Wednesday, 15 March 2023

Finance Investment Movement 31

Are we seeing the first signs of crack from the unabating interest rate rise? The collapse of Silicon Valley Bank was a surprise. Took just a couple of days for a liquidity problem to emerge and then buckled under. I believe it's a bank relatively unknown to most people. The reaction thus far? Pretty orderly and that's where I felt slight uneasiness due to the hysteria usually associated to a bank closure event, even more when it's the 16th largest bank by assets in US. Soon after, another one namely Signature Bank was foreclosed. Although the markets did sell off, the depth of despair certainly isn't that bad, compared to 2008. Perhaps strong indicators in payroll, jobs creation, tightened banking environment etc are giving people confidence that past lessons have prepared the market well to absorb such an impact. Still, those companies who deposited money with SVB will feel the pain. If they were to quietly fade away, nobody notices and the contagion effect is dismissed, like an occasional gust of wind. The above is a good learning moment. Even when rules and accounting were properly followed, it doesn’t mean a bank is healthy. The point here is to scrutinize the assets and liabilities held in the books of a company. After all, items can be valued differently and unfortunately, SVB forgot to give a discount factor to market realities when a fire sale is required.

Personally, I feel the interest rate effect is biting and likely to worsen in the next six months. What I will be looking out is the tipping point of affordability. When expenses overshoot income generation, that's when worry sets in and eats into daily lives. As a third party, we can't tell from appearance whether a person is jobless or having stress over a mortgage payment. So the better observation would be to look at people's spending on the wants (think cars, electronics, restaurant visits, holiday trips, luxury investments). I liken the current market to walking in the streets with overcast skies. The SVB example is just a slight drizzle. For those companies and people living on the edge, it's time to take take out the brolly and look for shelter, the weather is about to turn. The next SVB is likely round the corner if central banks do not give confidence in their coming actions.

Now, for some positive news, I managed to get $5000 worth of T bills at 3.98%pa payout. Also made a purchase of 200 shares of OCBC at $12.48 (before SVB came out). The next plan is to continue SSB purchase and a side glance at US stocks. It's tempting to go out buying when prices fall but I think the safer option at the moment is to be patient.

Tip: Maboroshinotaki Junmai Ginjo, tasty spring water imparted with medium crisp

Tuesday, 28 February 2023

Month of February 2023

I'm sure many people tried and willingly spent effort standing in the hot sun, all for that improbable shot of winning. But it was in vain as three winners scooped the grand Toto prize for CNY. For days leading up to it, my colleagues and I bantered about what we'll do if we won. In a last minute action, we added more bets on the actual draw date using the convenience of the app and not joining the crazy queues. As per countless years, it turned out to be a dream and we didn't manage to submit our retirement letter the next day after results were announced. My wife later commented that none of the major Toto winners in previous draws had bought their tickets via app, suggesting that I join the masses in queue. I don't think so.

It was time to pick up tools and do some DIY at home. The kitchen light was changed, plants got repotted, leaky gaps were sealed, aquarium had a touchup and toilet seats were replaced. Now, it's waiting for the rainy season to stop before a little painting can be done. However, there was nothing I could do as my car tyre got punctured. The moment he opened the door, my son alerted me to a gushing sound. I thought about rushing to a nearby repair shop but the deflation happened too quickly. This was the second time within a year and I don't think it was by coincidence. Rather, there had been many renovation contractors moving in and out during this period of time and someone likely accidentally missed picking out the debris. I had to call in the mobile tyre repair service who arrived an hour later. A chatty young man appeared in a truck and did the patchwork in less than ten minutes. I was rather impressed by the well equipped vehicle as this was a one man repair shop on wheels. Paid him $70 and off he went for his eighth appointment of the day. It was 4pm, business must be going well, he told me the company had two trucks on the road at any time.

