on ‘lecturing’, but fell short on solutions. No student would like being lectured. Then again, that isn’t the point I reckon.

Yes, as a Singaporean living in peaceful Singapore knowing nothing about HK and what Hong Kongers are going through, I don’t think I am qualified to say anything. This is just my personal thoughts.

In the video, the professor was stating that Democracy in China (HK) is an illusion, what they are doing (rioting, defecating, beating people up, graffiting the walls, vandalising the streets) is stupid. Weeks after weeks of protesting is not going to yield any results. It is disrupting the lives/livelihood of their peers (countrymen). It is exactly what China wants. Their freedom (social media – Facebook, etc) will be taken away from them. What happened in Mainland China (I reckon he meant the Tiananmen massacre / crackdown) will happen in HK. He urged them to be more intelligent in their ‘revolution” (He mentioned Mr Robot and Cyber-attack – being anonymous, instead of buying products from China to riot). It is disruptive in the Wrong way.

Guess from an investor’s point of view… Sometimes the hardest thing to do.. is to Do Nothing. Will we see a HK version of Gandhi? Joking.

Here we are now, weeks after weeks, months after months of protesting, rioting….Albert Einstein is widely credited with saying, “The definition of insanity is doing the same thing over and over again, but expecting different results.”

As we approach June 2020, the professor’s premonition seems to be coming true. With the recent news, there seem to be no winners. And the biggest loser seems to be Hong Kong.

To quote the article below: “After 1997, if there are people in Hong Kong who scold the Communist Party of China, scold China, we will allow them to scold. But if it becomes action to turn Hong Kong into an anti-mainland bastion under the guise of ‘democracy’, what then? Non-intervention would not be feasible,” Mr Deng told members of the committee drafting Hong Kong’s Basic Law, or mini-constitution, in 1987.

  • Fear of foreign interference looms large in China’s version of Hong Kong law (read here)

It is really none of my business. However, I can’t help feeling for those working-class Hong Kongers with families to take care of / feed. After all, I am also a family man.

Yes, Democracy is important, but why are these people (who are not even protesting) suffering?  Can there be true democracy and independence without social stability or economic prosperity (even as simple as putting food on the table)? The video below was dated 7 Aug 2019. Wonder how is he and his family now…

With the world in recession due to the Covid-19 virus, it has been a double whammy for HK. Caught between 2 giants (often stressing that they have little to lose), HK itself a small pawn in the whole scheme of things.

HK itself seem to be trapped in a quick sand. The more it struggles the deeper it sinks, the more China tighten its grip on it. The more reasons China can find to do so.

With the world re-opening after the Covid-19 lockdowns, and economies set to recover (albeit slowly) for many countries, I can’t really say the same for HK.

And after months of rioting (coming to a year), what have HK rioters got to show? Any progress made in democracy? A country where the economy is at a standstill (earlier than most others), with no tourism revenue to speak of, hospitality, F&B, retail sector near collapse, unemployment rate hitting 9 years’ high.

  • Coronavirus: most Hong Kong hotels record single-digit occupancy as industry faces ‘life or death’ struggle to survive (read here)
  • Hong Kong outlook ‘pathetic’, ‘dire’ in near term, mall and hotel operator Wharf REIC says as it reports drop in revenue, profit (read here)
  • Hong Kong Disneyland’s Latest Losses Blamed on Politics, Not Virus (read here)
  • Hong Kong unemployment rate hits highest in more than 9 years (read here)

Even Jimmy Lai (founder of Hong Kong’s pro-democracy newspaper The Apple Daily) recently mentioned “I hope, for example, that the United States government does not completely lift Hong Kong’s privileged economic status. The city needs those special ties, so it can keep standing apart from the mainland and have at least some economic edge over it. Removing those privileges would only make Hong Kong more dependent on China.” 

The above is extracted from the article below.

  • Do My Tweets Really Threaten China’s National Security? (read here)

And the prolonged unrest has pushed six Hong Kong tycoons (including Li Ka-shing) to be supportive of the national security law.

  • Tycoon Li Ka-shing throws weight behind Hong Kong national security law, suggests it will ease Beijing’s ‘apprehension’ about city (read here)

The fact that I am still invested in Hong Kong stocks (of companies, many with businesses in Hong Kong itself), is that I have not lost hope for Hong Kong. And yes, I am really tired of reading news saying that Singapore stands to benefit with the ‘fall’ of Hong Kong. Instability in HK / China (and Taiwan) will only do more harm than good.

  • Hong Kong tensions unnerve world stock markets, oil tumbles (read here)

If I am to use Sun Hung Kai Properties stock as a barometer, the last time I saw SHK shares at this price (eg. HKD 90 on 29 May 2020) was in May 2012 (and then Feb 2016). The prices then in 2012 were depressed due to the saga of the Corruption trial involving Thomas and Raymond Kwok, the billionaire co-chairmen of Sun Hung Kai Properties Ltd. After so many years of progress, we are now back to 2012 (and even lower).

Well anyway, after tracking SHK share prices for years.. it seems like the prices just oscillate around a datum.

  • Sun Hung Kai Properties Limited shares (Time to buy?) (read here)
  • Hong Kong landlord stocks trade like it’s 2009 all over again (read here)

Funny, a few years back, I was talking to my dad about properties. I made a ‘joke’ about properties in Singapore (just joking so don’t hold me to it :p), was saying in Singapore, people should buy when the government ‘tells’ them to buy. For example, there were periods (often during a recession, market crash) when restrictions are lifted and borrowing limits are loosened to encourage people to buy properties. But when properties prices are overheating, restrictions (cooling measures) are imposed discouraging speculation.

The thing is people are often reluctant to buy in the former situation due to fear. But often rush to buy (in the latter situation) when prices are overheating and huge penalties are imposed due to FOMO.

To put it simply: Buy property (for investment) when the government wants you to buy.


Moving Foward…

Yes, for the month of June, hold on tight.

I will still be looking to add more to my US & HK portfolio. Just the usual DCA. Holding on to my warchest. Yes given the valuation of many stocks in the HK portfolio, it does look tempting (esp. the stronger counters).

The tech stocks and the innovation subject is an evergreen theme (be it a recession or not). Valuations for many seem rich, still, the sector is growing, and the strong will keep growing. Why punish the overachievers? Nevertheless, I am not going to go crazy about it though.

Beyond Tech (the FAANG or BAT stocks), there are other fields of innovation. Just reading up on ARK Investment Management, you will find companies leading in Genetic sequencing (eg. Illumina, CRISPR Theraputics), industrial innovation in energy, automation and manufacturing (eg. Tesla), technologies that make financial services more efficient – blockchain (eg. Square Inc), etc…

With the Covid-19 cloud lifting, and the HK riot cloud not abated… HK would take time… so also not going crazy about it.

Posted in Hong Kong Shares, Portfolio | Leave a comment