Tea with KenjiFX: 3 types of people who borrow money.

There are many types of people who borrow money (from friends and family) and here are 3 types listed by KenjiFX (AKA KenjiWealthMgt in FB):

1. People who borrow and want to repay the loan but lack the ability to do so.

2. People who borrow and never intend to repay the loan even when they have the ability to do so.

3. People who borrow continually.
For example, borrow $50, repay $20, borrow $70 later to round up outstanding loan to $100, repay $30, borrow $80 to round up outstanding loan to $150 and it goes on to a point when they really can never repay the loan in full.

Perhaps, we know some people who fall into the three categories above?

It has to be said that getting into debt is easy while getting out of debt could prove to be really difficult.

Credit Counselling Singapore (CCS) revealed the following reasons for Singaporeans having debt problems:




 49% all debtors helped by CCS blame overspending!

"Just because our friends or family members have a car (or two) or a condo (or two), it does not mean that we should have them too..."
From: If we are not rich, don't act rich.

“We need much less than we think we need,” Maya Angelou.

Related posts:
1. Lending money to someone you care about?
2. An easy way to improve cash flow in life.
3. The secret to avoiding financial ruin.

Tea with Matthew Seah: A pâtissier on financial freedom.

Regular readers know that our guest blogger, Matthew Seah, is a good investor but I dare say that none of us knows that he is also an aspiring pâtissier (pronounced "pah-tee-syay"). In this guest blog, Matthew shares with us what the processes used by an investor and a pâtissier have in common:

I have been making tiramisu for years in a very specific order:

1. Separate egg whites from yolk. Make sure yolk is not broken.

2. Beat egg white till firm.

3. Add liquor into egg yolk.

4. Mix mascarpone cheese into yolk mixture, a little at a time.

5. Fold beaten egg white gently into yolk mixture.

.
.
.
.

And the result?

 

Note: I am NOT trying to boast here nor am I promoting my culinary prowess…

Having tasted my healthier choice tiramisu (no additional sugar was added, all the sweetness come from the ingredients alone), my friend wanted to try making one. So I hastily came up with a soft copy of my recipe for him.

Over the weekend, it took him 2 tries to get a good looking tiramisu, but it tasted a bit different from what I made although still delicious.

Having talked through the process, I found some critical mistakes in my recipe such as:

• An alternative is to place the biscuit on the cream, then pour coffee over each biscuit.
  My friend did as per recipe and poured too much coffee in his first tiramisu such that the cake came out wet and soggy.
  My intent was to pour 2-3 tablespoons of coffee over the biscuits.

• 1/4 cup of liquor
  My friend measured ¼ metric cup of rum and the cream turned out runny and the cake reeked of alcohol.
  This is actually an estimate, as typical Singaporeans would say, “agar agar” What I meant was about ¼ of my coffee cup, but it was interpreted as a standard ¼ cup measurement (1 cup = 250 ml).

(Ok, I am a frog in a well for not knowing a standard cup is 250ml… I have cups of all sizes at home and I don’t have a metric measuring cup -.-“)

On a side note, I was lazy once and combined steps 1 – 5 together. I beat the hell out of the mixture, but I never did get the same fluffy texture.

Through these examples, I have learned a valuable lesson which I believe most culinary experts would agree: The quantity is just as important as the order of ingredients.

And since AK blogs about personal finance and food, why not have both in the same guest blog? What am I saying? There is a connection with what I learnt in the kitchen and in personal finance!

You see, just as anyone can make the same tiramisu by following the same recipe, financial freedom can be achieved by anyone too as long as they follow the steps in an orderly fashion.

Regardless of your income, you can attain financial nirvana when you choose to follow the basic steps to financial freedom:

 

1. Get educated.
2. Start saving.
3. Get insured.
4. Invest in income generating assets.
5. Repeat step 4 until financial freedom is reached.

Some of you may disagree and can still be financially successful if you do not stick to this order. However, you certainly increase your odds of success when these steps are followed in proper order.

Some people jump straight to step 4 due to lack of patience, and they usually lose a significant amount of money that may dissuade him/her from investing ever again. 

So, how about following step by step so that you can get more interested in your own personal finance and ultimately achieve financial freedom?

