Formulation of my investing strategy

Finance blogs

When I have the time, I would like to read personal financial / investing related blogs. There is actually a finance blog-roll in one of my blog page. After some time, I can sort of get a feel of the distinctive style of each of these bloggers.

Some sites / blogs tend to be more informative and detailed, such as the Fifth Persons, Investment Moats and Financial Samurai.

Other tends to be more personal, informal, and not as lengthy, such as STE’s Stocks Investing Journey, A Path to Forever Financial Freedom (3Fs), Mr. Money Mustache: Blog, and Mr Tako Escapes. Sometimes, the post itself may not even relate so much on investing or techniques on investment. For instance, the blogger from Mr Tako Escapes will just blog about his activities with his kids and the meals he makes, or the blogger Mr Money Mustache talks about his son’s education, etc. Each blogger has his/her distinct way of writing. Some style of writing is more of a ‘in your face’ kind of style while others are just more relaxed, personal style.

Event driven strategy

Beyond the blogs, I also like to read business news. Sometime when I reflect back on my style of investing, I sort of understand why.

I don’t think I adhere to any strict discipline of investing. Some people like to define their style of investing as growth investing, dividend income investing (or dividend-growth investing)… some practise DCA (Dollar cost averaging), some do lump sum strategic investing etc. Some invest with a time span of years, some trades with much shorter holding periods.

I think at the core, in terms of principle of investing (not speculation / short term trading), in a very broad sense, I reckon I am searching for dislocation from the normal value.

The blogger from STE’s Stock Investing Journey has a way of showing charts, whereby the indexes go above or below the trendlines, and take interest when prices dip below the -0.5 SD to -1 SD lines.

There is this mini documentary about Daniel Seth Loeb, an American investor, hedge fund manager, and philanthropist. He is the founder and chief executive of Third Point, a New York-based hedge fund focused on event-driven, value-oriented investing with $14.8 billion in assets under management, as of June 2019.

You can fast forward to 10:25min of the below video.

Dan utilises an event-driven strategy as he has deep knowledge of how certain industries / companies work. He is always looking for strategies to achieve alpha performance (over the market performance). To do that he needs an edge eg. ‘ unique information’ or some kind of intervention to the company that create more value.

He attributed his success to his ability for pattern recognition which comes from experience looking at companies, industries and situations that work.

Events for my own portfolio

I reckon most people (including me) do not have as much deep knowledge of many the industries / companies as Dan Loeb.

However, in certain situations / events I do believe it does present opportunities to us (retail investors). If we are invested in the market long enough, by investing during these periods of events, we can see the realisation of the true stock values over time. Typically stock prices are way off the values anyway (non linear by definition).

Many times, my instinct is wrong, but I do hope I get better as times go by. I am especially bad (in terms of timing) at selling my stock holdings and increasing my warchest.

So yes, when I reflect back, especially in recent years, I can see this recurring pattern as to how my investment allocation increases according to certain specific events. True, this is not an exact science, and I often get my timing way off….

The STI index peaked at around April 2018, started trending down after that, was kind of range bound in 2019, and started crashing in Feb-March 2020, before recovering much of the losses in 2021.

The US Markets, specifically S&P500 has more pronounced volatility. It trended down in the later part of 2018, but generally was on an uptrend in 2019, before crashing in Feb – March 2020.

2018 was not a good year for stock markets. Factors that contributed to the poor performance include: President Donald Trump’s trade war with China, the slowdown in global economic growth and concern that the Federal Reserve was raising interest rates too quickly all contributed to a pessimistic reaction from the stock market.

6 factors that fueled the stock market dive in 2018 (read here)

I started selling my stocks and increasing my warchest some time in April 2017 and kept increasing my warchest allocation to early 2018 (read here) as I felt then that equities were on the expensive side, and market volatilities are low. And all through 2018, the ratio of warchest is high. In Jan 2018, ratio of Stocks to Warchest is 35:65. In Dec 2018 (read here), ratio of Stocks to Warchest is 20:80.

However, by holding on to my warchest, I missed the uptrend (specifically in the US markets) in 2019.

apenquotes.wordpress.com/2019/10/27/income-investing-and-hong-kong/(opens in a new tab)

While markets in Singapore are range bound in 2019 and markets in the US are on an uptrend in 2019 (and at all times high), in Hong Kong on the other hand was sinking into a recession in the later part of 2019 due to the on-going social unrest and protests. The economy in Hong Kong contracted in the second quarter 2019, almost certainly did so in the third quarter, and the data is still deteriorating.

So yes, the ‘event’ happened in Hong Kong, one of the first city to fall into a recession even prior to the pandemic. And by end 2019, I have created for myself a Hong Kong dividend portfolio.

Income Investing and Hong Kong (read here)

Hong Kong Dividend Portfolio (read here)

The next event will of course be the infamous COVID-19 pandemic, which I allocated more of my funds into creating a Singapore dividend portfolio and a Story fund focussing on US and HK listed growth stocks.

So far these stocks are doing well, and I have deriving dividend from them along the way. Of course, it will not be as stellar as compared to a portfolio which is primarily focused on speculative growth stocks of cryptocurrencies. Anyway, there will always be better performers elsewhere. The focus is to stay the path and hone the skills.

We encounter these ‘events’ on a recurring basis. Some call this as an event based strategy. I have also come across people describing this as investing ‘in cycles’.

To tie in which I have mentioned earlier about me being keen on reading news… I reckon it is primarily because I am searching for these events. More often than not, these events just pop up even without me searching.

Not all events are created equally

Not all events have impact on stock prices, or put it in another way, cause any significant dislocation from their mean values, if we use the analogy of reversion to mean in stock values – and that is if we believe in such. There are growth stocks that will perpetually not revert to their mean value:p

For example, the recent expansive set of antitrust reforms introduced by a bipartisan group of House lawmakers on 11 June 21 against big tech companies (Amazon, Apple, Facebook, and Google). The five bills propose to prohibit discrimination by dominant platforms, forbid anticompetitive acquisitions that curtail innovation, prevent Big Tech companies from leveraging control across multiple business types, and update filing fees for tech mergers.

This piece of news in my opinion hardly make in a dent in the big tech stock prices (yet).

Lawmakers unveil major bipartisan antitrust reforms that could reshape Amazon, Apple, Facebook and Google (read here)

Bipartisan bill seeks to break up Big Tech’s stranglehold on innovation (read here)

In addition, with the rise of social media, the definition of ‘event news’ is getting more and more vague. For example, the recent rise of meme stocks like Gamestop and AMC whose price volatilities are attributed to a group of reddit traders from Reddit’s WallStreetBets. Or the fluctuations of bitcoin and dogecoin prices due to Elon Musk tweets.

Frankly, for me, it is hard formulating any strategy base on these social media feeds.

It used to be much simpler. News were basically news from the mainstream news media. Now the lines or definition is not as distinct. These days, we probably get part of our ‘news’ from the social media, be it Facebook, Twitter, Tik Tok, Telegram messenger, Blogs, etc

Well, as to whether the dislocation of the stock prices is indeed a true reflection of the eventual value of the stock… only time will tell.

In the meantime, I guess I will just keep reading the news and formulating my own thesis. Even now there are various themes at specific pockets of the equity market, from certain Chinese Big Tech stocks to ignored Recovery plays (price stagnant for ages)… provided that one has the patience.



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Exchanging my cash for something of more value

Prior to reading about the term bitcoin or cryptocurrency, I seldom thought about the term fiat currency or fiat money.

Well, money to me, is just …. money. Pieces of paper with numbers on them, which I can use to purchase goods and services. Or these days, numbers on a screen. Perhaps it is also because up till now, in my life in peaceful Singapore, I have yet to witness a run on the banks here.

The term fiat derives from the Latin word fiat, meaning “let it be done” used in the sense of an order, decree or resolution. Investopedia defines fiat money as a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

Investopedia highlighted that one danger of fiat money is that governments will print too much of it, resulting in hyperinflation.

Random thoughts on Cryptocurrency

I have been reading articles and watching documentaries on cryptocurrencies and the blockchain technology behind it. It is truly a ‘rabbit hole’. I am still a novice when it comes to cryptocurrency. However, it is worth understanding before investing.

I can understand the usefulness of bitcoins and other altcoins in revolutionising the financial system by creating a decentralised payment system among anonymous users (in lieu of having centralised third parties like financial intuitions or the government).

The loss of confidence in institutions (US Federal reserves, banks, etc), and the numerous rounds of quantitative easings, plus past examples of bank failures in Cyprus and Lebonon, devaluation of the Argentine Peso and similar situations in other countries like Mexico, and Uruguay…. all in a way contribute to the growing interest in cryptocurrency.

El Salvador becomes first country to adopt bitcoin as legal tender after passing law (read here)

Lebanese banks hold deposits hostage, face angry protestors (read here)

On one hand we have the block chain technology, with strong supporters from tech specialists, and on the other hand, its decentralised blockchain (aka ledger) allowed low cost financial transactions without the need for a third party intermediaries found strong supports among the libertarian, anti-establishment groups.

I see Dan, the old computer programmer from Pittsburgh who was the key figure in the documentary title “The Rise and Rise of Bitcoin” as part of the first group. His obsession is in the technology, and not the price of bitcoin itself.

I see Roger Keith Ver who is an early investor in bitcoin, bitcoin-related startups and an early promoter of bitcoin, aka the “Bitcoin Jesus”; and Charles Shrem IV, an American entrepreneur and bitcoin advocate, as part of the second group. The psychological and emotional drive behind Roger is probably best summed up in the later part of this video (fast forward to 47.18min), or just click the below video.

