Value for money: Rolexes snapped up in Singapore.

"Rolexes flew off the shelves over the weekend after the Swiss franc's surprise appreciation last Thursday sent Singapore's luxury watch enthusiasts on a buying spree before retailers adjust their price tags."
Source: The Straits Times.

Today, a fellow blogger sent me a message:

"I read today that pple are rushing to buy Rolex and other Swiss watches, from a value point do u think it is worth to buy now?"

To be quite honest, the thought of buying a Rolex or two crossed my mind too after reading the news regarding the Swiss Franc last week.

I thought about it a bit more and decided that although the prices of brand new Swiss made watches are certainly going to be higher in future, I would be silly to lock up money in what is a consumption item that is likely to depreciate in value over time even though I might have a margin of safety buying at the pre-adjusted prices. I am very sure, therefore, that it won't be an investment.

Depreciate in value? Don't believe me? Go to shops that sell pre-owned Rolex and other atas Swiss watches to take a look. Most people have relatively short memories but we might want to be reminded that, during bad times, we might even be spoilt for choice in these shops.

Well, it seems that many people disagree with me, going by the newspaper report today. Mr. Market is always right. So, AK is the silly one.

Anyway, my reply:

"Watches are consumption items. We can buy pre-owned Rolex and other Swiss made watches at a fraction of what they would cost brand new.

"I know some people say that luxury watches are investments. Well, I believe that some luxury watches can be investments. These could be highly sought after limited production pieces from very exclusive brands.

"It is not a subject that I have the time or inclination to learn more about. So, I am quite happy to stick to what I know which is that given a choice, I would rather hoard gold and silver than luxury watches."

Since I am not an expert on the subject, I have "invited" an expert to give us his view:

"The Swiss watch market is especially sensitive to economic depressions, and finds itself always having to aim where new money is. This is because high-end wrist watches for the most part are a poor economic investment. You should buy them because you love them, because they are beautiful, and because you want to wear them. Not because you think they will hold or increase in value.

"As a professional talking head on watches I often get asked about investing in watches for profit. The idea that you’ll buy a watch and wait until it increases in value doesn’t made for good sense. Plus, historically it doesn’t happen often even with extremely rare watches. Of course this is not the universally the case, but if I was your investment adviser, I would say stick with watches for wearing not anticipating." Ariel Adams in Forbes. 

Have you bought your Rolex yet?

Related post:
My vintage Rolex.

Saving time, money and my backside but lost face?

In the ongoing saga of the holey backside, I decided to improve the living conditions for my nether regions by addressing the drafty environment through a patch.

Very happy! 

My sister has saved me time and money with her handiwork. 

Thanks, sis!





To be quite honest, one of the things I dislike shopping for the most are pants. 

Very troublesome. 

So, when I find some that I like, I would usually buy at least 2 pairs and hope that they last many years.





A friend who saw my blog post on the hole in my backside couldn't resist giving me a call and he said (not in the exact words):

"OMG! You are the only person I know who actually wears out his clothes to the point of having holes in them! And you actually blog about them? Don't you think it is embarrassing?"

I am so sorry. I didn't know I am supposed to be embarrassed. 





I feel so embarrassed now. 

Thanks for taking the trouble to inform me.
---------------------------
Added on 5 May 2016:

Be frugal! Save money, patch it!

I support the Singapore Police Force's austerity drive (no pun intended)! 





Related posts:
1. An essential habit to becoming richer.
2. What to do when you have a hole in your backside?

We might stay apart but my mom is a big part of my life.

I like noodles. I have been told that they are not as healthy an option compared to rice but that cannot stop me from liking them.

Anyway, I use the healthier version of instant noodles these days, the non-fried instant noodles from KOKA. They are pretty inexpensive actually. They come in transparent plastic packets and don't come with any seasoning at all.

I asked my mom to fry some Ikan Bilis and ginger for me so that I could add them to my noodles for flavour. She gave two full containers to me!

I also have some Ikan Bilis stock cubes with no MSG nor artificial preservatives. They also have less salt than other stock cubes available.

Voila, a simple meal that is filling, flavorful and friendly to my wallet.

