Friday, November 30, 2007

Why the Feds are bailing out the banks again?!?!?!

I don't believe it. I thought at long last they are going to hold the benchmark rates steady so as to let the policies filter through and settle down. Now, they say that they might be cutting again!

Logically, when someone wants to borrow money, but know that the rates will go lower and lower every month, will this person wait for until the rates hit the trough? Of course this person will if possible!!! The feds are actually encouraging these people to wait by refusing to stabilize the benchmark rates. Everyone is waiting for the rates to be stable before lending or loaning. Of course there is a liquidity problem.

Furthermore, now we have a liquidity problem because of the sub-prime crisis. Meaning, people want to loan, but no one is willing to loan them the money. Therefore, lowering the rates would have no effect on the current situation. In fact, lowering the rates will just worsen the liquidity crisis. The only effect it has is to push down the USD further, and fueling the inflation upwards again!! After this, countries would seriously think of replacing the USD with the Euro. USD would lose its place as a reserve currency, and it would go on a downward spiral. Without its status as a reserve currency, I want to see how they are going to dig themselves out of the debt cycle. This crash would even be bigger than the great depression.

At least oil did not hit USD100 this month. However, it did hit USD99 last week. If US cuts benchmark rates again, you can be assured that rate cut plus cold winter equals ... ... ... Rest assured that not only oil will be affected. Suddenly, I think that barter trade is much better than all the paper money flying around.

I really hope that I'm wrong, for the sake of everyone.

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Thursday, November 29, 2007


I quote from the Slice of Life:

Perception is a way of grasping and making sense of the "realities" around us. Perception links a meaning to what you take in with your senses that allows you to have the experience in your nervous system. Because perception is based on interpretation we can change it.

A change in perception is what turns the half empty glass into a half full glass. Perception explains how two people can have exactly the same experience and one commits suicide while the other becomes an inspiration for generations to come. Whatever you perceive is going to be true for you, regardless of what you see. Change your beliefs, change your perceptions, and you can change your life.

Always look at both sides of the story. After which, evaluate with an open mind. Glass should always be half full. :)

Wednesday, November 28, 2007

Anger Management II

I quote from the Slice of Life:

When we react impulsively, we're not fully conscious of what we're doing. We're not thinking about whether our outburst is justified. We're not thinking of the many other options we have to deal with the situation besides getting angry. But if we can consciously examine the situation, we'll find plenty of ways to handle the spat amicably.

It's sometimes too hard... I think I need a break. Or am I falling sick?
I feel like screaming... I think I better do something soothing before I go bonkers.

I'm burning out!!!!!!!!!

Need a place to vent out.

Arrrrrrgggggghhhhhhhh... I'm burning out!!!!!!

I don't know how long I can take this.

Tuesday, November 27, 2007

Risk and Return

In my previous posts, I've been shooting returns like 2% p.a., 5% p.a. Some people said that 8% returns is the minimum you should get. Some said 25% p.a. is the norm. If you do have friends who said that this is the norm, ask them the return now. Most probably they will not give you a straight answer because the market has not been doing well since the sub-prime crisis in the United States.

The higher risk you take, the more rewards that you should get (not will). This is the basis of investment. Most of us like to put our savings in our bank savings account, or Fixed Deposits (FDs). The reason is because it is quite safe. We're almost guaranteed to get back our money, plus the interest. Therefore, since the risk is low, we get obscenely low returns like 0.25% and 1.2% (Artificially low in my opinion).

However, if you want higher returns, the first question you need to ask yourself is are you willing to take the risk that you might lose money in the short run, but get your returns in the long run? That means staying put even though you might lose 20% of your investment, with the strong belief that everything will be right in 20 years time.

If you cannot bear losing that amount, then I would suggest that you should continue parking your money in FDs, saving accounts, and Treasury bills (T-Bills). Safest in Singapore. More likely you can only invest in one other option. Your job. Invest in it well, and you'll be paid better (hopefully).

If you think that you can stomach the 20% loss (Be truthful), then I would believe you're suited for investments in the different asset classes I mentioned in the previous post.

Why would people actually take such risks if you could lose 20% or more of your investment?

Main reason is because of the fundamental belief that over the long run, the market will be always a line that is sloping upwards. It will have some volatility but over 20-30 years, it will smoothen out, and the end result is that you will get your returns. Just imagine what Singapore was like in 1965, and now in 2007. 42 years and we've grown so much. That's the basis of this belief.

However, even though you could lose 20%, that doesn't mean that you have to. That is diversification, as mentioned in my previous post. Take a right balance of asset classes, with the risky assets and the safer assets. In the end, your returns are lower (still higher than FDs), due to lower risk, but your retirement portfolio will be growing steadily. This group of people most probably will be looking at the sharpe ratio more. In general, the higher the sharpe ratio, the better the risk adjusted returns you will have.

Some people likewise practice Focus Investing, which is the opposite of diversifcation. The basis is you focus your investments on the companies that you think will give the most returns, and invest in it big time. The most famous of them all is Warren Buffett. Coca Cola? MacDonald anyone? This relies on you making the right "bet", and getting it right. However, we usually only know about the winners, but not the losers. Focus investing is very risky because you stand the chance of losing everything. This group of investors focus alot on the alpha and beta of the company, especially on high alpha companies. In general, beta means the level of influence that the market has on the company. Alpha means the movement that is independent of the market. This is also known as systematic and non-systematic risks.

This post is not really about saying what's the risks vs returns graph, alpha and beta, or sharpe ratio. You notice that I've mentioned quite a few terms, but giving only a brief summary. Reason is that there are many books or websites out there that focuses on these definitions. I think they would do a better job than me explaining it in my small little post. This post is more about understanding the concept that there's no free lunch. If someone is giving you a high return, you're taking a higher risk.