For me, I am not an expert in tech / cryptocurrency. I think for many people, their interest in cryptocurrencies stem from the basic human psychology affiliated with any other forms of speculation. The sudden surge in crypto prices led to FOMO (fear of missing out) and greed; basic human desires. Beyond this, there is this promise of the wide adoption of cryptocurrencies in the future.

In fact, I would like to believe in the libertarian notion though (eg. a decentralised payment system among anonymous users in lieu of centralised third parties like financial intuitions or the government).

My current doubts in bitcoins and many other altcoins, probably stem from the articles & videos pertaining to the manipulation of crypto prices via tether.

Why I SOLD All of My Bitcoins… IT’S OVER. (watch here)

The Bit Short: Inside Crypto’s Doomsday Machine (read here)

It is not so much about Elon Musk’s tweets, China’s crackdown on crypto mining and their ban of digital tokens in financial transactions, and the massive consumption of electricity from bitcoin mining, or even the argument that cryptocurrency is used for illicit activities eg, transactions of drugs, weapons, etc (eg. Silk Road website which was taken down in 2013)…

I believe that there are solutions to cut down on the massive consumption of electricity used for ‘mining’ bitcoins eventually.

How Ethereum plans to get around a major drag on crypto prices (read here)

A blockchain tweak could fix crypto’s colossal energy problem (read here)

There are also other criticisms about how cryptocurrencies seem to fall back into the flaws of fiat currencies eg. the rise of bitcoin end up enriching the very small number of early adopters or bitcoin whales.

And how prices of crypto can be inflated or manipulated by unregulated exchanges and other stable coins. Dejavu perhaps, like how the Fed is thought to be inflating or propping up the stock indexes, via qualitative easing.

The rise of “unbanked” exchanges like Binance, Bit-Z, HitBTC seems like a loophole. These exchanges don’t have direct access to the US financial system, and many of them are not registered in the US, and hence are beyond US regulatory scrutiny.

Binance is a Cayman Islands-domiciled cryptocurrency exchange. BitMEX is a cryptocurrency exchange and derivative trading platform. It is owned and operated by HDR Global Trading Limited, which is registered in the Seychelles. Bitfinex is a Hong Kong-based cryptocurrency exchange owned and operated by iFinex Inc., which is registered in the British Virgin Islands.  Bitfinex customers’ money has been stolen or lost in several incidents, and they have been unable to secure normal banking relationships.

As with any subject there are the ‘for’ and ‘against’ camps. There are articles / videos debunking these doubts or findings. For instance, the overall amount / capitalisation of tether in circulation is only a small fraction of bitcoin’s overall amount / capitalisation to justify such manipulation or the jump in tether inflow did not correspond with bitcoin’s price rise (esp. through the long period of bitcoin price stagnation in 2018).

More findings may emerge, but in the meantime, the opaqueness of these exchanges, the leverage offered by many of these exchanges, and the large trading volume of tether (as compared other cryptocurrencies and fiat currencies) into bitcoin and many other altcoins, is something that could be a potent time bomb.

Actually I have been anticipating further and deeper falls in bitcoin or ether’s prices. Perhaps the inflow of funds or wider adoption of crypto by more and more institutions have helped to lessen the volatility. Still prices have dropped significantly.

Perhaps we are in the capitulation phase as mentioned by Cathie Woods. According to her, Bitcoin is on sale right now, reiterating her price target of $500,000 per BTC.

However, there are still many hodlers.

“We’re In A Capitulation Phase,” Says Ark Invest’s Cathie Wood; High Conviction In $500k Bitcoin Target (read here)

Investing is simply changing fiat currencies into something else

As we know, the fiat currencies we hold in our bank accounts depreciates over time due to inflation (around 2% to 3% yearly). In the broader scheme of things, the value of the fiat is determined by the government.

I find this dated video of a talk by Peter Thiel interesting. Yes perhaps he did predict cryptocurrency way back in 1999.

However, in the video (fast forward to 3.15 mins) or just click on the below video, he talked about other models whereby the financial instruments are very liquid. For example, in the US, it would be an Index on the S&P500, or other stock market index. This is in lieu of fiat currencies which have values backed by the government. The stock index would be backed by real properties, real companies… things that have real values. So instead, we can trade via slivers of this index, or even stocks of large multi-national companies (MNCs) like Microsoft, MacDonald, Intel… which becomes the de facto currency.

Just like people in Russia replacing their ruble for US dollar, there are people trading their dollars for equities.

So in the broader scheme of things, every time I ‘change’ my fiat currencies (SGD) to equities (REITs, stocks, etc) I am hoping that these real companies and properties perform better than my SGD over time, and hoping it is where the true value reside.

With regards to the Singapore dollar (SGD, from 1985 onwards, Singapore adopted a more market-oriented exchange regime, classified as a Monitoring Band, in which the Singapore dollar is allowed to float (within an undisclosed bandwidth of a central parity) but closely monitored by the Monetary Authority of Singapore (MAS) against a concealed basket of currencies of Singapore’s major trading partners and competitors.

Back to the idea of exchanging between fiat currencies and equities… To put it in another way, would I want my cash to be in USD back by a government who is in trillion dollars of debt or a well capitalised, strong moat company like Apple, Google or Microsoft, or a decentralised cryptocurrency like bitcoin or ethereum, over the long term?

Then again, we never know…

G7 nations reach historic deal to tax big multinationals (read here)


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Tiger Brokers

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Thoughts on my Portfolio (June 2021)

My personal cash flow for the past few months has been tight. My parents needed more cash early this year. It is only in recent days or weeks that I have some spare cash to invest. Work wise, salary has also been stagnant given the recession.

Chinese Tech stocks sell-off

It is perhaps also timely as growth counters (US listed & HK listed stocks) have taken a beating in May 21. A quick look at the growth stocks in my portfolio (namely Alibaba, Pinduoduo, Alphabet and Mastercard) showed that many of them have dropped from their peak stock prices.

Pinduoduo Inc. (PDD) stock price is around 35% down from its peak.

Alibaba Group Holding Limited (9988.HK) stock price is around 32% down from its peak.

Mastercard Incorporated (MA) stock price is around 8% down from its peak.

It appears that there are more significant price drops from Chinese tech stocks, despite their recent stellar quarterly financial reports. In fact, Tencent Holdings Ltd., Alibaba Group Holding Ltd. and Meituan have accounted for more than 40% of the MSCI China Index’s decline since the February high.

As reported in May, PDD’s total revenues in the quarter showed an increase of 239% from the same quarter of 2020. Average monthly active users in the quarter showed an increase of 49% from the same quarter of 2020. Net loss attributable to ordinary shareholders in the quarter also dropped significantly (was RMB2,905.4 million (US$ 443.5 million), compared with RMB4,119.3 million in the same quarter of 2020). 

As reported in May, Alibaba’s revenue showed an increase of 64% year-over-year. Annual active consumers on our China retail marketplaces was 811 million for the twelve months ended March 31, 2021, an increase of 32 million from the twelve months ended December 31, 2020. Net loss attributable to ordinary shareholders was RMB5,479 million (US$836 million),and net loss was RMB7,654 million (US$1,168 million), primarily due to the above-mentioned Anti-monopoly Fine. Excluding this impact and certain other items, non-GAAP net income was RMB26,216 million (US$4,001 million), an increase of 18% year-over-year.

The stock price drop in the Chinese tech counters could be attributed to various reasons from the ranging from:

1) Beijing crack-down on heavyweight tech firms over monopolistic practices;

2) Washington’s threats to delist Chinese companies;

3) Concerns that commodity-fuelled inflation will prompt central banks to tighten monetary policy, denting the appeal of (tech) stocks whose valuations often hinge on earnings prospects far into the future.

Beijing names and shames Tencent, Alibaba, Baidu and 81 other apps for excessive data collection under new rules (read here)

Global tech sell-off deepens as Chinese index sinks 30% from high (read here)

China tech stocks may recover as most regulatory risks priced in, analysts say (read here)

Tiny bites into the dips

My unbalanced bar-bell portfolio (read here)

My stock portfolio is more skewed towards dividend income stocks. With my little bit of spare cash, I recently bought more of Alibaba stocks and will be looking to add a bit more to my growth counters (US or HK listed stocks).

Dividend cash flow machine

My passive dividend ‘machine’ has been churning along nicely.

I reckon 2021 total dividend will be much more than 2020 dividend income, although I reckon my focus this year tends to be slightly more skewed towards building up more on my growth counters.

Month over month, the dividend income should be more than the previous year’s amount, for most of the months.

The table below show the dividend amounts base on ex-dividend dates. Month over month, there is an increase as compared to the previous year (2020) dividend amount.

The table below show the dividend amounts base on pay dates. For May 21, the dividend amount was unfortunately lower than May 20 dividend amount. Nevertheless, the June 21 dividend amount is much more than June 20 dividend amount (more than make up for it).

Thanks for reading.


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FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

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Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

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What is like to be in Coast FI?

This will probably be a short post. I reckon I am just not in the mood to write a long post.

It could be due to long period being stuck at home due to the Phase 2 (Heightened Alert) measures. The super hot and humid weather is not helping much, On the other hand, it could also be because there has not been much changes in my portfolio or lack of interesting news. Nevertheless, it is good to pen down some of my thoughts, just to clear my mind. On another note, I did manage to spend and engage with my family more.

For this month, I have moved most of my US-listed and Hong Kong listed counters from UOB Kay Hian & POEMS to Tiger Brokers. It was pretty smooth sailing except for some hiccups. For me, I will sell the counters in UOB Kay Hian / POEMS, wait for the cash to be deposited into my bank account, deposit the money into my Tiger Broker account and purchase the same counters. During this time, I will hope that my purchase price is lower than my sell price. Things don’t usually go my way, there are times when I purchase back at the same price or higher price. In one case, for International Houseware Retail, the price actually appreciated by close to 10% (the difference between the sell and buy price). Oh well.