Oh, mustn't forget to have a fruit:

Ho, ho, ho! Burp.

My mom did the most difficult part, I believe. I don't like frying stuff. 

Made with a mother's love. Thanks, mom!

As we pursue financial freedom by building passive income streams, it is important to remember a higher purpose for doing this.

Money can always be made but family cannot be replaced.

--------------------
Update (5.35 PM)

Ordered this for breakfast from a "chye perng" store at the market to complement a plate of fried carrot cake. Trying to have more vegetables in my diet after many kind reminders from some readers:

Price: $1.50

Related post:
1. Yummy, yum, yum lunch made with love.
2. Make $3K a month? You could get a 6.6% raise!
3. Passive income: A higher purpose.

IREIT: Is the projected distribution yield of 8% safe?

For investors who plonked down money in IREIT's IPO at 88c a unit, they must be feeling somewhat relieved that the turmoil in the European markets, following the move by Switzerland to scrap a 3 year peg to the Euro, sending the Swiss Franc sky rocketing, has not affected IREIT's unit price. 

However,  I have a faint suspicion that this feeling could give way in time to come.

I did not take part in the IPO partly because I didn't like the fact that it was priced at a hefty premium to its NAV of 78c per unit. 





When we are buying real estate, we must have a very good reason to pay a premium to valuation. 

If it is a hefty premium, the reason must be even better. 

Often, it is on some expectation that the piece of real estate would provide higher returns in future either in the form of higher rental income or capital gain. 

However, I have difficulty seeing both or either one happening in IREIT's portfolio.

I also wondered if the promised yield of 8% per year was actually going to be sustainable. 

This is especially so when there was no currency hedge in place and, bearing in mind what Mr. Lee Kuan Yew said about the Euro before, I was not sure if the currency's strength might not falter.

From my FB wall last year in August.

In fact, with many Eurozone economies very weak and requiring more help in terms of money supply, my expectation was for some form of QE by the ECB which now seems imminent. 

This could, in fact, be the reason why the Swiss decided that enough is enough and scrapped the currency peg to the Euro.

In the event of QE by the ECB, what is going to happen to the Euro? 

The currency would most likely fall in value. 





The US$ fell in value when the Fed carried out rounds of QE. 

The JPY fell when the Japanese carried out what is now called QQE. 

So, it is not going to be an exception with the Euro.

With the expected QE by the ECB, the Euro, this time, would not just fall in value against the Swiss Franc, it would also fall in value against the S$. 

This is going to affect the value of IREIT's portfolio in S$ terms and it is going to affect income distribution as well in S$ terms.

SG/JPY. Source: Yahoo!Finance.

How much would the Euro decline against the S$? 

I don't have an exact figure, of course, but remember that the JPY sank as much as 30% against the S$ from its peak in 2012. Quite alarming.

To be honest, I do not think that the Euro would fall as much as 30% against the S$. 

The JPY was perceived as a safe haven, for some reason, and was attracting quite a bit of interest before its decline. Thus, it had more room to fall. 

The Euro, on the other hand, doesn't have such a lofty status to begin with.





So, what is my opinion of IREIT now?

Although I rather like the stability of the REIT's income, the inability to milk more rental income from its current portfolio plus the strong FOREX risk means that if I want more certainty of an 8% yield in future (which was what attracted many investors to part with their money in the first instance), then, I would need a lower offer price from Mr. Market.





Related post:
Mr. Lee Kuan Yew on the Eurozone.

To be richer, do not indulge in creature comforts. Really?

I am definitely not one of Starbucks' favourite people as I always tell family, friends and readers of my blog that Starbucks coffee is very expensive. 

I am always using Starbucks as an example of something that is really not a necessity in life. OK, for some of us, we need to drink coffee but do we need to drink Starbucks coffee? OK, definitely, their shareholders don't like me too.

Well, this is one of the perils of being the leader in an industry.  Yes, whenever I think of expensive coffee, I think of Starbucks. 

Depending on how you look at this, it could either be a good thing or a bad thing. So, maybe, they would look at it as a good thing, be flattered and don't dislike me that much.