Related posts:
1. Tea with Matthew Seah: Financial freedom.
2. Be a millionaire next door.
3. Free e-books by AK: Financial security.
4. How to be one up on wall street?
5. Tea with The Minimalist: Personal finance & investing.

SATS, er, SAF must get AK to be a food ambassador!

When I first enlisted in the Singapore Armed Forces, combat rations were made up of canned sardines, canned chicken curry, canned baked beans, hardtack biscuits and chocolate bars.

When I went back 4 years later, combat rations came in army green packets and the variety was amazing! The packaging was strong and practical too.

We would leave the packets on the bonnets of 3 tonners and they would heat up under the Sun. Simply tear open the packets, pour out the contents into mess tins and we would have really yummy (almost gourmet, I feel) and warm meals.

I brought home a packet of red bean soup then and my mom loved it! My mom is very critical when it comes to red bean soup and she loved it! So, it must have been really good.

Anyway, a friend who went for reservist training recently told me packets and packets were thrown away as none of his fellow soldiers consumed any of the combat rations, preferring to simply dump the food packs in the rubbish bin at the end of the exercise.

It really pains me to think that so much perfectly good food is going to the landfills. All the resources that went into producing, transporting and storing the food are wasted. Of course, it is also a waste of precious tax-payers' money.

I do not understand why people would throw away perfectly good food:

Potato, cheese and sausages.

Black pepper mushroom noodles with sausages.

Baked beans, corn, cheese and sausages.

To readers who are still serving our country either as active servicemen or reservists in the military, please don't waste food. Please don't throw away your combat rations.

Like what my mother used to tell me when I was a boy, "Think of the many less fortunate people who do not have enough to eat."



Finally, for a bit of trivia, do you know that there is a company called Singapore Food Industries (SFI)? I used to be a shareholder. They are the people who supply combat rations to the Singapore Armed Forces. I rather liked the regular and good dividends which they paid.

Soldiers have to be fed and MINDEF is a good paymaster. 

Unfortunately, SFI was bought over by another company, SATS. 

Yes, interesting bit of trivia, isn't it?

Related posts:
1. AK71 gets recognition from the government!
2. SATS: A nibble while learning from Rusmin Ang.

An incomplete analysis of Wing Tai Holdings Limited.

Wing Tai Asia.

Someone asked me that since I bought into OUE Limited at a 50% discount to NAV, why not Wing Tai? Wing Tai's NAV/share is $3.78 and it last traded at only $1.74. That is a massive 54% discount to NAV.

Well, both OUE Limited and Wing Tai might be in the real estate business but they are not exactly the same. Wing Tai makes most of its money from property development, more than 80%, in fact. On the other hand, OUE Limited keeps its exposure to property development to a smaller 20% or less.

Of course, we know that in the current day environment with all the cooling measures in place and also an impending increase in interest rates, property development business is really not as promising as it was a few years ago.

We could say that Wing Tai also develops properties in Malaysia and China but are the residential real estate markets there insulated from rising interest rates? I would think not.

In an environment that makes building and selling residential real estate difficult, it is the property companies which have strong recurring income streams that will weather the downturn better. In this area, Wing Tai is rather weak as its investment properties are a small fraction in value compared to its development properties.

Undeniably, for Wing Tai to do well, its development properties will have to sell well but it seems unlikely that this is going to be the case.

Revenue has dropped significantly in the last 12 months and the decline could continue for some time to come. Although Wing Tai's boss said that they are not dropping prices to move stock, I would not be surprised if he should eat his words in the next 12 to 24 months.

Unless some of the earlier cooling measures should be removed by the Singapore government, things are unlikely to look up for the property sector. Unless interest rates stay low in future, investors are more likely to avoid investing in properties.

Wing Tai will have to pay extension charges for development properties which have not been sold two years after receiving their TOPs. It will be a percentage of the respective sites' purchase prices. 8% in the first year, 16% in the second year and 24% in the third and subsequent years.

To avoid paying these charges, Wing Tai could do a SC Global and privatise but with only slightly more than 50% of the issued shares in their control, it would cost the Cheng family quite a fortune to do so and Wing Tai's boss has already said that there is no plan to privatise.

I am not an expert analyst on the property sector and I am not sure how well Wing Tai's properties will sell in future but I am willing to bet that conditions will continue to be difficult. Revenue could continue to decline and if Wing Tai should drop prices on its development properties, revenue could receive a boost but earnings might be flat.