By some good fortune, I had the chance to visit two new restaurants. The first was Brasserie Les Saveurs for a weekday afternoon tea. The set came in a beautiful three tiered assortment of tarts, scones and cakes, served with a tea or coffee of choice. The taste, however, couldn't keep up to my expectation as I found them just ordinary, not one item but most. The calm ambience, aided by wonderful natural light and tall ceiling, did provide a little redemption. Don't think I'll be back unless someone invited. The second was Olivia Restaurant on a weekday night. The place was packed and specialized in one of my favourite cuisines, Spanish tapas. My friend and I ordered the jamon, octopus and beef cheek ragu, accompanied by a delectable Verdejo. This was meant to be a quick bite as we had a meeting straight after. We were done in 45 minutes and the impression left was a good one. Finally, to round off the gastronomic indulgence, my wife and I dropped by a stall that we patronized since school days. This was at the Holland Village XO Fish Head Bee Hoon. The owner was as usual, seated at the order counter with pen and paper in hand waiting for customers. He's obviously aged but looked fine and his sprightly voice confirmed it. The food was as delicious as before, underlined by years of dedication to his craft. Hopefully it's not another five years before I have this again.

Tip: Basa Blancos De Rueda 2020, lemon straw, light ham with a soft body

Wednesday, 15 February 2023

Finance Investment Movement 30

It's been a few weeks of feeling good in the financial markets. The Nasdaq, in particular, had been on steroid booster after the US Fed sort of kept investor expectations in check. When I see the green highlights in a stock code, there is almost instant relief. So while basking in this positivity, something also don't feel right. There is an obvious inflation beating exercise going on, corporates are starting to report downbeat numbers, cut jobs and no major economy can confidently say it has recovered from Covid. I get that investors are forward looking and pricing in those expectations but I am skeptical. Is this the calm before a storm?

This month started with paying Careshield premium and my wife's life insurance. Upcoming would be the kids' insurance and taxes. I was looking at fixed deposit rates and then got alerted by HSBC about the latest account promotion. Any incremental balance in fresh funds for the next three months would enjoy 4.55% pa interest payout. Without hesitation, I quickly transferred excess cash over from SCB.

I'm happy to receive the first dividend payout from last month's investment in the Allianz fund. It worked out to 9% pa and while it showed price fluctuation throughout, it didn't matter as I was mentally prepared. If this continues on its current positive trajectory, further investment would be considered. On the other hand, I also wished to DCA into bank stocks. At least there's choices and I have time to think.

Tip: Michisakari Choutoku Daiginjo, clear and dry, a workmanlike drink

Monday, 13 February 2023

Wake Up From HDB

Back in August 2021, I wrote an opinion piece (here) on the issue of HDB affordability. Currently, it seems like the situation has further escalated into more anxiety for potential first time home owners. Resale prices continued to rise and into its 31st consecutive month! That's against a backdrop of a recovering global economy, political tensions and inflation. I kept wondering how could this be when personal income is climbing slowly, cooling measures are in place and the most important factor, that all HDB flats are 99 years lease which mathematically would reduce to zero at the end of it. So at this juncture, I have arrived at the following pointers.

1. People have still not woken to the fact that the HDB flat is a depreciating asset. They are leasees who happen to be given the option to sell any remaining lease period. Perhaps the first 50 years of a flat can be traded but the value should fall thereafter given the lease decay and natural wear and tear condition. Therefore, if prices continue upward, someone in the end stands to hold this hot potato and get burnt.

2. The HDB flat may have been mistaken to be holding certain intrinsic value throughout its tenure. Singapore was growing when the first HDB was built and as people became wealthier, prices naturally increased. But being a mature economy now, there would be limited upside in its ability to achieve continuous high growth figures, yet the HDB price is showing otherwise. Rising prices in older flats are simply unsustainable, even in the best locations and biggest units. I think the asset enhancement policy touted by the government is working its "magic". Despite several reminders by ministers that majority of flats would not be enbloc and have to be returned when time is up, this has fallen on deaf ears or maybe blind faith?

3. The government had taken pains to emphasize that HDB flats were heavily subsidized and various metrics showed that the average BTO remained affordable. What's missing in their narrative is the great buffering action taken so far. They have been kind to absorb any interest rate impact by keeping the lid on HDB loan rate. That, in my opinion, perpetuated the idea of affordable home ownership. But for how long can the budget allow such benevolence? The taxpayer better be prepared for bad news.