Anyway, there are times when I would indulge in a bit of Starbucks coffee although I am not much of a coffee drinker, preferring tea most of the time. Iced mocha? I rather like that although friends have told me that it isn't real coffee. It is more like a chocolate plus coffee mixture. Adulterated. OK, I am not into gourmet coffee nor gourmet anything. If I like the taste, it is good for me.

So, when are the times I would indulge? Here is an example:

Yes, I know. I am terrible.

I think some readers would remember that I shared what David Gan said in an interview before:

"Tell you a secret. I have a bad habit. If it is not expensive, I don't buy."

People like David Gan would look down on people like me.

Well, AK has a secret too. Nah, I am not going to say it. I am sure you know what it is.

Anyway, I do agree that there is nothing wrong with indulging once in a while. For example, why have only one Fillet-O-Fish for lunch? Have two!

Easily my favourite thing on the menu at McDonald's but at $3.95 each, it isn't cheap. However, it looks much better when we have this:

It is not about not indulging in creature comforts, it is about looking to get greater value for money and trying not to pay full price for anything.

OK, I am feeling full and doubly happy now.

Related posts:
1. Kopi with Song Stonecold.
2. A meal for $2.00 from McDonald's.
3. Seven money habits of AK71's.

Newly married and planning to have a child: Questions.

Is there anyone here who might be in a similar situation as this reader?

Hi AK,

Happy weekend to you. I see that you have recently posted quite a lot on saving and contribution to SA for retirement. This has really set me into thinking, seeing the benefits of compound interest. 

However, as I only started to work for 2.5 years and juz got married and got a house, my situation may not be favourable for making huge moves in my savings. Below are some pointers that I may need your input.

1) I did think of volunteering to contribute to CPF thru cash but as I juz started a family, cash flow could be very important especially we are planning to have a kid next year. Would you advise us to still bite the bullet (like seriously) and still contribute or wait till we are more comfortable before we start contributing? We both own some small portfolio of reits.

2) As we find it hard to contribute cash to CPF, how about transfer in from OA to SA lump sum when we get our bonuses to exploit the higher Interest rates? Alternatively we can opt to pay down our house with the lump sum, which lower our loan and perhaps it more worth it as the small monthly payments we are paying now in the initial phase mostly go towards interest. :( What would you do if you are us? Haha

Thanks AK. As usual, look forward to your enlightening reply. :)

Regards,
B

My reply:

Hi B,

Yes, the blog posts are meant to set people thinking. They are not meant to be advice. OK, this is where I talk to myself. ;p

1. Get my priorities right. Now, I have a family and planning to have a child next year. Need money. Budget. Make sure that the money needed for this has been or is being put aside.

2. Do I have an emergency fund? Is the emergency fund able to cover 12 months of regular personal, household and other routine expenses? This would include the necessary insurance coverage.

3. Before I do an OA to SA transfer, check whether there is enough funds in the OA to pay the monthly mortgage for at least 12 months? If there is, the balance, I could think of transferring to the SA.

4. What is the interest rate on my housing loan now? Am I able to get better returns by investing my funds instead of paying down the housing loan? However, ask am I risk averse? Would paying down the housing loan give me peace of mind (which is priceless)?

I hope these questions will help you find the answers you are looking for. :)

Best wishes,
AK

If you have any ideas or relevant experience to share, please leave a comment for us here. Thank you very much.

Related posts:
1. Achieving level 1 financial security.
2. Options for CPF-OA with a new flat on the way.
3. PM Lee Hsien Loong on retirement adequacy.

What to do when you have a hole in your backside?

Last evening, when I was walking back to my car after meeting a friend for dinner, I was stopped by a stranger who told me with a smile:

"Excuse me, you have a hole in your backside."






OMG! I was taken aback!

I looked at him and I didn't know what to say to that.

I mean, how would you react if you were in my shoes?

Black hole?

Of course, I have hole in my backside.

All of us do, don't we?






I wondered if he was trying to be funny.

Anyway, I must have stared at him long enough for him to feel uncomfortable after that.

He gave a weak smile and pointed at the back of my pants.






I turned to look and found a big tear in the seat of my pants!