The question now is really what is Wing Tai worth on a per share basis?

Well, I am more sanguine about its investment properties than its development properties. Those are worth about 72c or 73c a share. These properties are recurring income generators. Income could be increased by improving occupancy levels or increasing asking rents or rates where possible.

As for its development properties, the only way for them to make money for Wing Tai is if they were sold. Otherwise, even if we were to assume further write downs in value, they are just dead weight if they remain unsold. With the extension charges payable 2 years upon receiving their TOPs, they will become liabilities until they are sold. Therefore, to be very conservative, taking into consideration possible bigger write downs in future, to me, they could be worth $1.50 a share.

Wing Tai has cash on hand but not enough to pay off all its borrowings. They are short of some 58c per share. However, unless things get seriously bad, Wing Tai is in no danger of going belly up. It could always sell a fraction of its development properties cheaper to raise cash. At the moment, with the cash that it has, Wing Tai is at least able to reduce borrowings further in case interest rates should go up in order to avoid higher finance cost.

So, based on this incomplete analysis of Wing Tai Holdings Limited, to me, a fairly good entry price would be $0.72 + $1.50 - $0.58 = $1.64, give or take a few bids.

Technically, $1.64 looks like it could be tested as a support while in the short term, we could see a rebound in share price as the MACD formed a higher low.

See: Full Year 2014 Financial Statements.

Related post:
OUE Limited: A nibble.

Formerly Wing Tai's headquarters.

I could not afford it but now I can.

In the past, my mattresses cost between $150 to $400 each. I am usually not very picky and the price is more important a consideration. 

My last mattress was a queen size mattress from IKEA that cost about $400. Maybe, a bit lesser than that.

However, as I age and am more prone to aches, I have become more aware of why I should get a good mattress that is suitable for me. So, I decided to "invest" in a good mattress in the hope of sleeping better. 




OK, we can have a debate on whether a good mattress is an investment or a consumption item later.

Anyway, I visited quite a few stores and two of them were branches of big local chain stores. There were so many brands available and almost all of them had some kind of special offer going on. The many different types of mattresses on offer were impressive.

Some salespeople were very good while some really needed more training. Some stores had more ammunition to help their salespeople get more business too.

I lingered on a couple of mattresses because I rather liked them. They cost between $3,000 to $4,000. 

Almost right away, the salespeople would say how I could pay for them with easy instalments and that I should not have to worry about the seemingly high prices.

OK, it might be my fault for giving them the impression that I needed to pay by instalments because I was wearing a very worn (and some parts torn) cargo pants and a ratty looking t-shirt. 

However, I wondered how many people bought those mattresses even though they might not have been able to pay $3,000 to $4,000 in a single payment?


"I could not afford it but now I can."

Sounds good?

That sentence is incomplete, actually.

"I could not afford it but now I can because they are letting me pay in instalments."

Doesn't sound so good anymore, does it?

In fact, even if we had the money to pay $3,000 to $4,000 for a mattress in a single payment, we might want to try delaying gratification. Put the money to work and, then, buy the mattress 10 years later.


OK, I can imagine some readers getting ready to give me a piece of their minds on this matter now. 

Just because I waited almost 20 years to get an atas mattress doesn't mean that others must do it too.

Well, it doesn't have to be a mattress per se but you get the idea.



Could be mistaken for a mattress.

Payment by instalments for consumption items is really giving in to instant gratification. 

It does nothing to create wealth and, in fact, holds us back for as long as it takes to make full payment for these purchases. The opportunity cost could be quite astounding too.

So, what would sound good?

"I could not afford it but now I can have it and keep my money too."

Wait, I close my door first. OK, you can start throwing things at me now. Nothing explosive, please.

Related posts:
1. The evil instalment schemes and their minions.
2. The Millionaire Next Door.
3. An easy way to improve cash flow in life.

Are you financially on track for retirement?

I chanced upon this over the weekend and think it is interesting enough to share.

Source: JP Morgan Asset Management

So, according to this, if we are 40 years old and making $75,000 a year, we should have $120,000 put aside for retirement by now.

By putting aside, it doesn't mean just stashing the money in a mattress or a mooncake tin, it means having money in investments which are producing a 7% annual return.