4. People can choose to be oblivious but the government is the only actor who can defuse this situation. It can guide a free market into the preferred direction through a series of rules, incentives, policy changes, interventions etc. The sense I get is that the minister in charge and his wise council know the problem but do not know when is appropriate to take a tough stand. A jolt is needed, not some teeny measure to tame the HDB price exuberance and expectations.

Tip: Longmorn 18, apple orange peel, lightweight and toffee in the middle

Tuesday, 31 January 2023

Month of January 2023

It's been a bumpy start to the year. I got a new Apple SE Watch mainly for the health monitoring function and tracking my activity level. Another attractive feature was the emergency call function in the event of a fall detected. So I went on a jog on the first day of 2023 with determined thoughts for a fresh new year. It was a rather comfortable pace with 3.5km completed. I felt good and healthy. One week later, it was my company's annual dinner event. As was expected, it was lively and busy. The next day, my body showed signs of fatigue with heavy legs and dry mouth. I tried to overcome the tiredness by sleeping and drank lots of cooling water. Things seemed normal as I returned to work. That night, a fever began to appear and kept me tossing throughout. A doctor's visit was inevitable and I was prescribed medication for viral fever. One of these, Anarex, helped to relieve muscle tension and headache. It worked well for a couple of days until I noticed general muscle weakness when I couldn't even write my signature properly. So I stopped the medication but the fever remained and left me irritable. On the fifth day, I had to go back to the doctor. There wasn't much improvement and it was starting to get me worried. After an examination, the doctor decided to draw blood for dengue check. My instinct told me it shouldn't be as the feeling was more like a bacterial infection. Fortunately, the next day's result turned out to be none of them. 

The second son started his new adventure in secondary school. With the kids off to different schools, we are trying to work around the schedules and gaining new experiences in navigating the morning traffic. At the end of the orientation week, parents were invited to commemorate the finale with the school badge presentation and a campfire. It was a symbolic event to officially welcome the new students. Through continuous and enthusiastic singing, I could feel the bond being forged among them with healthy respect among the different house colors. Hopefully, this strong spirit can put them on the path towards fruitful friendships, mutual encouragement in studies and sports, growth in maturity and a rewarding four years.

The resumption of Chinese New Year visits was eagerly anticipated. Amid long hours of mahjong, lunch/dinner and playing cards, it was fun catching up with family members not seen for over two years. There were announcements on upcoming weddings for a number of cousins, updates on children and changes in job status or lifestyle. One of more notable mentions was my niece who's in dentistry and urgently looking for participants in dental procedures. She needed referrals so as to complete the course requirement. It's not easy nowadays as schools no longer provide such resources. It was at the same gathering that I saw two of my uncles, L and P, in their late sixties who suffered from stroke and dementia respectively. L was a high flying corporate executive for many years till he retired, got struck by illness and left incoherent, seated in a wheelchair now. P was once flamboyant with a loud voice, being the outstanding one in any party. Now, he looked mostly dazed and trying to figure out his surroundings, spoke in soft tones and slimmed down by half. This was a poignant moment to understand that life can get unstuck when you least expected it. So, live meaningfully, enjoy family moments and find happiness while lifting those around you.

Tip: Ardberg Grooves, charred smoke, pickled orange, bacon. A mouthful that lingers

Monday, 16 January 2023

Finance Investment Movement 29

I guess it's becoming a habit. As advocated by many in CPF discussions, I topped up the MA by $2500 on the first day of the year. However, the annual tax deductible portion of $8000 is unlikely to be fulfilled since I have achieved FRS. The next few months will be an assault on my wallet as bills are due for property tax, insurance, income tax and Medishield. 

For the last few months, while many put their cash in Tbills, I was also on the lookout for value in global high yield funds. After pondering for so long, I made the move by investing $2000 in Allianz Income And Growth. What interested me were the US centric focus, mixture of bonds and stocks and 9% pa yield at current price. Yes, the risk is there and I'm well aware of the coming wave of volatility. My view is the upside is at least twice the downside, so it's a bet I'm willing to take.

This year, I plan to track dividend yields and took a template to do this. Still monitoring it and hope this gives greater clarity on the cashflow.

Tip: Mer Soleil 2019 Chardonnay, slick with oaky body, fresh herbs and decent finish