So, that was what he meant.

I smiled and thanked him for telling me.

It must have happened very recently as I didn't see the tear when I did the laundry over the weekend.






I have had this pair of pants for almost 10 years.

I knew it was getting a bit threadbare and even ratty looking in some parts but this particular tear makes it (possibly) indecent to wear out from now on.

Looks like I will have to part ways with another old friend.






Feeling a bit sad but what to do?

Related post:
Parting with an old friend.

Is it wrong to be idealistic and live the good life?

If we should be able to do something we love and be paid well for it, we are very lucky indeed.

Now, if we should be given two choices of 

1. a job that pays us well but we do not enjoy 

and 

2. a job that doesn't pay well but we enjoy, 

which one should we choose?




Which option we choose might depend on whether we are a pragmatist or an idealist.

However, I also believe that which one we choose will depend on how comfortable (or uncomfortable) we are financially.

My breakfast. Cute?

I know young people who are very idealistic and many can afford to be so because they already have a roof over their heads, they get a generous amount of pocket money from their parents and the labour market is generally quite tight. 

So, they can afford to be picky.


Is there anything wrong with this? 




Well, as long as they and their parents are able to sustain that kind of an arrangement almost indefinitely, I don't think so. 

There are families which have enough old money to last them a few generations, for example. 

Lucky people.






However, if we are talking about a regular middle class family, then, I think that such an arrangement could be a problem. 

It could be a problem also because it could become a problem for society at large.





"We can afford this lifestyle. What is your problem, AK?"

Yes, for how long? 

Have they ever asked that question?





"We have a plan. Don't be so nosey, AK!"

Oh, ok, that is good. 

I am so sorry for being a big kay poh.




Bad AK! Bad AK!

(I hope the plan does not include a "RETURN OUR CPF" protest in Hong Lim Park.)

Related posts:
1. Why a wealthy nation cannot afford to retire?
2. Two questions that help us build wealth.
3. Are you a millennial? (30 years old or younger.)
"Millennials' general attitude towards work is a result of having doting parents, structured lives and a high level of connection with others through information technology."

How much to invest? Nibbles, gobbles, values and prices.

I have blogged about my nibbles and gobbles in the stock market before and although it might be quite intuitive to us, what exactly is a nibble in terms of numbers? 

I received an email from a reader asking if I could blog about this in greater detail. 

So, this is my attempt to give some notable form to the concept of nibbling in the stock market.





When I have identified a business I would like to invest in, I should also decide how much money I want to invest in it. 

Now, how do I do this? 

Hint: Remember the pyramid? 

Cannot remember? Go to related post number 1 at the end of this blog post.

So, based on my own unique pyramid, I would be able to estimate (yes, it is always an estimate for me) how much I want to invest in the business. 





Example 1:
If it was an investment for income and growth and if I had allocated, say, $200,000 for that kind of investments in my portfolio and if there should be $50,000 left in unused funds earmarked for the same, then, that should be the upper limit of my investment in the business.

Of course, we can have variations. 

Example 2:
If I had decided that no single investment in this layer of the pyramid (i.e. my portfolio) should exceed $25,000 in size, then, that $50,000 left in unused funds for this layer would have had to find at least two businesses to invest in, not one.






Now, let us say that I had decided that $50,000 was a good amount to invest in a business I had researched that had a PE ratio of 12x under more normalised circumstances and generated a dividend yield of 3% based on a pay out ratio of about 35%, I might start nibbling at a PE ratio of 12x. 

Pay a fair price for a wonderful business? I can accept that.

To me, a nibble should be a single digit percentage of the total amount earmarked for the investment. So, in this case, it would be under $5,000.





When do we stop nibbling? My take? 

When we have already invested a third or so of the funds earmarked for the purpose.

Then, what about the rest of the money? 

The rest of the money is reserved for gobbling. 

What is a gobble? 

A gobble is bigger than a nibble. 

50% bigger? 100% bigger? 

Well, I am not prescriptive.

One instance in which I would gobble is when I feel that the stock has become undervalued.

So, for example, if a stock which usually traded at a PE ratio of 11x to 13x should be offered by Mr. Market at a price that translated to a PE ratio of under 10x, to me, that would be undervalued. 