Coast FI (What is it like to be in it?)

There is really no single way to pursue financial independence. A number of people within the community are modeling a different approach, called “coast” or “slow” financial independence (FI).

Coast FI rejects the idea that you should try to reach financial independence as soon as possible. Once you reach your coast FI number, you could continue pushing hard towards full financial independence, or you could pursue one of two alternative paths:

1) Stop saving for retirement completely: Scale back your work and/or side hustles so that you are only earning enough money to cover your cost of living. This could be considered fully coasting. Essentially, you will continue with your new work arrangement until you reach conventional retirement, which is 25X your annual expenses.

2) Keep saving for retirement, but at a slower rate: Use your new levels of financial freedom to make incremental lifestyle changes. Depending on the changes that you make, you will still retire before the conventional retirement age, but not as early as someone pursuing a traditional or more extreme version of financial independence.

People who pursue coast FI focus on finding happiness along their journey. They use the increasing levels of financial freedom that they gain to live happier and healthier lives in the present.

In fact, recently there has been much talk about the concept of Coast FI within the blogosphere. Perhaps this is triggered by Kyith’s post below. In his post, he went on to break down the numbers one may need to have, to be able to coast FI.

Coasting Financial Independence / Barista FI – More Realistic, Attainable and Balance (read here)

I think it is great to know financially (the numbers), how much we need to be able to ‘coast’. Another aspect, I often wondered is: How is it like to be in this state of Coast FI, from a psychological and emotional aspect.

We often hear about the technicalities of it, but what is it like actually?

I reckon this pandemic actually made a lot of us think hard about our career, our current path / lifestyle, etc…

In fact, while reading the Sunday Times today, I came across an article in the Life section talking about “Uncle caregivers“, whereby more middle-aged men are switching to the eldercare sector. Some were forced into it by retrenchment, while others were drawn to it after caring for their own elderly parents. Perhaps this quest for a more meaningful life and happiness is what this latter group of men pondered before they switched to the eldercare sector. Some left their higher paying job, and opted for this lower paying job (with one man stating that his current eldercare job pay is 1/6 of his last drawn salary). They chose to leave their current career to switch to a more emotionally / mentally fulfilling endeavor.

I came across this Youtube video by chasejuggler. It is a simple self made video. He talked about how it is like after 5 months into Coast FI.

In his video, he mentioned that he and his wife started doing odd jobs when they adopted the coast FI path. The jobs that he is doing now is like delivery driving (for Door Dash, Jimmy John’s or grocery delivery called Shipt), selling Plasma (liquid portion of his blood) twice a week and starting a tutoring business.

During this period there are a few changes he noticed about himself:

1) Dislike the grind, not the work itself.

He originally thought that he disliked working, which is what motivated him to achieve financial independence. However, after coasting, he realised that it is not work itself that he disliked, but rather it was the 40hrs a week grind part of it. Currently, he is only working 10 to 15hrs a week, and he does not mind it at all (in his words, it is something ‘cool’ to him now). He does not feel exhausted and feel like he is making progress on his personal goals.

After ‘coasting’ he started to question if full FIRE (Financial Independence/Retire Early) is a goal he wanted anymore. He can see himself doing what he is already doing now for the rest of his life, or until he is 70 yrs old. eg. 10 hours week odd jobs whereby he can choose his own schedule.

2) Stronger in their money saving endeavor

He and his wife became more frugal after they stopped working full time (during their coast FI period). He and his wife started planning their budget for meals and errands better.

Their expenses dropped more.

3) In control of how much money he wants to earn

When he was working full time, he was always thinking about earning as much as he possibility could. He would try to aim for a better pay grade, etc. Now, the question is more of “how much money do I want to earn”. If the job pays a bit more but stresses him out, he would opt out.

He is in control of how much money he wants to earn now. If there is a purchase he wants to make or a vacation he wants to go to, he can now scale up his income to meet it (since he is doing odd jobs). Eg. If he wants a better E-bike, he can do more odd jobs to pay for it.

This is in contrast to when he is stuck at a full time job; he is stuck with the amount of monthly income they pay him. There is very little he can do to push it up or down. Now, for some weeks he does not work, for some weeks he hustle more.

4) Stopped ‘measuring’ money

When he was working full time, he was measuring his income, expenses and investment returns constantly. He was obsessed with it as money means freedom.

Now in Coast FI, when it comes to money, there is no super goal in front of him anymore. It is simpler now. He only measures money in 2 ways, like if they are earning enough and have enough or if they are not earning enough and have not enough.

He does not go into specific amounts. As the money would not drastically alter their current lifestyle 3 months down the road (in the near future). He feels that when people have a surplus of anything (including money), they stop measuring it or going into the details of it. People only measure things that have a scarcity.

5) Timing is more important than effort

He highlighted that it is more important to apply the effort at the right place at the right time (rather than just focussing on putting in more effort). Now that he is in coast FI, he can apply his efforts at the best possible time to get the most out of the situation. For example, like grocery shopping – when the store is not busy, he can go in and get it done quickly (or other errands).

There are a lot of jobs that pay a person more money when he/she can be more flexible with their timing. For instance, for his Jimmy John’s delivery job, he told the company that he is only willing to do his shift when they are really busy. He does not want to do delivery when they are not busy as he does not earn as much money (for the same amount of time). And they don’t mind that at all because the period when they are the busiest is the time they need drivers the most.

With ‘infinite’ flexibility with his time, he can use his time more efficiently.

He and his wife can also do projects like indoor hydroponic growing of their own vegetables or biking (putting together e-bike). He can now put his whole life on pause and be obsessed with one project / hobby, and work at it to achieve his goal quickly.

In gist

Well, I am not in Coast FI yet. However, I can totally understand his point of view, and can understand why many would opt for this lifestyle change. On another note, I can also see why some would rather opt for Coast FI rather than the full FIRE.

COAST FI CALCULATOR:

WalletBurst: https://walletburst.com/tools/coast-f…

The Fioneers: https://thefioneers.com/coast-financi…


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Posted in Personal Finance | 3 Comments

Mapletree Commercial Trust: Slow and Steady recovery

Yes, I know recently many others are talking about the proposed restructuring of SPH and its CEO Ng Yat Chung who took umbrage at a reporter’s question at the press briefing. 

Let’s take a break from SPH.

Personally I feel that Mapletree Commercial Trust (MCT) is one of the stronger listed REIT in the Singapore market.

To first understand about MCT, we must first think about the components within the REIT itself.

MCT Group’s properties comprises of VivoCity, Mapletree Business City (“MBC”) I and MBC II, mTower1, Mapletree Anson and Bank of America Merrill Lynch HarbourFront. The aggregate value of these properties was S$8,737.0 million as at 31 March 2021. FYI, mTower was formerly known as PSA Building. mTower is an integrated development with a 40-storey office block and a three-storey retail centre, ARC, with an aggregate NLA of 523,839 square feet.

Among these components and with reference to the gross revenue, the biggest contributor is from Vivocity (35.3%) followed by MBC I (26.9%). There is also a significant increase in revenue contribution from MBC II in FY 20/21. See below.

Before I continue, I would like to highlight that I am currently vested in MCT.

In this post, I would like to share a few key points in the recent 2H and FY20/21 Financial Results dated 27 April 21, which I feel is noteworthy.

Tenant sales and shopper traffic

Whenever I think about MCT, it is only natural to think about Vivocity first and without fail, the footfall traffic in MCT. After Vivacity is the biggest revenue contributor.

My family and I frequent Vivocity quite often, so I do have a feel about how it is like there, especially during the weekends. Nevertheless, I can also refer to the chart below. As you can see, base on the YoY performance, shopper traffic has not recovered to the pre-pandemic levels. See below.

However, I find that given the slow but progressive recovery from the pandemic in Singapore, the place is rather vibrant during the weekends. Do check out the above video. These are the scenes I as a retail investor would like to see. On the other hand, I would be very worried if it appears to be like a ghost town.

In fact, if you look at the chart below, Tenant sales and shopper traffic in March 21 is near to the pre-Covid levels. Both tenant sales and shopper traffic have recovered progressively since Phase Two of reopening from 19 June 2020 with the rebound in tenant sales continuing to outpace shopper traffic.

However, with stricter measures which started in 8 May 21, which Education Minister Lawrence Wong described as a return to phase two of the country’s reopening, the next quarterly performance might not be a straight forward upward trend. Bumpy recovery to say the least.

Return to phase 2: Stricter rules on social gatherings to curb virus (read here)

Another point that is worth noting, is that MCT has managed to secure a further expansion by existing tenant, adidas, at VivoCity. Following adidas Originals’ flagship store that was successfully opened last December, adidas launched another flagship store for its Performance line in April 2021. Spanning over 13,000 square feet, this Performance store is more than three times its previous footprint and is the largest in Singapore. adidas has also debuted the MakerLab right here.

Revenue, Grant and DPU

For the 2H FY20/21, we can see that there is a slight drop in the gross revenue (of 1.5%), however this is mitigated by MBC II’s full period contribution and tapering of COVID-19 rental rebates to retail tenants. Operating expenses and net finance costs have also dropped (which is good). Consequently net property income has increased by 1.8% and distribution per unit has increased by an astounding 57.9%.

A good set of 2H FY results.