There's also a misconception that index funds, or ETFs are very low risk investments and you can plonk your whole fortune in it. That's in-correct. Let's say you have invested in the Singapore Index when it's at a high of 3800. Now the index is at 3300. How much would you have lost?

Asset Allocation is what matters in index investing, and that's what keeping the risk low for index investing. I'll be talking about it in my next retirement planning series.

Monday, November 26, 2007

Why must charity heads be paid market rate??!?!?

I do not understand why charity heads must be paid market rate! To join a charity, you must first understand its mission, and what it stands for. It's the same for any organization. If you are leading a big company, you must first understand its mission, goal, vision in order to lead the organization. That goes the same for charity.

If the CEO does not understand the concept of charity, how can he lead the charity? Charity relies on mostly donations to sustain its operations. Charity by itself means giving to the needy. By paying market rate, why are we giving to the CEO instead of the needy? That goes totally against the concept of charity. You're taking the much needed funds to the CEO instead of the charity work that the charity provides. Many of the charities are also volunteer driven. So you're saying that the operations people can be volunteers and not paid, but the CEO is paid market rate??? Why the distinction between the CEO and the operations people??

Furthermore, the fiasco at NKF shows that a profit-driven CEO in a charity is a major disaster in public relations. Profit-driven ways of getting funds might work in the private sector, but it should not be done in the charity sector. It goes against the spirit of charity.

The more I read the news, the more I feel the government is VERY out of touch with the ground, and looks too much at the $$$. Furthermore, the perception that they give is that they want the private sector to do it, and they do not want a hand in this. Then I ask this question. Why are we paying taxes?? So that the government can get a raise anytime they want?? Or are they suppose to do something for the people??

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Sunday, November 25, 2007

Terminal 3 is stuffy!

Just went to see the Singapore Changi Airport Terminal 3 open house today.

Their basement consists of many shops. Saw Candy Empire there, and Ya Kun.

Above that is the Arrival hall. Typical airport layout. I don't really remember much about it though.

It's the Departure hall above that is different from other airports. Can you identify the picture below?

You can see this "contraption" everywhere. This is actually the air-con vent. Innovative deisgn. However, there is a problem with this. I'll explain later. Now, this is the picture of the ceiling.

See the problem? The design of the roof is such that the sunlight is filtered down through these strange reflectors. However, the aircon vents are all near the ground level (There are 2 more levels above the departure hall). The result is a stuffy departure terminal. All the hot air is trapped above, and I'm not sure how effective the air-con will be if the vents are all near the ground level.

There are also a lot of live plants around the whole terminal. I really hope that the plants have sufficient sunlight or artificial light because if they don't, we're going to suffer from carbon dioxide overdose.

The 2 levels above the departure hall consists of mainly shops. If I understand correctly, Kopitiam will be operating the food court above the departure hall. I've also seen Harris, and Harry's there. Burger King and Dian Xiao Er too. Yes... You heard me correctly. Dian Xiao Er.

Inside the departure hall though, is different. The moment I went in, I felt that it's much cooler than outside. Maybe because the air-con vents are finally situated at the top. There are many shops inside, which includes Charles & Keith, Sony Gallery, and even an official FIFA shop. They also have a small butterfly kingdom inside. Weird, but true. Terminal 3 is also connected to the other terminals by the sky train, whether you have checked-in, or not checked-in, so its not a problem going to the different terminals. There's still a lot of construction though.

Here's a couple of photos within the departure hall, and arrival hall:

This is what you'll see after you check-in.

This is the departure hall where you wait for boarding.

This is a small eco-corner at the arrival hall.

This is the main arrival hall.

This "eco-attraction" is near where you collect your baggage.

Due to the number of mirrors used in the Terminal 3 architecture, it looks very big. In fact, I think its as big as 63 football fields. However, with all the mirrors, it looks even bigger.

One thing I don't like is that the departure hall is quite stuffy. Other than that, I would say that Terminal 3 seems to be designed for shopping. I see shops everywhere! Inside, outside, basement... It might be because they are catering it to the hotel to be built near the airport.

Frankly, if they have used solar panels instead of reflectors on the top, Terminal 3 would truly be eco-friendly. I thought they would have done something out of the box. After looking at it, I do not see anything that is very out of the ordinary. In fact, to me, it looks like Terminal 3 is a very big greenhouse. Oh well...

Official opening is 9 January 2008.

Strengthening the currency is not a cure-all solution

Just read with interest of the views on how to lower inflation in today's newspaper. Both the government, and the Straits Times Paper(which I presume copied from the government stance) sited strengthening the currency as the way to go.

Strengthening the Singapore currency will result in an increase of expenses for all the MNCs which set up headquarters or branches here. No matter how strategically located we are, MNCs always think with their wallets, and that is especially true for listed MNCs (actually its true for all bosses). With increase of expenses, more will start to shift to lower cost countries. That would mean Hong Kong.

Inflation in my opinion, could only be mitigated by free market competition, which is what we do NOT have here. Recently, Hong Kong's MRT has reduced fares because of a merger. In Singapore, we will never have a free market competition because our "first world" government has created a big conflict of interest, Temasek.

Will any sane organization invest in a company, and vote that it should reduce fees/prices?? Temasek has a stake in DBS, SMRT and CapitalLand. So do you expect DBS to start giving us 5% savings rate or SMRT reducing fares? Or Plaza Singapura (own by CapitalLand) to start reducing rentals?? The papers have highlighted the plight of so many residential and commercial property owners on the sky-high increase of property prices here. What is the government reply? They will monitor. Monitor what?!??!? The evidence is already there that we have a shortage of residential and commercial space. Or are they monitoring Temasek?

There is a very strong conflict of interest between the welfare of the general public, and Temasek. The government is giving the perception, at least to me, that they are thinking on the $ sign, and not on the needs of the public. Market competition is designed such that the strongest will prevail. The Singapore government instead, promotes monopoly of services because they claimed that Singapore is too small.