I thought of tweaking this so that it takes into consideration CPF savings. After all, a Singaporean who is 40 years old could have been working for 15 to 20 years already. There could be quite a bit of savings in his CPF account.

Then, I decided not to bother because most Singaporeans will use their CPF savings to pay for their home. How much of their CPF would they utilise and whether they would monetise their home now or in the future is hard to say.

Anyway, this table also assumes that there is a 2.5% annual wage increment (and no chance of any job promotion). There are also the assumptions that the retirement age is 65 and that the accumulated money must last for 30 years of retirement (i.e. till age 95).

In case you are wondering, Singaporean females have a life expectancy of 85 years and males have a life expectancy of 80 years. So, 95 seems to be generously realistic.

Of course, there are probably quite a few holes we can poke in the table above. However, I feel that this table is useful as a wake up call for people who do not have at least what it says we should have in liquid assets at this current point in time earmarked for retirement, excluding CPF savings and emergency funds.

They are probably not saving enough and should take action to improve their financial health quite rapidly. The earlier they realise this, the better. The longer they have to save and invest, the better. If we know of such people and if we could give them a nudge in the right direction, the better.

Related posts:
1. To retire by age 45, start with a plan.
2. How to have a comfortable retirement?
3. IPS Forum on CPF: Housing and the CPF.
4. 5 points you ignore at your own risk.
6. SRS: A brief analysis.

Spotting the next OSIM?

This is freshly taken from TheFinance's wall in FB. I made a few comments and I think this is substantial enough to share with readers who do not follow me on FB:

I have to go out in a while.

Have a good Sunday, everyone.

Related posts:
Managing exposure in investment portfolio.

Celebrity investment blogger who knows it all?

I have been rather busy with a personal project lately and will continue to be busier than usual in the coming weeks. So, I could be absent from blogging for a day or two (or a few) from time to time.

Of course, I will try to reply to comments, emails and PMs in FB in a timely manner but if I don't, it is because I am too busy to do so. Please pardon my tardy replies in such instances.

This is, perhaps, another reminder that AK is a regular guy who can only try to do what he thinks is right with what limited resources (which includes time, of course) he has.

I know that many readers have come to think of AK as someone a bit more than ordinary. 

I know because I get comments such as:

AK is a super idol? 
If I were on American Idol, 
X-X-X.

So, is AK extraordinary?

I have never felt anything more than ordinary.

I don't feel very wealthy. 

I don't feel very smart. 

I don't feel very wise. 

There are wealthier, smarter and wiser people by the truckloads. 

An important difference is that AK has a blog and likes talking to himself a bit too much, I feel.

I shared with a friend who is in the business of investment education recently that I fear that some are beginning to think that I have all the answers. 

This is a problem that investment educators have. 

People think they have all the answers because they are regarded as gurus. If they don't have the answers, then, their credibility could be discounted.

Well, you might have heard this saying before:

"Good things not cheap. Cheap things not good."

So, expensive is better. Expensive course means instructor must be guru lor. 

Then, cheap is not good. Cheap course means instructor is half guru, maybe. 

What about free? 

Aiyoh, so simple. 

Free means instructor is not guru lah! (Where did I put SMOL's instant noodles cooking pot?)

AK is not an investment educator and he is definitely not a guru. 

ASSI is free for all to read and does not have advertising campaigns or other marketing efforts to "gurufy" AK. 

(The only ads are the ones you see in my blog which hopefully will help to make me some pocket money for the hundreds of hours I put into blogging. Sorry, I couldn't help myself.)

In fact, I periodically blog about how I am just a regular retail investor.

So, to the many readers who contacted me recently as well as those who are thinking of contacting me on whether it is the right time to buy certain stocks, whether their investments will be safe and whether the market has hit bottom, please forgive me when I mostly say I don't know (for now).

I will, however, say that if you have yet to pick up FA and TA, please do so. There are great books out there. 

If you don't know where to start, my blog has a list in the right sidebar titled "Food for thought". 

You might want to start by reading the books listed there. Education is necessary but it doesn't have to be expensive.

Remember, AK's path to financial freedom is not the only path. I am not so dogmatic as to insist that there is only one correct way.

It takes time to discover the path you are best at walking but while we are on the same path, I could share what I know with you but there are many things which I don't. 