Low Gearing

In April 2020, MAS raised the leverage limit for S-REITs from 45% to 50%, to provide S-REITs greater flexibility to manage their capital structure amid the challenging environment created by the COVID-19 pandemic. (read here)

MCT currently only has a gearing ratio 33.9% (or S$3,032.9 mil). It has in fact improved slightly from end 2020.

MCT’s distribution policy (as with other REITs) is to distribute at least 90.0% of its adjusted taxable income. Consequently, there is scope for MCT to increase gearing in the future for yield accretive acquisitions.

Moreover the Average Term to Maturity of Debt is a comfortable 4.2 years, with the bulk maturing in FY 24/25 to FY 26/27. See below.

Turn-around for mTower (formerly known as PSA Building)

Reading through the past financial reports of MCT, I always felt that the laggard among the properties in MCT’s portfolio is the PSA Building.

Hence, in the recent 2H FY report, I was pleasantly surprised. The committed occupancies for mTower has jumped from 75.5% to 91.7%. It would have been 95.9% assuming the lease pre-termination had occurred before 31 March 2021 and the space had remained uncommitted as at 31 March 2021.

Bearing in mind that many companies are still allowing their employees to work from home, and many companies have decided to trim down on their office spaces in Singapore. So this increase in committed occupancies percentage is indeed a piece of good news.

In fact, overall, the committed occupancies for MCT Portfolio has increased from 93.5% to 97.1%. If we look through the list, all the properties committed occupancies percentage has either increased or remained at 100%.

MCT in its report, highlighted the following forward outlook for the office sector: “Going forward, demand is expected to be supported by employment gains, a gradual recovery of the economy and a tight supply pipeline. However, recovery will not be uniform – the Grade A market is expected to be the main beneficiary as large corporates leverage on the pull-back in rents for an upgrade in location and quality.”

For the Overall outlook, MCT stated: “Anchored by a well-diversified portfolio with key best-in-class assets, MCT is expected to derive stable cashflows from high quality tenants. MCT’s overall resilience will keep the vehicle well-placed to ride through the pandemic.”

Valuation

In terms of share price, MCT share price has increased by approximately 40% since the March 2020 lows, but is is still off the peak reached in Jan 2020 (eg. at $2.45). It is currently priced at $2.11 per share.

Currently, MCT shares has a P/B of around 1.21, with a distribution yield of around 3.79%. Yes, it is not exactly cheap. However, if the strong performance, low gearing and good management continue, it would be good to add more or hold on to the current holdings.


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Posted in REITS | 2 Comments

The Age of Inflation Is Here.. What would I invest in?

The Warnings

During last week’s annual Berkshire Hathaway shareholder meeting, Warren Buffett mentioned: “We are seeing substantial inflation….We are raising prices. People are raising prices to us, and it’s being accepted.”

Warren Buffett just sounded the alarm on inflation — here are 8 ways to be ready (read here)

In fact, months ago (in Feb 21), Michael Burry of “The Big Short” fame, already mentioned about the dangers of inflation.

‘Big Short’ investor Michael Burry turns to Warren Buffett to underscore the dangers of inflation (read here)

‘Big Short’ investor Michael Burry says ‘prepare for inflation’ – and warns bitcoin and gold might be at risk (read here)

“Prepare for #inflation,” Burry said in a now-deleted tweet on Thursday night. “Re-opening & stimulus on the way. Pre-COVID it took $3 debt to create $1 GDP, and it is worse now. In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold.”

Between Congress and the Federal Reserve, the government has committed record levels (more than $ 6 trillion) to try to stop an economic calamity. Just recently, President Joe Biden signed his US$1.9 trillion (S$2.5 trillion) stimulus Bill into law on Thursday (March 11), commemorating the one-year anniversary of a US lockdown over the coronavirus pandemic with a measure designed to bring relief to Americans and boost the economy.

The U.S. has thrown more than $6 trillion at the coronavirus crisis. That number could grow. (read here)

Biden signs US$1.9 trillion stimulus Bill into law on US lockdown anniversary (read here)

Flood of money

Now a bit of context here:

In the US, it was previously reported that fewer than 4 in 10 people had enough savings to pay for an unexpected $1,000 expense in cash. The rest would have to borrow, use a credit card or take out a personal loan. Or just in 2019, it was reported that 40% of Americans did not have $400 in the bank for emergency expenses.

Just 39% of Americans could pay for a $1,000 emergency expense (read here)

40% of Americans don’t have $400 in the bank for emergency expenses: Federal Reserve (read here)

Due to the pandemic, the US government has been issuing stimulus checks. In fact, the total number of payments issued out is approximately 164 million, or about $386 billion. Just this month (May 21), a new set of $1,400 stimulus checks has been sent. More than 1.1 million payments were sent this time, representing more than $2 billion. About 600,000 of those payments were made using direct deposit, while the rest were sent via paper check.

The new payments mark the eighth batch sent since Congress approved the checks in March. Payments are for up to $1,400 per individual, as well as $1,400 per eligible dependent, so long as recipients fall under certain income thresholds and meet other requirements.

More than 1 million new $1,400 stimulus checks have been sent. Here’s who got a payment (read here)

So currently, millions in the US who previously did not even have $400 in their bank account for emergency expenses, now have stimulus cheques money to spend (issued over the past year).

In addition, just recently, it was reported that Federal Reserve has shut down its money supply data as money supply has increased 500% and inflation is a major threat. The M2 money supply is up 30% in the past year.

Gold: Fed Shutting Down Its Money Supply Data Is Alarming (read here)

Everywhere I looked… Signs of inflation

When I look at the commodities charts, the sign of inflation is everywhere. See below.

Over a 1 year period, WTI Crude Oil is up by 120%, Copper is up by 95%, Soybeans is up by 91%, Corn is up by 137%, while Lumber is up by 397%.

Well, in the US, shortage housing is starting to be an issue. The market is red hot now.

U.S. Housing Market Is Nearly 4 Million Homes Short of Buyer Demand (read here)

The Pandemic Ignited a Housing Boom—but It’s Different From the Last One (read here)

Yet to rear its ugly head?

The part that is still holding up is the U.S. Core Consumer Price Index. I reckon it is the slowing economy and people are still not willing to spend (a lot). In the latest release, the YoY rise is only 1.6%. (See below)

Note: The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

However, the CPI is far from perfect as a measure of either inflation or the cost of living, and it has a number of inherent weaknesses. For instance, one limitation of the CPI is that the consumer goods it considers do not provide a sampling that represents all production or consumption in the economy. 

On another note, many companies have already announced that they are passing on the rising prices to consumers, to offset the pandemic related inflation. Eg. Coca-Cola, Nestle, Hasbro Inc, Mattel Inc, Boston Beer, Kimberly Clark, Reynolds, Procter & Gamble, Whirlpool, etc… and the list goes on.

Coca-Cola CEO says company will raise prices to offset higher commodity costs (read here)

Nestlé warns of prices increases, against ‘excessive’ growth (read here)

Hasbro toys to get more expensive as costs surge (read here)

Higher commodity costs lead to price hikes from Kimberly-Clark and other consumer giants (read here)

These companies are jacking up prices because of exploding inflation (read here)

Attention shoppers: Price hikes are ahead, but consumer companies hope you won’t notice (read here)

Investing in an inflationary era

With the rising prices, however, given that we are still not out of the pandemic.. many sectors are thus still affected (travel, tourism, retail, hospitality, etc). For many, there may not be any substantial pay increment/bonuses. For others they may even be jobless.

In fact, the US unemployment rate is still relatively high at 6% (see below).

So I guess, the real question to us retail investors, is how to invest during this period of substantial inflation? While searching, I came across the below article.

Inflation Proof Investments: 6 Ways to Brace Your Investments (read here)

1) Keep Cash in Money Market Funds or TIPS.

2) Inflation Is Usually Kind to Real Estate.

3) Avoid Long-Term Fixed-Income Investments.

4) Emphasize Growth in Equity Investments.

5) Commodities tend to Shine During Periods of Inflation.

6) Convert Adjustable-Rate Debt to Fixed-Rate.

Personally, I feel that having a mixture of REITs (selected sectors though eg. Logistics, Data Centres, Business parks, Industrial) and high cash flow big tech growth companies (FAANG, BAT) would help. Typically the latter group should have sufficient pricing power to ride over the inflation waves.

In addition, in view of the potential rising interest rates, banks / financial stocks should do well too.

For tech stocks, there are really two sides of the coin. The recent ‘inflation tantrum’ early this year caused sell offs in many of the highly valued tech stocks (more speculative and loss making companies). Tech stocks get hit harder during inflation tantrums because they are “long duration assets.” 

On the other hand the US mega tech stocks (and with their recent blow out quarters reports in general), seem less affected.

Having said that, I am not saying only mega techs, just have to be selective and probably focus on companies with more pricing powers and with high cash flows. Also it is more of a balance…with a mixture of stocks, with more weightage on certain sectors.

Opinion: The inflation tantrum scared investors — here are eight tech stocks to buy when it happens again soon (read here)

Warren Buffett Berkshire Hathaway Annual Meeting Transcript 2021 (read here)

Apple is the largest position in Berkshire’s investment portfolio, in a bet worth nearly $111 billion. In last week’s annual Berkshire Hathaway shareholder meeting, one person (Jack) asked the following question to Warren and Charlie: “What’s your mindset, when you see so many of these high flyers, not the GME or meme stocks, but more like the big tech growth stocks gaining 50%, 100%, 200%, et cetera, in a matter of a year or less? I know you eventually bought Apple in 2016, because of the quality of their businesses and their management. How do you assess if these high flyers are worthy of your investment, given this crazy high valuations that muddy the waters?”