Look at our public transport system. It's dominated by 2 big transport groups. Comfort Delgro, and SMRT. Look at the hot property market. Heard of CapitalLand? Keppel Land? Look at the Telecommunications. Singtel anyone? Look at the media. Mediacorp? SPH? Look at infrastructure. Keppel? Sembawang? Temasek has a stake in all these companies.

I am not suggesting that Temasek should divest off all these investments, but since Temasek belongs to the Singapore government, which indirectly uses Singaporeans' money to invest, something should be given back to the Singaporeans by law on a regular basis (based on a formula), like the Singapore shares given previously every year (discountinued ?!?!?!??).

With this amount of money given back to Singaporeans (must be tax free), it will increase our income and hopefully mitigate the rise of cost of living. This coupled with imports from other countries for our needs, more energy efficient usage, should keep inflation under control.

Sometimes I wonder why the perception that the government gives is to continuously keep flogging a dead horse.

Did you say the word "invest"?

Updated 25 November 2007: Added Cash asset class

To build up your retirement portfolio, I don't think we can run away from investing. Some people might say... I have already invested in fixed deposits (FD). It's not technically wrong, but you'll take a long time to build up your retirement just by using FDs. Let me give an example of someone investing $10,000 in FD returning 1% compounded, and in a balanced portfolio returning 5% compounded for 20 years:

FD (1%): $12,201.90
Balanced portfolio (5%): $26,532.98

See the difference? It's more than double. Now with Singapore's inflation getting higher and higher, our miserable FD rates will not even be sufficient enough to even overcome inflation. However, not everything is about returns. You must be able to first take the risk that comes with it.

I will just briefly introduce you to the 4 common asset classes for investing.

This is not the money you keep under the pillow, or in the bank's miserable 0.25% p.a. savings account. This usually represents the FDs, Treasury Bills (T-Bills), and the money market funds.

Basically, this means stocks, unit trusts, index funds, and Exchange Traded Funds (ETFs). What are stocks? Basically, it just means that a company allows the public to invest in the company, with the public hoping that it will become the next Apple, or Sony. The company will issue shares which the public can buy from an exchange. In Singapore, its the SinGapore eXchange (SGX). In the SGX, you can find financial reports, and announcements with regards to the company. This is considered very high risk because there is no capital guarantee, and you might not have any returns for some time.

Unit trusts usually invests in a basket of companies (There are some that invest in other investments). Therefore, when an investor buys into a unit trust, they are buying into a basket
of companies, thereby diversifying their risks of the companies going bankrupt. The unit trusts are also available to the public for subscription.

Index funds usually buy into all the companies that are in the index. Giving an example, whenever you hear someone in Singapore say that the market is good/bad, they are usually referring to the Straits Times Index (STI). The index contains a number of companies like Singtel, DBS, OCBC, etc. So if an index fund buys into the STI index, the index fund will own all the companies within the index. The index fund will rise and fall together with the index, minus the fund expenses. The risk is lower than unit trust because very seldom will the whole index collapse. The index usually consists of companies that are the one of the biggest, and influential in the country. It is unlikely, although possible, that all the companies in the index will go bankrupt. Therefore, this risk is one of the lowest among equities.

Exchange Traded Funds are similar to Index funds. The only exception is that they are listed in the exchange (e.g. SGX), and you're able to buy them like stocks.

It just means that you're lending money to a person. Whenever you invest in a bond, you're allowing your money to be lent to another company/orgainization. It's actually similar to FDs, just that its much bigger.

There are many types of bonds like government bonds, company bonds, and the mortgage backed bonds. These bonds can be termed investment grade (meaning it is relatively safe), or junk (meaning it is risky). The current sub-prime crisis in the United States (US) originates from junk mortgage backed bonds.

The bond might give you interest regularly like your FDs, or it can be a zero-coupon bond, meaning that you receive no interest. Instead, you'll get a discount when you buy the bond, and you'll get back the "original price" when the bond matures. Our Treasury Bills (T-Bills) are zero-coupon.

For bonds, it is less risky than equities, but there is still risk. A bond can also run into a risk of default (company go bankrupt), or the risk that the bond interest does not cover inflation.

Alternate Investments:
This covers a wide range of investment products, like gold, silver, wine and property.

Usually, people will choose a mix of investments of the above asset classes so as to diversify their risks. If there is no overweight of any asset class and it covers many asset classes, it is sometimes known as a balanced portfolio. Balance the risks out and you'll find that the returns are relatively safe, compared to the risks involved.

If you wish to read up on more, there are many books in our easily accessible libraries. I've only covered the very basics here. It is always better to know about this, even if you have someone managing your portfolio for you. It's better to be informed.

Next on my retirement series, I will talk about Risk and Returns.

Saturday, November 24, 2007

CPI basket

Updated 20 Dec 2007: Breakdown of the 2002/2003 CPI basket

Saw that they published the Singapore CPI basket so I thought I would leave a note here. This is based on the 2002/2003 housing expenditure will be updated every 5 years. Hmm... That means it should be updated soon.

Housing: 21%
Transport: 17%
Recreation & Others: 17%
Cooked Food: 13%
Non-cooked Food: 10%
Education & Stationary: 8%
Communication: 5%
Health Care: 5%
Clothing & Footwear: 4%

Looking at the CPI basket, inflation for the coming November and December might really hit about 3.6% to as much as 4%. Food inflation is evident across many countries, and all the mad cow, bird flu diseases doesn't help. Price of oil affects more than 2/3 of the CPI basket.

Without going into details, based on this broad category, inflation for this year should be around 2% to 2.1%. Next year will be interesting. Average inflation will should hit at least 3.2% based on the current sky high prices, and other countries refusal to reign in their over-growing economies.