So, I appreciate a hint, a nudge or a wink whenever you think I am walking into a "longkang". On that note, happy walking.
-----------------
UPDATE (29 July 2017):
I am so used to saying that ASSI has more than 2,000 blog posts. I must remember that we have more than 3,000 now.

Related posts:
1. Five revelations from a regular retail investor.
2. Revisiting AK's simple strategy with Charlie Munger.

SembCorp Industries: Increasing exposure.

In a sea of red, I had many choices and I decided to increase my exposure to SembCorp Industries at $4.84 a share. This was one of the supports I identified in a reply to a reader. Read reply: here.



Based on what I feel are undemanding assumptions of a 40c EPS and a 15c DPS, my additional investment has an assumed PE ratio of 12.1x and a dividend yield of 3.1%. I feel that it is probably another fair entry price and, so, I did not bring out the heavy artillery.

With $4.84 failing to hold and the stock closing at $4.82 a share, we could see lower prices if sellers should continue to overwhelm buyers. Then, we could see $4.78 and $4.72 tested next.

The trading volume is very high on a massive down day. I cannot help but wonder if I could have a chance to buy SembCorp Industries at a PE ratio of 10x or lower in the coming weeks or months.

That would be when I bring out the heavy artillery.

Related post:
SembCorp Industries: "A safe price of entry."

Vard Holdings: Bloodbath.

When a reader asked if I might be nibbling at Vard Holdings, I took one look at the charts and said I would need dentures made of titanium before I dare think about it. See comment: here.

If we look at the weekly chart, we will gain insight into why share price hit 63c before rebounding. That is where we find the 150% Fibo, a relatively strong golden ratio. With share price closing above the 138.2% Fibo, we might see immediate support forming at 67c.

Vard Holdings: Weekly chart.

However, with such a high volume sell down today, there could be a follow through and, in such an instance, the question to ask is whether we might see the 161.8% Fibo tested and that is, approximately, at 59c.

Weekly momentum oscillators, and I am looking at the CMF and the MACD, are not supportive of a reversal. With lower lows looking set to form, unless there is a dramatic reversal with higher volumes on buy ups in the next two sessions, we could see a lower share price in due course. Any near term rebound in share price would probably be selling opportunities for both stale bulls and short sellers.

There are many types of mushrooms in the woods. This mushroom, I am not able to tell with confidence if it is edible or not. So, I am not nibbling.

When in doubt, I stay out. I have a delicate stomach.

Related post:
Vard Holdings: Initiating coverage.

Tea with TheMinimalist: Selecting a good financial advisor.

I am happy to publish another guest blog by TheMinimalist and this time the focus is on how to select a good financial advisor:

In this guest blog, I want to talk about a topic that is close to the hearts of many readers here which is picking a good financial adviser to work with. 

Why is it important? The reason is that the majority of us are clueless when it comes to managing our money. That’s why we read blogs like ASSI, which, in my opinion, is one of the best places to start in educating ourselves on the topic of personal finance.

Seek to establish a lifetime relationship with your FAs.

It is unfortunate but from my regular interaction with financial advisers (FAs) in Singapore,  I notice that most of them have no freaking idea about financial planning. I notice that they like to forge transactional relationships with their clients. What this means is that they approach their prospects, present their sales script, address any possible objections and then close the prospects. Rinse and repeat.

I find this a very worrying situation in Singapore. 

Firstly, financial planning is all about systems and processes, NOT products. For example, how can one set up a disciplined system to save at least 10% of one’s income each month? The answer can be found in my previous guest blog. 80% of the financial advisers will not even bother to go through this with you. Why? They don’t earn a single cent, duh! (Take note that most FAs in Singapore are still commission-based, a terrible system if you ask me.)

Secondly, financial planning extends far beyond selling insurance products. An obvious area to bring up here is investment planning. I am seriously surprised by how most of the FAs are lacking in investing knowledge. Ask 80% them about fundamental/technical analysis and they simply give you a blank look. For those new to AK’s blog, fundamental analysis (FA) and technical analysis (TA) are the main due diligence processes before making an investment decision. FA tells you what to buy while TA tells you when to buy/sell off your investments. 

It’s not difficult to be financially literate so long as you are willing to put in the time and effort to pick it up.

Now, what do I consider is the million dollar question to put to your prospective financial adviser? Here’s the answer:

“Could you show me your financial plan?”