The closer the PE ratio declines to crisis valuation, the more undervalued the stock becomes, all else remaining equal.

Now, this is just me talking to myself. Definitely, there is nothing sacred about the numbers. They are just examples. 

The philosophy that is the foundation of this blog post is, however, quite timeless. 

I hope this blog post has thrown some light on the matter of nibbles and gobbles.




Specific numbers and percentages? 

You know your circumstances best. 

That is your job.

Related posts:
1. Investing and position sizing.
2. AK went shopping in the (stock) market. (Nibble.)
3. Saizen REIT: Why did I buy? Buy more? (Gobble.)

Another step towards retirement adequacy taken.

My voluntary contribution in 2015 to CPF is done:

With this, I will enjoy the risk free interest rates of 2.5% to 4.0% earlier.

Sit back, relax and wait for the magic of compounding to do its work.

Related post:
Retirement: AK is buying a AAA rated bond.

Friend selling exclusive investment with 6% a month return. (Could this be a great investment?)

"Those at the bottom are left with a loss."

This is another example of my ignorance:

Hi S,

Welcome to my blog. :)

What you have described is something very esoteric. Well, at least to me, it is.

I am afraid I know nothing about something like this. If you would like me to blog about it to see if other readers might be able to throw some light on the matter, let me know. :)

Best wishes,
AK


What was this in response to? This:

Hi AK,

Just a basic introduction of myself, I am a 21 year old teenager, I have been reading your blog since I was 19. I made my first small sum investment when I was 19 too.

Here is my query:

Recently, a friend of mine contacted me to sell an investment policy to me. It was described as an "exclusive" investment. Here is how it goes.

- Minimum sum invested must be at least SGD $2 million dollars

- Period of investment is 25 months

- The investor will get a return of 6% a month (4% being the capital return, 2% being the interest of the sum invested)

- There is a banker's guarantee attached to this investment for the capital return too

So I did my simple math and calculated, if someone invested 2m, by the end of 25 months, it will be 3 mil. I was very skeptical about it at first, but after consulting one of my friend from the bank, he said there are such things. Why is there such an investment instrument in the market? What's more the security is there with a banker's guarantee attached. Can investment like these be trusted just because there is a banker's guarantee attached? We all know 2m is not a small sum, therefore I am humbly enquiring about this with you. Could you give me some opinions on this?

Thank you:)

Best regards,

S

Sure thing, share it with the readers. I am really curious, is there really such thing as a "almost-zero-risk" investment like this?:) thank you AK.

Much appreciated.

Sounds too good to be true? A healthy dose of skepticism is likely to improve our chances of survival in the field. However, what if it were true?

If you have any idea what this is or if you have something to say about this, please leave a comment for us. Thank you.

A useful reminder as we are offered opportunities:
Advice from a fraudster.

Bread ends are the best!

I actually know people who don't eat bread ends and would throw them away! For me, bread ends are the best and I always look forward to when only the bread ends are left in a loaf.

Bread ends are really delicious if we apply some margarine on them and leave them in a hot frying pan for a bit so that they become warm and toasty.

Today, I included some honey baked ham and ginger in the pan:

Guess how much I paid for this non-stick frying pan?

Pan fried honey baked ham on a toasted bread end.

Then, I sprinkled the ginger strips on top.

A slice of low fat cheese.

Voila!

A stupendous home made sandwich, nicely toasted, for lunch. Soooo very good!

Coffee with Raymond Ng: 8.5% yield? Don't play play.

UPDATE (18 Jan 17):
The Singapore dollar climbed to a new record high against the Malaysian ringgit early Wednesday morning (Jan 18), reaching as high as S$1 to RM3.1474, showed Bloomberg data. Source: TODAY.
--------------------------





Raymond is a very diligent investor who regularly makes very sensible and balanced comments in ASSI and on my FB wall.

In relation to my last blog post, he made a series of comments on my FB wall with attachments that we had trouble transferring to the comments section here.





Hence, this guest blog which is a compilation of Raymond's comments on my FB wall and more:

Don't play play with Malaysia G fund..... the G is bankrupting soon.