Regardless of the inflation rate for both this year, or next year, you can see that our savings rate of 0.25% p.a. means that we're losing money every day due to high inflation eroding our savings.

Some economists say that wage inflation will help in mitigating the rise of cost. What wage inflation??? They assume everyone is having a raise just because finance, and O&G sector is booming?? Every company is finding ways and means to cut cost. What wage inflation?? More like wage deflation soon.

Anyway, seems like the CPI basket might be reviewed soon. I'll see if there is any news about it.

Friday, November 23, 2007

Inflation is up 3.6%!

Inflation rates since July:
July: 2.6%
August: 2.9%
September: 2.7%
October: 3.6%

Why September inflation is lesser? I dare say it's because of the hungry ghost's festival. That means average inflation should hit above or at 2% this year. This is despite a very low inflation figure for the first 7 months! What happens if you calculate inflation from July onwards?? I leave it to you to do the calculation.

The news said that the average inflation is 1.6% for the first 10 months. I believe that they round down. It's closer to 1.7% than 1.6%!

Inflation is going to be worse come 1st half of 2008. China and India are still consuming resources at a very rapid pace. Next area where economic expansion will become more rapid will be Middle East (Dubai, Qatar), and Africa.

Whoever said that inflation here will be average 1.5% this year is definitely slacking, and didn't do the ground work at all! Of course the most common excuse is that market is dynamic, etc etc. That's a very very bad excuse. The signs are all there for a high inflation. All you need is to take an effort to understand what's happening, and not relying on just only the numbers. It's high time the government start feeling what's like on the ground. Take the public transport like we do, go to the places we go to, and get the salary like we do.

Even in China, they released guidelines for officials to use the public transport. Over here?? We have people heading the public transport who doesn't even take the public transport on a regular basis. In fact, look at the number of cars the civil servants own. When ERP rates raise, the government got a subsidy by giving themselves a raise.

Will prices still continue rising? For some reason, I believe the prices will continue rising all the way to Bejing Olympics 2008. In fact, I'm beginning to worry that there are hints of a stagflation. This is not good at all.

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Think positively

I quote from the Slice Of Life:

When was the last time you were reminiscing about a great time in your life and it made you feel terrible? When was the last time you were thinking about a painful event in your life and it made you feel good? These paradoxes exist because what you focus on is what you get!

With this in mind, the next time you find yourself in a less than desirable situation, be sure to find the positive side of it and focus your attention on that. Not only will you feel better about the situation, but also you will actually be in a better frame of mind to work through it. With this mind-set you will find yourself focusing on the solution rather than the problem.

The best way to control your focus is to ask yourself good questions. Such as "what can I find that is good in this situation?", "what have I learned from this that will make me more successful the next time?", or "how can I make this situation better?" By asking yourself effective questions, you will force your brain to look for and find a solution for what you can do to solve a problem and how you can make a situation better.

I've learned long ago that things never go my way. Never won a single prize in my life, and everything I do, I have to sweat for it. Always, whenever I feel down, I try to think of happy things. If that doesn't help, usually my baby will cheer me up. :p

Anyway, it's not good to be stuck in negative thoughts. It's never good for the mind and your body. Think positively, and you'll live your live happier.

Create, not compete

I quote from the Slice Of Life:

Creation, on the other hand, is about using your talents to produce things of value to society. Creation does not look at other members of society as benchmarks; it focuses on what we personally can achieve with what we have. Creation is about reaching inside to create abundance. This kind of spiritual abundance, not material abundance, is what brings about lasting joy.

When we compete, we're always comparing with others. Why make ourselves miserable? Instead, focus on creating based on what you know and have, and you find that you no longer need to compete, or compare with anyone.

Results always speak louder than talk!

Tuesday, November 20, 2007

Why do we need insurance?

First of all, need to clarify upfront that I'm not related to the insurance industry, and all these views is based on my layman understanding of insurance. I'm not really in the position to advise anyone on insurance since I'm providing the view from a layman perspective. I would encourage you to approach an independent financial adviser if you wish to purchase insurance. They should be able to explain it in much more detail, and the coverage needed.

Why do we need insurance and why is it related to retirement planning? I'm actually not talking about the normal term or life insurance here. It's the health insurance that I'm actually targeting. To me (subjective), in order of the most important insurance:
  1. H&S (Includes medishield)
  2. Critical Illness
  3. Disability

In retirement planning, you will be formulating a plan to achieve a certain amount by the time you retire. Health is one risk that you should hedge because this risk is quite likely to happen (Insurance is all about hedging risks). Short hospitalization bills for small illnesses come up to slightly < $2,000 for a B1 ward. There might also be some illnesses that require you to be hospitalized quite regularly, and its recurring. Do not think that all illnesses can be cured completely. Big hospitalization bills... I will not mention here, but many people have lost their fortune over medical bills, especially over cancer. Critical illness is less likely to happen to you, but if it does, you can be sure its going to be a big drain on your financial resources. Some of the required treatments might also not be covered under the H&S insurance. Disability insurance is more to ensure that you have an income if you're unfortunately seriously injured and you're unable to work.

Some people might ask... I have a retirement portfolio. Why don't I draw on this retirement portfolio to fund my health needs? Retirement portfolio in reality, is really a long term plan. To generate returns, it's always the battle of risks vs rewards. High risk does not necessarily equate to high returns. However, over the long run (20, 30 years), the risks will become manageable (not disappear).

Withdrawing from the retirement portfolio will affect the returns substantially because the fundamental tool that the portfolio will be using is compound interest. Take away some of the capital, then there's not much you can compound on. If the economy is down, withdrawing from the portfolio will be like buying at a high price, and selling at a low price. Being sick is an expensive affair. It's even worse even if its a critical illness. This will adversely affect your retirement plan.