Huh? That’s it! Not education level? Not net worth? Not personality? Those are important questions but they are NOT the most important one.  Here, let me explain why.

Majority of Singaporeans do not have a written financial plan!

A financial plan (or financial blueprint) is the best piece of evidence to reflect the competency of a FA. Logically, you engage a FA to manage your finances for the long-term. If the FA cannot even plan out his own finances, how in the freaking world will you ever expect him or her to be capable of advising you on your finances? 

To give another example, you will not ask a designer to renovate your new house based on some arbitrary designs right? You will show designers the blueprint of your house, tell them what you would like installed in the living room, study room etc. You will talk through the plans with them; confirm that you are satisfied with everything first before starting renovations.

I previously mentioned that the FA industry is under-developed due to the commission-based system. This is mainly because the interests of the FA and the client can never be aligned. The FAs are focused on closing sales, selling high-premium products that can generate the highest % of commissions for themselves. Budgeting with the clients? Er...

Am I recommending a fee-based system then? My short answer is yes but this is not the best solution. This is because fee-based planning in Singapore is very expensive. A typical financial plan with a professional financial planner can cost upwards of S$4,000. (AK: Wow!)

What is the best system then? In my opinion, it is self-education through experts but I’ll leave this discussion for another day.

Since I like my blogs to be practical, here are some actionable items for you:

1. Find out what a financial plan is. Talk to a professional planner. If you can’t afford to engage one at the moment, do not worry. I’ll discuss constructing a DIY financial plan for yourself in future guest blogs.
2. If you are meeting financial advisers now or in the future, ask them to show you their financial plan. If they can’t produce one, please think TWICE about engaging them for their services. He or she is a financial salesperson, NOT a professional planner.

P.S If you have found my guest posts useful; please feel free to share it among your friends via FB or e-mail. J

Note from AK: 
I think I shall have to t-loan from SMOL his instant noodles cooking pot on behalf of TheMinimalist. Works quite well as a helmet.

Read other guest blogs by TheMinimalist: here.

OUE Limited: A nibble.

On 25 September, I wondered in a blog post if I might be given a chance to pay 50c for what was worth a dollar. I am referring to OUE Limited's stock, of course.

Twin Peaks.

Although already trading at a hefty discount to NAV back then, I was concerned about how its luxury condominium project, Twin Peaks, could be a drag on performance. Also, looking at the charts then, selling pressure showed no sign of weakening. So, I decided to wait.

Today, I became a shareholder of OUE Limited as my overnight buy order at $2.01 a share was filled.

As the NAV/share is $4.04, I have paid 50c for what is worth a dollar. My wish came true.

It is a very small long position as sentiments are still very bearish and if the $2.00 psychological support should give way, we could see lower prices.

Could we see $1.96 or even $1.92? It could happen but it might not. If it should happen, I suspect that it could be a slow slide downwards. So, I am not going to be too hasty or "show hand" as some readers would say.

If the stock should be well supported and if the support at $2.00 should hold, then, I could add more to my long position if a reversal should take place.

Related post:
OUE Limited: An asset play that could be cheaper?

Financial security: What good is the idea to us?

Sometimes, I wonder why people making lots of money at work are still complaining about not having enough money. Then, if we ask a few questions, we understand why.

Often, the reason is because they scaled up their consumption as they made more money.

Keep our lifestyle simple even as we make more money over time. That is a sure way to having enough money now and in the future.

Want some ice cream? We don't have to go to Swensen's.

Over the years, quite a few readers have written to me to say that they took action after reading my blog posts. I am happy that they feel less stressed up and more secure about their finances now.

Recently, I wrote this in reply to a reader:

"I am happy to sense a tone of determination and also a clarity of mind in your message. You have a plan now and you sound confident of your financial future."

I would have liked to share his story but he would rather not have his story shared. It would have been quite helpful to some, I thought, to read a real life account of how scaling up our consumption even as we make more money would set us back financially.

I will end with a Chinese saying:
师父领进门，修行在个人.

If we do not act upon a good idea, what good is the idea to us?

Related posts:
1. Are you sometimes forced to be extravagant?
2. The evil instalment schemes and their minions.
3. An essential habit to becoming richer.

Free "e-books" on financial security for Singaporeans: here.