And Warren answered: Well, we don’t think they’re crazy. But we don’t… at least I… Charlie… I feel that I understand Apple and its future with consumers around the world, better than I understand some of the others, but I don’t regard prices, and that gets back, well, it gets back to something fundamental in investments, I mean, interest rates, basically, are to the value of assets, what gravity is to matter, essentially….

But if present rates were destined to be appropriate, if the 10 years should really be at the price it is, those companies that the fellow mentioned in this question, they’re a bargain. I mean, they have the ability to deliver cash at a rate that’s, if you discounted back and you’re discounting at present interest rates, stocks are very, very cheap. Now, the question is what interest rates do over time. But there’s a view of what interest rates will be based in the yield curve out to 30 years and so on

It’s a fascinating time. We’ve never really seen what shoveling money in on the basis that we’re doing it on a fiscal basis, while following a monetary policy of something close to zero interest rates, and it is enormously pleasant….

And if it doesn’t cause anything else, you can count on it, continuing in a very big way. But there are consequences to everything in economics. That is why the Googles and the Apples, but we don’t have a Microsoft, but they are incredible companies, in terms of what they earn on capital. They don’t require a lot of capital, and they gush out more money. And if you’re trying to find bonds that gush out more money from the federal government, we got a 100 billion that’s gushing out like 30 or $40 million a year, or whatever it may be depending on the short term rates.

As for cryptocurrency which many deem it to be a hedge against inflation (BTC – the Digital Gold), I am still very much on the fence. Sure nothing wrong with having a small portion of your assets in it (1% to 5%), however, ask me on its valuation, I would be hard-pressed to answer.

As a speculative ‘tool’, prices have been stubbornly up, hovering around USD 50k+ to 60k (from Feb 21 till today in early May 21), although there were a recent correction to the high USD 40ks… (still that is not a significant correction, in view of crypto’s relatively short history). Let’s not go into Ether or Dogecoin…


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Tiger Brokers

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Posted in Investing methodology | 5 Comments

Implementation of CPF SA Shielding Hack using FSMOne.com

I chanced upon Christopher Ng’s blog post below and it got me thinking. Frankly, it is the post’s title that first caught my attention (key word: Abomination… what a strong word to use). BTW, you might want to read the comment section in his blog post. Many others have given their views as well.

CPF Shielding Lifehack is an Abomination that must be ended by the CPF Board (read here)

To quote his post: “The difference in returns is non-trivial, suppose the Enhanced Retirement Sum when you retire is $280,000, hacking the difference of 1.5% interest will net you about $4,200 every year.”

Basically, I have yet to turn 55 years old. The rules might have changed by the time I am nearing 55 years old.

I have been reading about the CPF Shielding Hack and this post is to share what I have found out. The key point of this post is about how to implement the hack; a step by step guide. After all, many others have talked about the concept of it. In addition, unlike Christopher Ng’s blog post, this post is not about how this hack shows that there is a failure in policy-making…. What the heck??!! (pun intended 😄)

CPF Special Account (SA) Shielding: How You Can Perform This Retirement ‘Cheat Code’ (read here)

CPF SA Shielding and OA Shielding — A Live Example (read here)

What Is The CPF SA Shielding Hack?

To understand CPF SA Shielding, you first have to understand the CPF Retirement Account (RA). 

Ah yes – Retirement… I am sure many would wish to have more money to spend during their retirement years.

“The question isn’t at what age I want to retire, it’s at what income.” -George Foreman

As its name suggests, your CPF RA is meant for your retirement, where your retirement sum will provide you with monthly payouts during your golden years. 

When we turn 55, a new Retirement Account (RA) is created for us. Up to our Full Retirement Sum (FRS) will be transferred from our Special Account and Ordinary Account into the Retirement Account.

The first pool of monies to flow into our Retirement Account will be from our Special Account. This is because the balances in our Special Account has always been set aside for our retirement purposes.  If we are unable to hit the FRS, then our Ordinary Account balances will flow in to plug the gap.

The Full Retirement Sum (FRS) for 2021 is $186,000. See below.

If we do not want our CPF SA balances, or even our OA balances, to be transferred into the Retirement Account, we can use the CPF Shielding Hack to “shield” these balances.

The Special Account Shielding Hack

The main issue some people have with the way our Retirement Account (RA) is filled up is that our Special Account balances, which earn 4.0% per annum, flows into it first. Meanwhile, our Ordinary Account (OA) balances, earning 2.5% per annum, is only transferred in after that.

Hence, someone financially savvy would try to maximise the interest earned in their CPF accounts, by having their CPF RA formed largely by CPF OA (which earns lower interest) rather than CPF SA. This way, we optimise the amount of interest we earn on our CPF balances. Do also keep in mind that you cannot make transfers from your CPF OA to your CPF SA after you turn 55. 

The aim is to have more of your CPF money earning 4% p.a., rather than 2.5% p.a. 

To shield our Special Account balances, we typically have to correctly time an investment into a low-cost and liquid fund offered on the CPF Investment Scheme (CPFIS). Remember, we’re only trying to shield the amount, not trying to beat the 4.0% interest on our Special Account. After our 55th birthday, we’re going to divest it and see the entire amount flow back into our CPF Special Account.

When doing so, we can only invest anything beyond $40,000 in our Special Account – which means at least $40,000 of our Special Account balances will be transferred into our Retirement Account.

Implementation

So yes, the above is the concept side of it. The key question here, is how to implement it?

For some people, they have never invested the monies within their CPF OA/SA account. Given the low interest rate environment we are in (for a long time), and the risks involved with other investment products, many people actually treat these CPF accounts as a kind of risk-free bond in their portfolio (me included).

Returns for the CPF-OA account and CPF-SA account are 2.5% per annum and 4.0% per annum respectively. Not bad considering the April issue of the Singapore Savings Bonds provide a yield of 1.15% per annum over a 10 year period, while the oversubscribed Astrea VI Class A-1 bonds offer a yield of 3% per annum assuming they are called after 5 years.

So many would be wondering what they should do, and what should they invest in just before they turn 55 years old. This becomes more pertinent when they are nearing that age. After all, they have never invested their CPF monies, beside depositing money into their CPF accounts (or their spouse’s CPF account or aged parents’ CPF accounts), or transferring monies from their CPF OA accounts to their CPF SA accounts.

Beside thinking about when and what to buy, it is also good to think about how to go about doing it.

It would be worthwhile to compare brokerage costs. For POEMS, Dollardexs and FSMOne-Fundsupermart for example, the net sales charge or commission is zero.

For me, I would turn to FSMOne.com. If you do not have an account, I suggest you sign up for one. Please feel free to use my FSMOne referral code: P0031127, when you sign up.

FSMOne.com, previously known as Fundsupermart (“FSM”), is the Business-to-Consumer (B2C) division of iFAST Financial Pte Ltd (“iFAST Singapore”), the Singapore subsidiary of SGX-ST Mainboard-listed iFAST Corporation Ltd.

After you have signed up and logged in, you need to update your CPFIS (CPF Investment Scheme Account) details in the ‘Account Settings’. See below.

If you do not have a CPF Investment Account, just sign for one through one of the local banks.

Open a CPF Investment Account with DBS/POSB (Click here)

OCBC CPF Investment Account (Click here)

UOB CPF Investment Account (Click here)

Once you have logged in to FSMOne.com, go to ‘Place order’ in the top ribbon. See below.

Click on ‘Select a Fund’. See below.

So as mentioned earlier, what are the low-cost and liquid funds offered on the CPF Investment Scheme (CPFIS) that we should be looking for?

Here is the full list provided by CPF. To help you narrow down your search, look out for unit trusts with low to medium risk. Unsurprisingly, you’ll find that the options provided are the bond (fixed income) funds, such as: 

  • Eastspring Investments Unit Trusts – Singapore Select Bond Fund Class A (Expense ratio: 0.63%)
  • LionGlobal Short Duration Bond Fund Class A (SGD) (Dist) (Expense ratio: 0.57%)
  • Nikko AM Shenton Short Term Bond Funds (Expense ratio: 0.39%)
  • Schroder Singapore Fixed Income Fund Class A (Expense ratio: 0.69%)
  • United SGD Fund – Class A (ACC) SGD (Expense ratio: 0.68%)

Note: I have obtained the annual expense ratios from FSMOne.com.

I personally would look at SGD short duration bonds, namely Nikko AM Shenton Short Term Bond SGD and LionGlobal Short Duration Bond Cl A Dis SGD. They also have the lower expense ratios.

After you have selected the fund, go down the pay, click ‘Buy’, select payment via ‘CPFIS-SA’, and key in your investment amount. See below.

The minimum amount to invest for Nikko AM Shenton Short Term Bond SGD is SGD 500, while the minimum amount to invest for LionGlobal Short Duration Bond Cl A Dis SGD is SGD 1,000.

However, do note that you will have to set aside $20,000 in your CPF Ordinary Account and $40,000 in your CPF Special Account respectively before the excess savings can be used for investments. If you do not fulfill these requirements, CPF Board will reject any withdrawal requests for your CPF investments.

Then click on the box in Disclaimer & Verification, key in your password, and ‘Next’.

Why Short Duration Bonds?

This because you do not want your hard earned money (from your CPF SA account) to be affected by interest rate news which are beyond our control. In addition, at the same time you want to invest in high quality, low risk assets.

Also, as mentioned earlier, the above mentioned 2 fund have relatively lower expense ratios.

However, I like to emphasize: Low risk does not mean no risk. Yes timing is crucial, however, the prices of the bonds can still drop for various reasons (you can also refer to the charts as shown below).