When you're near retirement age, it's also more likely that you will be sick more frequently. I'm sure no one wants to save for their retirement, to only spend it all on hospital bills. If you spend it all on hospital bills, what are you going to live on?

Even if you're not gunning for a retirement portfolio, I will still encourage that one should at the very least, get a H&S policy. In Singapore terms, that would be the Medishield. Currently, most of the insurers in Singapore have launched the as-charged Medishield. Meaning that once you pay a deductible (fixed) and a co-insurance %, the insurer will foot the rest of the bill, provided your illness is not part of the exclusion list. The Medishield (government or private) can be paid using our CPF. There are other riders on top of the shields that provide cash allowances per day, waiver of co-insurance, etc etc. However, the riders will require you to pay by cash. For more information, please approach your adviser or the respective insurers' websites.

My focus of this post is more on highlighting that being sick, can and will affect your retirement. Don't think that you're now strong and healthy, and nothing will happen to you. Things always happen when no one expects it to. This possibility becomes higher when you get older.

Next post on my retirement planning series, I will be talking on how to fund our retirement.

HDB not building enough flats!

Just read another "stupid" news about HDB today. It was said that HDB is afraid that what happened in 1998 (over-supply) will happen again, so therefore, they are not building more flats.

Why this is "stupid":
  1. HDB is suppose to be affordable housing. Therefore, one should not expect to make obscene profits on it. It's suppose to be affordable, and for us to have a roof over our heads. If the economy is doing well, property will also do well.
  2. Over the past 3 years, we have many reports where couples get queue numbers of 4 digits, and most are first timers. The number of flats available is usually in the low 3 digits. Does that mean anything to HDB??
  3. We have fights breaking out during the walk-in selection last year. Doesn't this tell anything about the demand for HDB flats? Instead of solving the problem, they disallow walk-in now! That's called delaying the problem, not solving it.

It's very ironical that the government is trying to promote more babies, and yet, through their "policies", they are actually discouraging couples from getting married and having kids. You can never win for all cases. One has to give.

They expected everyone got a raise like them?? Affordable housing? My ... ... ... ...

Sunday, November 18, 2007

Savings is important

Savings is like the fuel to the fire. The more savings you put into a retirement portfolio, the more you will get in your portfolio. You might be able to generate 16% returns for 4.5 years consecutive, but it does not mean anything if you only have a capital of $1,000.

Example of 16% compounded returns for 4.5 years:
$1,000 = $2,000
$10,000 = $20,000
$100,000 = $200,000

Do not underestimate the power of compound interest. I'm sure you have heard the rule of 72. This rule is very simple. It simply calculates when your money doubles, given the returns (calculated in %). For example, if your fixed deposit gives you 3% per annum, your principal will double in 72/3 = 24 years, if you roll over the whole amount + interest every year. If you invest in a balanced portfolio of investments giving you 5% per annum, your principal will double in 72/5 = 14.4 years. See the difference?

Some people might say... Why talk about savings? I bank in my salary check every month. My bank balance increases every month. However, how many of us truly know how much we spend per month? If I ask you what's the % you spend on transport, and what's the % you spend on restaurant meals, can you give me an answer? If I ask you now to cut down on your expenses, do you know where to start?

Knowing your spending habits is important, for both the initial part of your retirement planning, and when you're finally withdrawing from it. By understanding your spending habits, you will be able to:
  1. Know how much you save per month
  2. Know how much of your spendings go to your needs, and how much spendings go to your wants
  3. Budget, and invest effectively such that you'll be able to enjoy life now, and after you retire.

Yes, the last point is important. I for one never believe that we are only suppose to enjoy life after we retire. Retirement planning is also not an excuse for you to live like a hermit, and eat bread everyday for your 3 meals. If your retirement planning results in this, I think you need to review point 2. Cut down on your wants.

By knowing your needs and wants, you will be able to figure out just how much you really need when you retire? How much you spend on food? Do you need that car when you retire? Are you sure you need all those millions that everyone is saying?

The ballpark % of savings that you should have is roughly at least 20% of your take-home pay. I emphasize on the word take-home pay. Yes... The CPF money is our money, but look at the current trend now. Our "first world" government has been delaying the withdrawal age more and more. Previously it was 62, now it's 65, and its rumored to be 68 soon. For those who are still young, just imagine if they delay it until 70? What are you going to eat on if your retirement savings are stuck in the CPF? Not to mention that most of the money in your CPF will be invested in your home. There's really nothing much left in the CPF by the time you retire.

If you do not know how much you save per month, there are basically 2 ways, the basic and the advanced way. :)

Note down all your withdrawals, Credit Card bills, Giro bills, etc. Anything that requires you to spend money. Do it on a monthly basis, for at least 12 months. You have to do it for a full year because there are some bills that are only paid in a certain month (e.g. IRAS, Insurance). Just spend about 15mins a month to note it all down. After which, use your annual salary + bonus, and calculate your savings %.

Some people might have many many accounts, and it becomes quite hard for them to keep track of all their spendings. One way is that you designate an account as the expense account. Transfer a fix amount into it at the start of every month. See if there's a balance at the end of the month. Simple way of keep track of your expenses.

This method though only helps you in knowing how much you're spending in relative to your salary. It usually can't tell you the specifics, but it's good enough though for some people. I'm currently using this method and it helps me keep track of my expenses per month. I've been doing it for at least 3 years. Simple, and yet effective.

This method is more for people who really want to differentiate between their needs and wants, and how much they spend on each type.

It consists of the following steps:
  • Keep track of all your receipts for everything that you spend on. Every single expense item should always have a receipt, or you issue your "own receipt".
  • Designate 2 boxes. One labeled as needs, the other as wants. Put in the receipts accordingly
  • At the end of the month, empty the boxes and calculate your expenses for your needs and wants. Continue doing this for at least a year.
This method actually surprises quite a few people because it reveals alot on their spending habits. Some people for example put restaurant meals as a need, instead of a want. At the end of this exercise, you will be able to in detail, know how much you spend, and where it goes to.