"The more than US$11 billion (RM38 billion) debt-ridden 1MDB, claiming it has assets worth more than RM48 billion, has twice failed to settle only RM2 billion in loans? 

Common sense, what does that tell you? 

Why would potential investors want to risk their money on such a super heavy debt-ridden 1MDB?"  

(1MDB = 1Malaysia Development Berhad)
Source: http://theantdaily.com/Main/Zeti-led-BNM-to-go-after-1MDB-Don-t-joke





The 8.5% yield is not attractive if we compare to MY FD rate.

In 1990+, the FD is 7~8%, so the yield spread is less than 2% but with lots of uncertainty. 

Even for 2010+, its FD rate is ~3.5%, so the spread is slightly attractive.

MY FD Rate from 1980~2009

Another consideration is SG/MY exchange... MY ringgit is depreciating against SG. 

You will lose out if you use SG dollar to invest.

Source: Yahoo Finance.

Tony Pua spoke about the Malaysia G poor handling of Malaysian Sovereign fund. 
That's why I said MY G is bankrupting soon.
Good 40 mins. 
MY bond is not like SG AAA rating.





Raymond has certainly provided us with much food for thought.
Related post:
A steady dividend payer with yield of 8.5% since 1990.

A steady dividend payer with yield of 8.5% since 1990.

AK doesn't know everything, for sure. So, when faced with a question of whether to invest in a sovereign fund of another country even if it should be a neighbouring one, I must be honest to say that I don't have enough knowledge to even write a simple critique on it.

Here are the emails concerned:

Dear AK,

I have been a reader of your blog, since last year. Has been inspired by how you achieved the passive income from REITS!! Still in the learning curve, and paying tuition fee now.(having paper loss in Lippomall trust and Sabana)

Refer to the email subject, I think maybe it would be interesting to you on these few unit trust or fund managed by Malaysian supported investment firm? More details of this firm can be found in their official website http://www.asnb.com.my/index_e.php.

You can change to english version at the top right corner "versi english",

Just some background of these funds.

The firm was initiated by government in 1980s, they run several funds, some of them are open to all Malaysian, some of them are open only" Bumi - putera" (son of soil, a.k.a. Malays and Indigenous people from Sabah and Sarawak).

The first fund open only to Bumi-putera, has been producing dividend not less than 8.5% pa since its inception in 1990. The highest being 10~12%pa during the good years of Malaysia economy. This fund has serve well as passive income for the Bumi-putera.(long queue at the broker counter during long weekends, festive season, year end holiday etc)

In late 90s and early 2000, they have opened up few more new funds, which are open for all Malaysian, but as usual there are quota for each race. The other funds that are open to all Malaysian, generally produce return slightly less than the first fund, which are open only to Bumi-putera(OK, you know this is Malaysia).

I have attached the annual report for 1 of the funds I invested (AK did not include in this blog post), wish you to give some comment on their financial position. Report is in Malay, I have tries to put down as much as translation i could at the side for each main term in balance sheets and cash flow statement. Other comments from managers, auditor, I hope you can use google translator, if you find it important.

There are some interesting facts on these fund:- unit price is fixed at RM1, so NAV is unknown

- no sales charge, no cost for transaction(buying and selling)
- dividend are paid in new units
- upper limit of the fund is set at RM14bil(or 14bil units). It has not reach the limit yet.(Note: Some of fund has no upper limit, Ponzi Scheme??)
- payment of dividend might actually come from the fresh fund for the new units, as I found their dividend + interest + gain from selling stock, is barely enough to cover the distribution(again, it can be in the form of new units)

I am not an expert in reading financial statement(still learning), hoping you can enlightened me!

A follow up email:

Hi AK,

First of all, really appreciate your reply.

My siblings have been pouring money into these fund without knowing how actually it run. Kind of worrying me.

But it has not stop in paying dividend since its inception. Some time political will can not be measured using common financial terms.

It will be great if you can share it at ASSI. Hoping to get some answer from other readers.
Regards
K

If anyone should have any insights to share, please comment in the usual fashion. Thank you.