As you can see below, Nikko AM Shenton Short Term Bond SGD has a FSM risk rating of only 1 (the lowest risk) while LionGlobal Short Duration Bond Cl A Dis SGD has a FSM risk rating of only 2 (still very low risk).

As stated within Nikko AM Shenton Short Term Bond SGD factsheet, the investment objective of the Fund is to seek preservation of capital and liquidity and consistent with this objective, to outperform the Singapore Interbank Offered Rate (SIBOR) by investing in a diversified portfolio of good quality, short-term bonds and money market instruments. See below for the fund’s top holdings.

As stated within LionGlobal Short Duration Bond Cl A Dis SGD , the investment objective of the Fund is to provide total return of capital growth and income over the medium to long term, through an actively managed portfolio of Singapore and international bonds, high quality interest rate securities and other related securities. See below for the fund’s top holdings.

In addition, over a 3 year period, the price trend of these two bonds have been trending up, with little volatility. See below.

However, the one year return of around 2+ to 3+% per annum of these bonds would not be as juicy as the 4% per annum of your CPF Special Account balances. So remember to sell out these funds after the full Retirement Sum is transferred from your Special Account and Ordinary Account. This will return the money back into your CPF SA account to earn the minimum 4% per annum interest.

The longer the monies stay in the bond funds, the more you lose out in terms of interest as compared to parking the monies in the CPF Special Account.

To sell, log in to FSMOne.com, go to ‘Place order’ in the top ribbon. See below.

Then click the below and select your fund to sell.

Voila! There you have it folks!

With these few steps which probably took a few minutes (excluding the time taken to approve the account sign-up), and depending on how much you have in your CPF-SA, this could mean a few extra thousand dollars a year after you turn 55 years old.

In fact, I struggle to find valid good reason why not to do the hack, unless you have lots of money and the extra money per year is too meagre to be worth the effort…. yes that is possible (good for you too), and who knows what will happen tomorrow or next year… After all, planning is important but the most important part of every plan is to plan on the plan not going according to plan..hahahaha (To quote Morgan Housel author of the book “The Psychology of Money”).

In conclusion

Among the two (Nikko AM Shenton Short Term Bond SGD and LionGlobal Short Duration Bond Cl A Dis SGD), given the lower expense ratio and FSM risk rating of only 1, I reckon most people would choose Nikko AM Shenton Short Term Bond SGD.

So that is the process for shielding the amount beyond $40,000 in your CPF Special account.

The remaining savings in your Special and Ordinary Accounts, after setting aside the retirement sum in your Retirement Account, can be withdrawn anytime from age 55. While withdrawal is an option open to you, you could consider stretching the value of your CPF savings by keeping them in your CPF accounts. You can also make regular top-ups to your CPF accounts to further boost your retirement savings. With attractive interest of up to 6% per annum, your CPF savings will grow over time so you have more in your golden years.

Below are minor points shared by one of the reader which I think is useful to know:
(1) Amount we can transfer to RA is ERS (1.5x of FRS). But I think it is not a good idea as CPF Life accounts does not earn interest and this insurance is costly.
(2) Double Shield (SA and OA) may be interesting for some people. Basically invest in CPF SA and CPF OA and then use Cash to top up RA.
(3) Interest calculation by CPF is based on minimum balance of the month. So further optimization is possible/needed.
(4) When we make CPF withdrawal from 55, the 1st bucket to draw down is SA. We need another chance to force withdrawal from OA.

That’s all for now. Just sharing my thoughts by the way. This is not an investment advice. Please do your own due diligence.

Do let me know your comments below.

“As in all successful ventures, the foundation of a good retirement is planning.” – Earl Nightingale


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

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Use the above referral code to enjoy the below benefits (Campaign Period: 14 April 2021, 09:44 – 16 July 2021, 23:59).

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Posted in CPF, Investing methodology | 7 Comments

‘Tools’ I used to track my dividend & bond interest income

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” John D. Rockefeller

I am sure many are way more advanced than me in tracking their dividend, but let me share a bit on how I do it for my own portfolio.

However, before I begin, I would like to highlight that to me personally, the focus on any stock/REIT investment should not be just on or primarily on the dividend yield or payout amount. The focus should be on the fundamental of the companies (behind the stock) and industries they are operating in as well as the narratives of the business.

A long term consistent growing dividend income (or capital gains) should be a by-product of companies which managed to increase their earnings and which fundamentally alright.

These sites are just tools for me to track these income which I hope will consistently grow over the years.

1) Dividend.sg

A good website to track Singapore listed stocks dividend payouts is Dividend.sg.

If I am wondering if I have missed any of the dividends of my stocks (yeah sometimes I too lazy to remember, and wonder why got cash deposit in my bank account), I might drop by this website to check on the dividend payout dates and amount of the stocks I own.

For instance, if I am thinking about DBS, I will go to ‘Quick Search ‘and click on DBS.

It will show the ex-dividend dates, the payout dates and payout amount for DBS stocks.

If I am concerned about upcoming dividend for this month, I will click on ‘Coming Dividends’ to check out which counters are paying dividend for this month.

2) Investing Note

Well, I always felt that Investing Note is more of a social platform for traders and investors.

However, there is a function there for you to track the dividend of the stocks you own.

First you have to create a watchlist of the stocks you are interested in. Click on ‘Watchlist” at the top bar. By the way, you can create new watch lists with different names.

Let’s use DBS as an example again. Add DBS (D05) to be part of your watch list.

Then go back to the main page. Go to the right and click on “Stock Calendar”.

Click on ‘My Watchlist Only” or the name of the new watch list you have created.

You can view events by month, and you should see DBS dividend action in April 2021.

3) Tiger Brokers

I am still new to Tiger Brokers, but this is what I have found out.

If you go to the desktop version, in the charts, there are boxes with the letter ‘D’ within as shown along the chart line (using DBS as an example again). Click on that and it will tell you the ex-dividend date and payout amount.

Alternatively, you can click on ‘Filings’ at the top and it will bring up the list of company announcement much like what the SGX Company website does and you can find the dividend payout announcement.

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

PLease use my Tiger Broker Referral Code:: GPE59H

Sign up here.

See below sign up bonus:

1) Upon completion of registration, you will receive 500 Tiger Coins.

2) Upon completion of account opening, you will receive 60 commission-free trades for U.S. stocks, H.K. stocks, Singapore stocks and Futures within 180 days.

3) If you make an initial deposit more than 2000 SGD or equivalent currency, you will receive a free share of Disney.

4) StocksCafe

StocksCafe is by far my favourite site to use to track my dividends. With this site, I seldom use the above three mentioned sites.

First, you must first create your portfolio of stocks and bonds (number of shares/bonds and when they were bought or sold).

Once you have done that, it is kind of easy moving from there. Go to the top bar, under your user name, click on ‘Portfolio’ then go to the bottom bar and click on ‘Dividends’.

You can track the ‘Announced dividend ex-dividend date, pay date and amount’. This also applies to the interest payout from bonds (in my case, Singapore Saving Bonds);

The ‘Projected dividend ex-dividend date, pay date and amount’. By the way, this may not be exactly accurate, but it does give you a feel of what you can expect for the next 12 months, and they do help to tally up the total amount of dividend base on what you currently own.

The ‘Due/Paid dividend’ page. In this page, it will show the amount already paid to you for the various years (summary page). As well as the ‘Soon to be due dividend ex-dividend date, pay date and amount’ for the various counters. Those up-coming dividend due dates are highlighted in orange.

There is also a chart that plots out the yearly dividend amount. So you can track your progress over the years.

Yes, from this page I can see the amount I have received so far; the page I like the most….Muahahaha!

I can check on the dividend income from stocks listed in Singapore and from other markets (eg. US, HK, Malaysia, etc), and then I can have an idea of the projected income for the next 12 months, and the due amount in the coming weeks. And finally I can see what I received so far (in SGD) from the past days, to the past weeks, to the past years.

You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

In Summary

Well, that’s is basically what I normally do. Actually there are many more sites, but these four are the usual ones I normally use.

Depending on how many counters you have, it might be more worthwhile to automate the whole process.

“Any daily work task that takes 5 minutes will cost over 20 hours a year, or over half of a work week. Even if it takes 20 hours to automate that daily 5 minute task, the automation will break even in a year.”
― Anthony J. Stieber

Let me know how you track yours, drop a comment below.

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Posted in Dividend & Yield | Leave a comment

Shifting of my HK & US-listed Stocks to a Low cost brokerage

Up until recently, I have been using two brokerage accounts, one with POEMS and the other with UOB Kay Kian.

The years 2019 and 2020 was a key turning point as I have invested more in that year and has expanded my portfolio to include more Hong Kong and US listed stocks.

With the increase in foreign market listed shares, there are increases in the custody fees and dividend charges. See below example of the fee structure from UOB Kay Hian.

See below example of the fee structure from POEMS.

Initially, there was not much charges as I was buying (and selling) stocks more often in 2019 and 2020. In 2021, with the rising markets, my trading activities have slowed, or rather stopped. Consequently, with my trading inactivity, the fees have kicked in.

At first, I was not really concerned about these fees as many of my counters are primarily dividend plays and their dividend payouts more than cover for these fees. Moreover, typically, these brokerages issue the custody fees every quarter. Hence most months I do not get any fees (except towards the end of each quarter).

In addition, I am starting to see more greens (unrealised gains) in many of these counters as markets continue their upward march. In fact, to me, the key focus I reckon in any investment should be on the fundamentals of our investments (the companies behind the stocks) rather than the small parts about fees. Why spilt hair? So yes, these do not really bother me (or so I thought).

However, with the proliferation of low fees brokers in Singapore, and many of their offering low commission ($0 commission in the case of moomoo) and attractive sign up promotions (eg. Interactive Brokers, Tiger Brokers and moomoo), I am starting to question why am I paying these fees.