I don't think you will be able to keep doing this method forever. This is usually done only initially, for you to be aware of your spending. Once you're aware of it, you can revert to the basic method, or maybe you do not need to keep track of it anymore. However, it is good to review this again when something significant happens in your life, like marriage, kids, etc.

Nowadays, many of us live to quite a ripe old age. 80 years old is not really that uncommon now. Just imagine you retire at 65, and you need to live for 15 years more (assuming you know when you pass on). 15 x 365 = 5,475 days!

Knowing how much you spend will be useful in deciding how much money to reserve for your retirement portfolio, how much you need for your day to day activities, and how much you need to keep for emergency. This I feel is just the basics that we need.

Next, I will be writing on the dreaded word people do not like to hear... Insurance. :p

Saturday, November 17, 2007

Argue with yourself

I quote from the Slice Of Life:

Tactic One: Know Your Enemy. In order to fight a good fight, you must spend some time getting to know your own thinking process. What are you saying to yourself? When a great idea pops into your head, what do you do with it? Many people diminish it until the good idea is but a mere memory. So listen close and hear what your personal inner critic sounds like.

Tactic Two: Talk Back. Isn't it strange that we won't accept someone else putting us down, but we are quite content to let our inner critic do us in? Quit being your own worst enemy. When you hear "I can't", disagree immediately!

Tactic Three: Write It Down To Size: Once you have learned to recognize the inner critic, and you've started talking back, keep it in its place by writing it out. This takes a little more time and a little more discipline, but in the long run you will come out ahead. Write down all the icky, finicky, frustrating stuff in your head. Write freely with no editing, no reading, and no rereading. Just get it out. Vent and complain!. Then you'll be rid of the emotional clutter that can keep you from succeeding. And don't stop with just the negative bits. Write out your affirmations as well - your strengths, your blessings, your hopes, your achievements.

Tactic Four: Be Nicer to Yourself: In other words, give yourself permission to be a little insane. Be better to yourself! It's high time you did! Praise yourself, give yourself treats, rewards for good work done, indulge your desires sometimes, look in the mirror and see what a beautiful person you are! Write down ten great things about yourself and read them everyday. Before long, you'll begin to see that you are right. You have amazing potential and superb ideas.

I guess we are always discouraging ourselves whenever the going gets tough. I'm also guilty of that. I guess that is why I started this blog. So I can read my thoughts, and hopefully learn from it.

The stage that is the hardest to get pass, is always yourself. Why must we always make things so difficult for ourselves?

Empower Others

I quote from the Slice Of Life:

We have the ability to assist another person in capitalizing on their full potential. This person could be your spouse, your child or co-worker.

How many thousands of dollars do people spend on motivational tapes, programs, workshops, coaches, and training seminars on learning how to make best use of our abilities? Most people want true fulfillment, in all areas of life.

Therefore, it benefits you and your loved ones to learn how to delegate.

The feeling is real good when you delegate to someone, and the person is able to do it good, and do it well. However, sometimes, you get people who just forgot that they need to do the job, or focus on something that is not the job that you've delegated. I really think that delegating is an art. Sometimes I really just want to do it all myself to avoid the disappointments I feel when the job cannot be done.

I should still try to delegate though. That's the only way forward. I can only do limited things by myself. I have to try to figure a way out on how to delegate effectively. Sigh... Sometimes I really wish that I'm back in primary/secondary school, where things are so simple. Oh well. Ganbatte...

Why do we need retirement planning?

Had a chance to read some books the past 2 weeks while I was away (yes, that was why my blog seems to be devoid of posts :p ). I guess I would summarize what I read into my blog for my reference later. Note that I read the books from a layman perspective, and I do not have any in-depth training for economics.

Why do we need retirement planning? One word. Inflation. Price of a good/service will not cost the same in the future. A simple example. 20 years ago, I can get a bowl of wanton noodles for $1.50. Now, it costs $3.00. The price of a bowl of wanton noodles increased 3.55% compounded, annually. The 3.55% is called inflation.

That was also the reason why I was so frustrated previously about the government's high-handed way of forcing us to buy annuities. I've written about it previously. Just imagine... You put in a sum of money into this annuity at 65 years old, which will only pay me $200-$300 20 years later. We are now talking about $200-$300 in today's dollars now. For those people who are not yet 65, can you imagine how many years we are talking about? Anyone can guess the cost of living when we are 85 years old? Give you a hint... The government recently just said inflation might hit 5% 1st quarter of 2008 (just compound the inflation rate until 85 years old).

One can say... I put money into my savings account every month. What's the interest we get for our bank savings account? 0.25% to 1.x% per annum. See the disparity between the savings rate, and the inflation rate? The inflation rate is hovering around 2.7% to 2.9% since the increase of GST in July.

Therefore, retirement planning is important to all of us, and we should start planning right here, right now. The earlier we start, the more we can save for retirement. There are many financial planners/advisers that are trained in this area. However, my aim for reading up on this is so that we can guard against advisers that might want to take us for a ride, and treat us as their retirement planning (There are good planners and advisers out there by the way).

Will talk about the most important part of retirement planning in my next post on retirement planning. Savings... :)

Sunday, November 11, 2007

Ease impact of food prices? How?

I refer to the recent claim by Mr Lim Boon Heng to ease the impact of high food prices on the people. As usual, the statement was made, without any links on how can this be done.

Frankly, I see no way of easing the impact. Singapore controls inflation by strengthening our currency. However, Singapore cannot strengthen it too much because this will affect Singapore businesses. A strengthened currency equate to lesser profits for companies here, especially those that sell their goods overseas, but expenses are in SGD.

They could go by subsidies to the poor. But then again, the qualifying income for subsidies have not kept pace with the standard of living, and many people are actually squeezed, but do not qualify for subsidies. It's especially tough for those who have children. Furthermore, the household income used for qualifying for subsidies is outdated, and it does not take into consideration how many members are depending on that household income.

Not to mention that the rise of standard of living was started by?? *drumroll* The government insistence on raising the GST.

Anyone who takes a slightest interest in world news will know that climate change is big news, and there are bad harvests around the world. Oil shortage has been evident since last year, US short-term view of using ethanol as their solution to energy which resulted in lesser farmland for food, and recently, 20%-30% increase of standard food items like flour, wheat, cooking oil, and now maybe even rice. All these can be derived since last year as the signs are all there. Yet, the government increased the GST.

They have also said that they want to tackle the problem of the growing income gap. What did they do? Give raises to the highest paid ministers in the world. That's tackling the problem?? If you want to tackle, you should give raises to the bottom rung civil servants first, not to the ministers.

Anyway, I'm going off topic. Back to easing the food prices. There's a world shortage of food and resources now. The growing economies of China and India does not help the food prices at all. Inflation will go up, and with the standard savings deposits rate of 0.25% p.a. here, we already have a problem of eroding purchasing power.

Food prices is just the least of problems. I'm curious on how they are going to resolve this problem. Well, the government just had a raise, so they better show that the raise is worth it. We based our system on meritocracy remember? You guys got a raise, so live up to that responsibility.

No Slides for Oracle OpenWorld in China?

Updated 21 November 2007: Refer to comments on how to download the slides for both Oracle OpenWorld held in Shanghai and US. There will be a small link on top for you to download the slides. Thanks kianhui for the links.

This is weird. I received an email long ago saying that I could download the slides that they presented in Oracle OpenWorld in China. However, up to now, I could not figure out how and where to download these slides. I've also emailed them regarding it, and no reply.

Oh well... Luckily I took notes. This further cements my view that Sun Tech Days is much better organized than Oracle OpenWorld.

Roadmap for Success

I quote from the Slice Of Life:

You want success, but do you understand why you want it? What does success mean to you? How will success, as you define it, benefit you and those around you? Only when you get into the nitty-gritty will the path towards success become clearer.

Success is the end result, that one big goal, but before we can get there, we need to break that one big goal down into smaller and closer goals and plans that will help us achieve those goals. What are manageable tasks you can do each day that will bring you closer to your success? Come up with a daily list. Checking off your list gives you a sense of achievement and keeps you motivated. And don't be downtrodden if you fail to achieve a goal. As someone once said, "It's not a tragedy not to achieve a goal; it's a tragedy not to have that goal to achieve in the first place."

Another quote from Slice Of Life on how to organize your thoughts on a goal:

One method that works well is called clustering. Put the central idea in the center of the page and circle it. Then, without pause, make associations, placing them in new bubbles and tying them to the main idea. The result is a complex matrix of ideas, many of which you didn't even know you had.

How often have we set an un-realistic target with no action plans to fulfill it? Or set a target just because others have it? Success goes to the prepared, not to the unprepared.

However, success also comes at a price. Would I want to pay that price? Hmm...

Thursday, November 8, 2007

Passion Part II

I quote from the Slice Of Life:

Wilbur Wright, of the Wright brothers fame, once commented, "We could hardly wait to get up in the morning." I know that exhilarating feeling of being so passionate about something I was working on that I couldn't wait to get back to work. And people who are winning at working know that kind of passion, too.

They get excited about work. They thrive offering their unique gifts and talents. And when things change as they sometimes will, they refuse to let a soul-depleting boss or environment hijack their self-esteem, passion or dreams. When work becomes work, they stop lying on a nail and do something about it.

This is somehow in relation to the previous post I have made previously about Passion And Curiosity. When I tell people I enjoy going to work, they think I'm crazy, or I'm a workaholic. When you're passionate about something, you will always find that 24hours is not enough for you. That is what you call passion!

Anyway on the safe side, I better not make that remark. Sometimes its not to one's advantage if someone label you as a crazy person. :p

Making your documents private

I've always encouraged my friends NOT to login using an administrator account because it will expose you to alot of viruses and spyware. This is evident in my case because up to now, I've never gotten any viruses or spyware. There's also a problem where all the local administrators of the same computer is able to see the other users' My Documents anytime.

Anyway, for those that still insists on using computer administrator account for your day to day use, there's a way to make your documents private, such that even local administrators of the same computer are not able to see your files in your "My Documents". I think this works only if your harddisk is formatted using NTFS. To check, just right click on your drive letter and click on properties. It should state NTFS, not FAT32.

These are the steps:
  1. Open your Windows Explorer (WINKEY E)
  2. Right-click on My Documents on the left panel, which is just below the Desktop
  3. Click on the Sharing Tab
  4. Click on the checkbox that says Make this folder private
  5. Click on the OK button at the bottom
Ensure that your current user account is password protected. These steps will ensure that your "My Documents" folder access level will be elevated to Access Level 1.

The following table describes the permissions:
Access LevelEveryone (NTFS/File)OwnerSystemAdministratorsEveryone (Share)
Level 1n/aFull ControlFull Controln/an/a
Level 2n/aFull ControlFull ControlFull Controln/a
Level 3ReadFull ControlFull ControlFull Controln/a
Level 4ReadFull ControlFull ControlFull ControlRead
Level 5ChangeFull ControlFull ControlFull ControlFull Control

That's all to it. This is the link direct to Microsoft that explains the settings.

GM loses US39Billion for the quarter

I've still no idea what the feds are thinking when they cut the interest rates. General Motors (GM) stated that they are suffering massive losses because of the weak USD, and the high oil prices. So far, I've never heard of a company losing so much money in only 1 quarter!