Tiger Brokers Review: Low Commissions And Attractive Sign-Up Promotions (read here)

Moomoo Review (2021) & Comparison: Super Low Cost Brokerage Showdown (read here)

I treat my Hong Kong portfolio primarily as a dividend portfolio. While the US portfolio primarily as a Story fund (Growth portfolio). Hence I am primarily holding these stocks long term. What is perhaps the major push factor, is the recurring custody fees, then next will be dividend charges (by UOB KH and POEMS). Ultimately, over the long term (years), they do add up. What have I got to lose? Think of it as a perennial mosquito bite itch, which happens every quarter and every time I receive a dividend payout (from my US or HK listed stocks).

Heck, I might as well use the money I paid for the custody fees to pay for my mobile phone bills :p

For my case I will be selling my HK-listed and US-listed counters progressively from UOB KH and POEMS and buying them back using Tiger Brokers. Yes there are fees incurred in doing so.

The other method is to transfer the shares out.

I am not aware of the fees involved for UOB KH (see below).

This image has an empty alt attribute; its file name is 5.png

However, in the case of POEMS, the fees for doing so is shown below.

Perhaps many of the local brokerage here can start assessing their fee structure, to keep up with the competition.

Nevertheless, I feel that many of the low cost brokerages here (and even the more established brokerages) here in Singapore can do more to enhance the user experience. I have seen the interface in M1 Finance, and how one can customise their portfolio (or create various sub-portfolios) using the platform there. One can track the monthly overall value of the portfolio to the monthly dividend payout amount, and set up orders to automatically purchase stocks in undervalued ‘sub portfolios’. In addition to assessing the technical/financial data of the stocks and companies, and of course, the low fees.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend / bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Friend of StocksCafe and test out all features for free for two months!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

Use the above referral code to enjoy the below benefits.

Shopee

Hi there! I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

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Posted in Investing methodology | 2 Comments

Singapore Reits, Rising interest rates and the Pandemic

This is not a new topic. In fact, when I think of Sg Reits in general, this appears to be a perennial matter on my mind. What is perhaps significant and new now, is the context. However, the conclusion will probably be the same. That could be the eventual conclusion, but there are a few key points I like to highlight. Things after all have evolved, and the Reits sector with the pandemic context as a whole has evolved (I try not to use the word ‘changed’).

For the beginning part of the article, I will be quoting many articles found online. This first part of the post is rather long. Subsequently I raised a few questions for all of us to ponder. So you can skip the first and go to the second part.

Before we move on, I just want to highlight that there are many things I like about Reits eg. their relatively high tax free dividend yield, stable assets backing the counters, not as volatile in terms of price movement. These are after all general statements. There are of course exceptions such as Eagle Hospitality Trust, Sabana Reit, First Reit, etc. Then again, ultimately no Reit investment is risk free.

Eagle Hospitality Trust stuck in limbo after unitholders vote against change of manager (read here)

Is it time for Sabana Reit to be euthanised? (read here)

First Reit FY2020 DPU down 51.7% to 4.15 S cents (read here)

1) Rising Interest Rates and Reits

In many way, I view owning Reits very close to owning an investment property, while excluding the headaches of dealing with tenants, agents, etc. In addition, it is pretty close to a bond like investment, with quarterly or semi annual dividend payouts.

So naturally many people would compare Reits to bonds and are concerned about yield, and how the rising yield (or interest rates) affect the dividend yield of Reits.

S-Reit investors need not fear rising rates (read here)

How Higher Interest Rates Impact REITs (read here)

I think the above 2 articles are good in explaining the matter. Let me summarise some of the key points below, while adding some other points from other sources.

To quote the second article: “Over the past decade, interest rates have fallen to historically low levels. This has created a challenging environment for income investors who previously enjoyed healthy, low-risk returns from money market funds, CDs, and Treasury bonds. In fact, since the darkest days of the financial crisis, many yield-starved investors have been forced to search elsewhere for their income needs, driving up demand for bond alternatives such as REITs.”

The below shows the U.S. 10 Year Treasury yield chart dating back to 1962. As you can see, yield peaked around 1981 and since then has been trending down. Today it is around 1.69% (at the time of writing).

Interest rates have never been this low for this long, making many of the academic studies about rising rates potentially less relevant. 

To quote Howard Marks in his latest memo:

“Through bond buying, the Federal Reserve grew its portfolio by $2.7 trillion, or roughly 55%, and the U.S. Treasury funded roughly $4 trillion in grants and loans.

Unlike the credit crunches that accompanied many past crises, capital flowed like water. High yield bond issuance for the year was $450 billion, up 57% from 2019 and well above the prior record set in 2013. Investment grade debt issuance totaled $1.9 trillion, up a similar 58% from 2019 and also ahead of the previous record, set in 2017.

Rising economic confidence and the increasing pace of economic development and growth, even if it comes with inflationary pressures can be good for REITs.

After the Fed cut its federal funds rate target to between zero and 0.25%, bond prices rose as bond yields fell in parallel. At year-end, the average A-rated bond yielded just 1.52%, and the average yield on high yield bonds (ex. energy) was just below 4%.”

As mentioned by Howard Marks, the Fed targets the federal fund rates to be between zero and 0.25%.

So how will it impact the 10-year interest rate? No much perhaps.

As mentioned, in the article below:  “In contrast, the interest rate on a 10-year Treasury bond does not appear to move as closely with the fed funds rate. While there appears to be some co-movement, the 10-year interest rate appears to follow its own declining path.

How Might Increases in the Fed Funds Rate Impact Other Interest Rates? (read here)

In fact, we have recently seen a spike in the U.S. 10 Year Treasury yield. Treasury bond yields (or rates) are tracked by investors for many reasons. The yields are paid by the U.S. government as interest for borrowing money via selling the bond. 

The 10-year Treasury yield is closely watched as an indicator of broader investor confidence. This is because Treasury bills, notes, and bonds carry the full backing of the U.S. government, they are viewed as the safest investment. The 10-year is used as a proxy for many other important financial matters, such as mortgage rates. 

When confidence is high, prices for the 10-year drop, and yields rise. This is because investors feel they can find higher-returning investments elsewhere and do not feel they need to play it safe. But when confidence is low, bond prices rise and yields fall, as there is more demand for this safe investment. This confidence factor is also felt outside of the U.S.

So why does the yield rate or more specifically interest rates matter to Reits?

To quote this article:

“There are two reasons why interest rates matter to REITs, and both have to do with the underlying business model of this high-yield industry.

1) REITs exist so that the companies that own the properties can avoid paying corporate taxes as long as they distribute 90% of taxable income as unqualified dividends.

This means that REITs aren’t able to retain much of their earnings or adjusted funds from operations (AFFO – similar to free cash flow for a REIT).

Thus, in order to grow, REITs need to raise external debt and equity capital from investors. As a result, higher interest rates increase a REIT’s cost of debt and make it incrementally harder to achieve profitable growth. That’s especially true because REITs frequently use secondary offerings (i.e. they sell new shares) to raise growth capital…..

However, when interest rates rise, bonds, including risk-free Treasury bonds, decline in value, causing their yield to rise. REITs compete for new capital with bonds, as well as savings accounts, money market funds, and CDs. Some investors who own REITs today might be inclined to sell their shares if rates rise because they can now achieve similar but less risky yields elsewhere.

2) To put it another way, because REITs are often seen as bond alternatives, higher interest rates could mean decreased demand for REIT shares, causing a REIT’s yield to rise. While that’s great for dividend investors looking for new places to put money to work, it can also be a problem for the REIT’s long-term growth prospects.

That’s because the higher a REIT’s valuation (i.e. share price), the less new shares it takes to raise growth capital.
In other words, the less dilution to existing investors is needed in order to continue growing a REIT’s AFFO, and thus its dividend.

Think of it this way. Suppose a REIT currently yields 5%, and management is able to buy new properties at a capitalization rate (annual net income / purchase price) of 7%. Even if the REIT has to raise 100% of the capital to buy a property by selling new shares, then AFFO per share will still increase, and so will the dividend.
And if the REIT buys the property with a 50/50 mix of equity and debt (with an interest rate of 4%), then the amount that AFFO per share increases is even more due to less dilution and an even lower weighted average cost of capital, or WACC.
However, if interest rates increased to 6% and a REIT’s shares fell enough to raise its dividend yield to 8%, then suddenly the ability to buy that property with 100% equity capital disappears.

The 8% yield a REIT would have to pay on its newly issued shares is more than the 7% capitalization rate it earns on its property, destroying shareholder value.
In other words, the REIT’s cost of capital has risen high enough to not make the deal accretive.
REITs essentially have an optimal growth sweet spot, in terms of their yield. If shares are too expensive, then the yield is too low for investors to earn the income they need.
But if shares are too cheap for too long (due to higher interest rates, for example), then the REIT gets cut off from growth capital and can’t expand its property portfolio and dividend.”

So as what I mentioned earlier, many people compare Reits to bonds. The rise in the bond yield stems from fears over inflation escalating as the economy recovers amid huge fiscal stimulus and ultra loose monetary policy. In Singapore, the 10 year government bond yield has also been rising (see below). The Singapore 10 Years Government Bond has a 1.715% yield (last update 3 Apr 2021 10:15 GMT+0).

So yes, a rising interest rate might (a) push investors to safer investments (eg. bonds) that offer similar yield and (b) with the shift away from Reits, share prices drop and their dividend yield increase, reducing the ability for Reits to access growth capital and expand its property portfolio and dividend.

Ok these are not new worries. Remember we already have a prolonged period of dropping rates and low interest rates / U.S. 10 Year Treasury yield.

As with all investments, everything is relative. The attractive of the relatively risky assets like Sg Reits are often compared to other safer investments in Singapore.

S-Reits generally trade at a decent spread to the 10 year government bond yield, typically in excess of 250 basis points.

At the point of writing:

1) Lion-Phillip S-REIT ETF currently has a dividend yield of 4.29%;

2) NikkoAM-StraitsTrading Asia Ex Japan REIT ETF currently has a dividend yield 5.04%;

3) Phillip SGX APAC Dividend Leaders REIT ETF currently has a dividend yield of 3.27%.

And as mentioned earlier, the Singapore 10 Years Government Bond has a 1.715% yield. So items 1 and 2 show that there is a spread of in excess of 250 basis points (or 2.5%).

By the way, for item 3 (Phillip SGX APAC Dividend Leaders REIT ETF), most of the REITs in this ETF are concentrated in Australia, followed by Singapore, Hong Kong, and Thailand. So technically it is not very representative of Singapore Reits (as compared to items 1 and 2).

REIT ETFs: The Ultimate Singaporean Guide to Investing in ‘Em (read here)

Savings in CPF accounts pay an interest rates of 2.5% (OA) per annum or more.

The April issue of the Singapore Savings Bonds provide a yield of 1.15% per annum over a 10 year period.

The oversubscribed Astrea VI Class A-1 bonds issued by an entity of Temasek Holdings Azalea Asset Management offer a yield of 3% per annum assuming they are called after 5 years.

So with the above mentioned taken into consideration, the price / yield of Sg Reits in general appears acceptable.

S-Reit investors need not fear rising rates (read here)

As per the article above, the conclusion is that with rising economic confidence and pace of economic growth, even if that comes with inflationary pressures and rising yield of long dated government bonds, this is not bad for Sg Reits. With incremental demand for real estate that stem from growing business growing and consumer spending increasing, the income of business and households will rise and tenants of Reits can afford higher rents. Retail and hospitality Reits stand to gain the most from further opening of economies and borders.

This conclusion is not new when the matter of increasing interest rates is mentioned. Way before the pandemic happen.

To be honest, I do not totally disagree with this argument, and as I have Reits in my portfolio, I do hope this is right.

2) Questions moving forward. The key word is “Unprecedented”

This is where it gets interesting.

There are a few questions on my mind, and we have to consider these questions together, not individually.

Let’s go back to the Singapore 10Y Bond Yield chart (see below). This time, let us go back further, to 1998. As you can see, the yield has been in a very consistent long term trend – which is down. This is also similar to the U.S. 10 Year Treasury yield chart – a long down trend since 1981.

The first listed Reit in the Singapore stock market is CapitaMall Trust (now CapitaLand Integrated Commercial Trust), which was listed on 17 July 2002.

So historically speaking, Singapore listed Reits have always been trading within this long term downtrend yield period (macro trend speaking). The macro yield trend did not change.

Howard Marks raised a few interesting questions in his latest memo titled “2020 in Review”. Yes, beyond the unprecedented flow of cash in the system, the loose fiscal and monetary policies environment we are in:

Question 1: The biggest risk of all is the possibility of rising interest rates. Rates have declined quite steadily for the last 40 years. This has been a huge tailwind for investors, since a declining-rate environment lowers the demanded returns on assets, making for higher asset prices. The linkage between falling interest rates and rising asset valuations is a good part of the reason why p/e ratios on stocks are above average and bond yields are the lowest we’ve ever seen (which is the same as saying bond prices are the highest).

But the downtrend in rates is over (if we can believe the Fed’s assurance that it won’t take nominal rates into negative territory). Thus, while interest rates can rise from here – implying higher demanded returns on everything and thus lower asset prices – they can’t decline. This creates a negatively asymmetrical proposition.

Question 2: The Fed says rates will be low for years to come, but are there limitations on its ability to make that happen?

Question 3: Can the Fed keep rates artificially low forever? On longer-maturity bonds? And what about inflation? Can the 10-year Treasury note still yield 1.40% if inflation reaches 3%? 

Since Howard Marks like to talk about odds, think of it this way, looking at the yield charts (be it U.S. 10 Year Treasury yield chart or Singapore 10Y Bond Yield chart), we have been in a really long period of downtrend. Yes, there is a possibility that we may go into negative interest rate zone, but that is a very low possibility (and seems to create more problems than good, looking at past precedents in other countries eg. Japan). What is the odd of that? I think it is rather low in the long term.

We are likely moving towards an inflexion point.

So that leaves us with basically 2 scenarios:

1) Scenario 1: A change in trend, eg, rising rates.

2) Scenario 2: A long period of stable rates or range bound rates.

Or put in another way, Scenario 1: Upwards, Scenario 2: Sideways.

As per the first part of the post, conclusion is that rising rates in the context of a growing economic condition is not exactly bad for Reits.

How Higher Interest Rates Impact REITs (read here)

In the US listed Reits context, the above article was able to show how US listed Reits perform historically in times of higher interest rates.

To quote: “The chart below, courtesy of REIT.com, plots the 12-month return of REITson the y-axis, and the change in the 10-year Treasury yield on the x-axis from 1992 through 2017. The blue dots represent periods when REITs earned a positive total return during each of those periods. The red dots signal that REITs lost money.

While an investment in REITs made money in 87% of rising rate periods observed, it is clear that REITs have been positively and negatively correlated with interest rates during different periods of time, indicating that there are other factors influencing their returns.”

However, there are also further questions. If in the context of rising rates or stagnant rates, there is another issue of structural change in the business of Reits. Basically, the 2 key “unprecedented events”.

No. 1: Unprecedented long term up trend (or sideway trend) for interest rates for Singapore listed Reits.

No. 2: Unprecedented structural change in business for many of the Reits tenants.

For No. 2 (yes that is the second spanner thrown), technically we are still not out of the woods from the pandemic. There are companies still practising a work from home system. In addition, travelling between countries is still affected. However, there are nonetheless discussions that there will be permanent changes to how people work, live and play in the future. There is no going back to pre-Covid situations.

A growing list of major firms, such as Facebook, Google, Twitter, Mastercard and Shopify, are now planning a permanent shift to remote working even after dangers of COVID-19 fade and cities lift shutdowns.

Business wise, in the supply chain, there will be a change from just in time model to just in case model. For the hospitality sectors there will also be changes.

For the retail sector, even prior to the pandemic, it is already facing pressure from e-commerce. The pandemic just hasten the change. In 2020, we saw the closure of Singapore’s Robinsons department store, ending an era dating back 162 years.

StanChart unveils permanent move to flexible working from 2021 (read here)

Microsoft is letting more employees work from home permanently (read here)

Goodbye office: Is the future of work in our homes? (read here)

EVERY COMPANY GOING REMOTE PERMANENTLY: MAR 20, 2021 UPDATE (read here)

Moving from Just in Time to Just in Case (read here)

Singapore’s Robinsons department store to shut down after 162 years (read here)

The world wide lock-downs, the large scale shift from office to work from home made possible by the advancement in technology, to the way people socialise, live, work, play, etc are in many ways unprecedented.

As a retail investor, I like to be able to forecast, to extrapolate into the future, while looking at the past. It is easier to do so when I do not have ‘unprecedented’ situations. However, for many retail investors, how fast rates will rise or the future direction of interest rates are beyond their control. In addition, as mentioned earlier, the interest rate on a 10-year Treasury bond does not appear to move as closely with the fed funds rate. So am wondering how will the Fed be able to keep rates artificially low forever.

Many investors are spooked by what they cannot foresee or control, nor have any historical references.

Inflation fears hit markets as Fed sticks with low-rate policy (read here)

In Gist

When we combine these 3 items together, Singapore Reits, Rising interest rates and the Pandemic, many questions arise.

Yes the economy will pick up after the pandemic, but will Reits prosper as well? Or will they be left behind?

There are not many pure play Reits listed in Singapore. Eg. Reits that are purely office, retail, industrial etc. Yes there are, but many of the bigger capitalised Reits have their fingers in different sectors. On another note, some sectors are more impacted by the structural changes (if they do become permanent). eg. Office or hospitality or retail sector. So in a way, many of the diversified Reits will be somehow impacted, unless they managed to off load or adapt in time.

In addition, Reits as mentioned earlier, pay out 90% of their profits, and essentially have an optimal growth sweet spot, in terms of their yield. So if yield rise and they cannot find ways to grow either by asset enhancement or addition of better assets, it is just a continuous downward spiral, while investors look for safer better yielding alternative investments. Are the Reit managers able to find that sweet spot in this environment?

Asset enhancement in the context of rising material prices (fast inflation + rising interest & mortgage rates) and disrupted supply chains is also not going to be cheap. And how willing will landlords be, to be the first to experiment and break through, without government incentives? Or rather what is the likelihood that the notion be approved by shareholders, who may be more ‘short-sighted’ retirees who are more concerned about the next dividend payout amount and date than the long term prospect of the Reit itself. This is not the fast paced disruptive tech start-up sectors we are talking about.

How experienced will Singapore Reits managers be in addressing the unprecedented situations?

jackie-chan-meme1 | Kartun, Inspirasi

I do not think it will be a dead end, and businesses / Reits will evolve and adapt. Nevertheless there are big question marks. However, knowing these few questions is probably the first step in tackling them.

Most people do not get rich by trading in and out of Reits, or holding Reits for very short period of time. It is typically through long holding periods, through the accumulation of dividends and capital appreciation that investors profit. So most retail investors will have to ride the long term trends, whichever they might be.


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