Indirectly, all this is caused by the Feds cutting the rates to bail out banks that made over-excessive risks in their investments! Now the situation is going to get worst if they cut more rates. It's really going to be a great depression this time if they cut more rates. The subprime issue will never be resolved through interest rates only, and the cutting of interest rates will drive up oil prices and inflation. This is especially so when we have a problem with over-exploiting of resources. When resources are scarce, the rates should be hiked, not cut!! In fact, not cutting rates will limit the damage to only 1 area. By cutting rates, all sectors will be affected. GM is only the tip of the iceberg.

I thought banks usually have risk management processes in place. Looks like I'm dead wrong! This is only the 1st week of November, and very soon, what I've said in this post will materialize. This is not good!

Sunday, November 4, 2007

Dell or Apple?

Decisions decisions... I've been trying to get a new laptop since the start of this year, and always, something happens and my buy would be postponed. Reason: Stupid Vista.

I'm fine with upgrades, like Win98 to WinXP, because my softwares can still work. However, Vista will render my Office XP, and my other old softwares unusable! I'm still playing DOS games every now and then.

That was why I thought of Apple. If Microsoft wants to change my software, I rather I change completely to a new one. I can use open source software in the MacBook Pro for my day to day activities, and switch to bootcamp if I want to play games with Windows XP. Perfect. However, the MacBook Pro is not exactly cheap.

In Singapore, it's next to impossible to get any laptop with WinXP loaded. However, I recently found one unlikely source. Dell. I am able to fix up a laptop loaded with the hardware I want, the OS I need (WinXP Pro!), and the accessories. It's much cheaper too. Almost half the MacBook Pro price. However, Dell's laptops do not exactly have a good reputation for reliability. My laptops usually last more than 5 years. My current Fujitsu is in its 6th year, going 7th. One good news about Dell though is Michael Dell is back. Maybe the quality will be better? Hmm...

Now I'm in a dilemma again. Should I try something new? Or should I listen to my wallet?

Saturday, November 3, 2007

Success and Failures

A passage written by Parris Garnier:

If misfortune doesn't break you, it fashions you into a better person. But this metamorphosis doesn't happen by chance. It takes a strong heart to struggle against elements that would see you destroy yourself in failure.

1 success out of countless failures. Do I see the countless failures as the building block to that 1 success? How do one keep the morale up even through countless failures? How do I even know I'm on the correct path? I guess the answer is really a strong heart, and the willpower to succeed.

Friday, November 2, 2007

Macbook refresh? Upgraded?

Seems like the MacBook has been refreshed with 2 new options:
  1. Intel processor seems to be upgraded. Previously Macbook only has 2GHz and 2.16GHz version. Now its 2GHz and 2.2GHz. I suspect the Santa Rosa chip.
  2. The graphics chip has been upgraded to the Intel GMA X3100 with 144MB of DDR2 SDRAM shared with main memory. Previously it was the GMA 950 with 64MB of DDR2 SDRAM shared with main memory.

The refresh is surprisingly quiet. No news. Details from the apple US website can be found here.

It seems though that it is only available in US. I've checked the Singapore site and it is still showing the old configuration. Oh well... I won't be interested in it though. The shared memory already takes away a minimum of 144MB of memory from the standard 1GB Macbook configuration. That leaves little memory for Leopard on the default 1GB configuration. It takes an additional 16MB of memory if you connect an external display.

I still have my eye on the MacBook Pro, with its own 128MB graphics memory. Or should I just get a standard Vista laptop? Hmmm...

Thursday, November 1, 2007

Why on earth did the feds cut the rates??

The US economy is churning around just fine, and yet they went to cut their rates by 0.25% again!! What happened to the inflation hawk?? More like a No Talk Action Only person again, AS USUAL. There's no economic reason why the Feds should cut the rates, unless they want to bail out the banks, which is the very thing they should not do.

I could only guess 3 reasons why the Feds cut their rates, all of which has nothing to do with the economy:
  1. More transparency on the rates movement, as indicated a few weeks back by Ben Bernake. Since the last meeting they said they would cut rates, so they cut a token rate.
  2. Pressurizing China to raise their yuan
  3. Banks are in whole lot of deeper trouble than we realized

Due to this rate cut, I would say 3 things will happen very soon, within this month:
  1. Oil will hit USD100 and stay there
  2. All major commodities like wheat, corn all will rise further
  3. Possibility of stagflation is more real than ever, and inflation will hit very high this year

I really do hope that they are not making a political move to make China raise their yuan by lowering the USD. If this is so, that means that unless the yuan revalues upwards by a significant margin, US will keep cutting rates. You don't raise, I cut mentality. Maybe I think too much.

I hope the Feds are now happy that they stroke inflation even higher. Inflation hawk??? Yeah right... If we're "lucky", we will see stagflation in 3 years time.

CPF Board doesn't know much about the CPF changes!

Sometimes, I really do wonder how efficient is out government. I asked the CPF Board a question about the CPF Lock-in on Monday through email. An automated reply came back, and said the reply would be back in 2 working days. That's fine.

Today, I received the email from CPF Board saying that they will reply me at the end of the week! They take 5 days to reply my question, which I think is quite simple?? There are only a few possibilities why I have this result:
  • The "helpdesk" know nuts about the CPF reforms
  • The CPF board themselves know nuts about the CPF reforms
  • No detailed analysis was done on all changes, and the impact to the existing framework. Therefore, my answer is "new" to them and they are now scrambling for an answer (I hope not)

None of this look good on the CPF Board. I'm going to say my favorite phrase again. And we gave this people a raise???

Looks like I jump the gun, or they read my post. :D Anyway, they have replied me regarding the bank charges for existing investments in CPF. The deductions will not be affected by the lock-in. I have updated my summary post.
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