Tuesday, September 27, 2016

Singapore Savings Bond: Aug, Sep 2016 Review, Nov 2016 Preview

All right, I missed the previous month because it was just a horrible issue and I don't think people bothered to apply for it, but I'm updating for this month because I've just enough time to squeeze in this post.

First up is the update of the subscription of the previous issues. As previously mentioned, the SSB will probably have $300 million available to be issued every month of 2016. While it is a HUGE drop from the $1,200 million that they were offering in 2015, the SSB take up rate has been... pathetic, so it makes sense to cut down on the total offer to boost up the fill rate. It looks a look less sad now.

The Aug 2016 SSB came in at 9% which is within expectations. However, the Sep 2016 SSB had a drastic drop to just 5.6% uptake. Why? It's a no brainer, the yield for the Sep issue is horribly low. For 10 years, you only get back returns of 1.75%. Looking at the yields of the Oct 2016, I wouldn't be surprised if we punch in a final number for the fill rate to be closer to 5% than 9%.

This month, there is no the yield curve inversion. The MAS rates continues to show strong levels of prediction to the actual SSB issue, confirming the relationship that we have identified. I might stop showing this table in the future unless we have a month with a yield curve inversion, because of intervention is rather obvious when it happens. But when it doesn't, it follows the relationship very well, with less than 1% margin of error for 83% of the time.

Moving onto the next SSB, we use the same old-fashioned method of looking up the data from MAS and constructing the table below. As a refresher, the current month's rates are used as a proxy for the issue in 2 months time (For example: Sep 2016 rates are used for the Nov 2016 issue). Also, if you are in the first 3/4 of the current month, you application this month is for the bond that is too be issued on the 1st of next month (For example: Sep 2016 applicants will receive the Oct 2016 issue). I hope this clears up some of the confusion people have regarding the names of the issues.

I would hazard a guess of 0.78 / 0.82 / 1.30 / 1.79 as the final yields for the Nov issue.

This upcoming issue looks set to be one of the worst ever SSB issued on record. 10 year yields have collapsed from 2.78% in Nov 2015 by almost 100bps in just a year! 5 year yields have also collapsed 80bps. However, the more interesting thing is that the 1 year yield will be pushing under 0.8% for the first time ever.

I'm not trying to predict the future, but lower long term yields is a sign that investors are more gloomy and dim about the future, hence the willingness to accept lower and lower rates for such a long time. Holding next month's issue for 10 years is the same as holding last year's Nov issue for just 7 years.

This month's issue and last month's issue are both bad, but next month's issue will be worse the entire front end. If you really want to buy some SSBs and are not sure when, it would be advisable to lock in your order today as opposed to waiting for next month's issue. But in all honesty, both issues are horrible and you're probably better off rolling fixed deposits.

Today is the last day of applications, which closes at 9pm. It can be done through ATMs or iBanking.

I would not be applying for this month's issue, and I'm 99% I will not be applying for next month's one as well.

If you really are looking for a low-risk savings-type of investment, you may want to consider the 5 year China Life Endowment Plan that has guaranteed 2.25% returns. It's almost a whopping 95bps of difference. Of course, you ought to be very very clear about your liquidity requirements before you purchase any product that has inflexible withdrawal terms. At the end of 5 years, the returns that you would get would be almost close to 75% higher than with the SSB. Their product closes 30 Nov or whenever it gets full, so just an FYI if you're looking for some pick up and don't have liquidity issues.

As much as I like the SSB, there are pros and cons to it, and the obvious con right now is its extremely low yield. It is likely to persist for a while. Let's all spend a moment to thank global central bankers for punishing savers and rewarding the gamblers in the casinos.

Sunday, September 25, 2016

Interesting News: The Failure of Obamacare

Don't look at me, look at Bloomberg.

The ACA is one of the worst government policies in the history of government policies.

No one can say that they didn't see this coming. It was already doomed to fail from the very beginning.

Truly affordable and quality healthcare in Singapore is really one of the things that I really enjoy about living in Singapore.

In a few days time, my new insurance coverage kicks in and I'll be doing an update on that. The premiums I'm paying are ridiculous. I heard about some of the insurance plans that my friends are forking out a few hundred dollars a month for and I just shake my head. Oh well. Look forward to that post once I get the confirmation of my insurance changes!

Friday, September 23, 2016

Bill Fleckenstein and Horseman Capital Speaks

One of the big fish that I really like is Bill Fleckenstein. Not only does he have a very unique and cool name, but I can follow his logic well and he has the (rare) ability to think outside of calendar year / quarterly / monthly performances. Because his main aim is to make money and not to lose money in the long run and he doesn't care about benchmark performances, he keeps things real and he plays it cool. I'd like to be that way as well.

The biggest mistake that the casual retail investor makes is trying to hit an annual target for investment returns. Few people would come out and say it, but investment returns are rarely as stable and smooth as people would have you believe. In fact, returns are usually lumpy. You don't get 8% a year, every year. The ability to think outside of those fixed time periods will help you take take advantage of one of the few things that the retail investor has an edge over professionals.

Do we get paid to sit in an office and read financial reports and news all day?
Do we have admin staff to do mind numbing data entry and to format data for us?
Do we have fancy computer algorithms to crunch data for us?

The only true advantage that we have is the lack of career risk. As our own portfolio managers, we have zero career risk because we don't need to fire ourselves, ever. Performed below benchmark over the last year? Oh well.

Putting pressure on yourself to perform well within arbitrary timeframes is really unnecessary and very unproductive.

Bill manages his fund without the usual constraints of investment managers and I like that he's aware, but unmoved by all the noise in the markets. Returns are nice and all, but REALIZED RETURNS is the only thing that matters at the end of the day.

Anyway, this is a nice interview where Bill just crushes it.

Moving on though, the infamous Horseman Capital speaks about "the best short in the world" (in their opinion) which is unsurprisingly Japanese banks. With negative interest rates, NIM is compressed and that is just killing off the main income for banks. Negative interest rates also promotes cash hoarding, and it doesn't take a genius to add 1+1 to figure out that plenty of Japanese are shunning banks and just keeping cold hard cash in personal safes at home. Throw in the declining population in certain areas and you have the perfect storm - less customers with less deposits with less interest. Now on top of that, add in a protected, high-cost, foreigner-unfriendly, locally focused businesses and you have structural problems with the economy that can't organically "grow" itself back to health. I wouldn't be surprised if NPLs start to go up when everything else starts going south.

Policy-wise, Japan is way too deep down the rabbit hole. They are pretty much exercising their nuclear options already, and the last thing to eventually come will be the devaluation of the yen. (but, I am expecting short-term appreciation because of the carry trade)

We're beyond the point of "if". It's only a matter of "when".

Thursday, September 22, 2016

Rate Hike Predictions for the next N meetings

This is how Yellen decides if its time to raise rates or not.

Just kidding, she looks at the S&P500.

Wow, no rate hike. Total shocker. Not.

What I wrote last year in April 2015 is STILL relevant today. Seriously, the Fed ain't every going to hike rates. And this cartoon just sums it up the best.

Honestly, if anyone really really thought that they were going to raise raise, I would think that they might be slightly delusional. The Fed has said that they would be raising rates for YEARS now.

This is an oldie, but a goldie. For more than 7 years now, the Fed has been giving "forward guidance" to raise rates. All in all, one rate hike.

But, oh wait, the next one is coming up VERY SOON. Yeah right. I wouldn't hold my breath for it.

US LT growth is collapsing every other meeting and now stands at a pitiful 1.7%-2.0% forecast. But of course, knowing the Fed and their ability at forecasting, you best be prepared for a number coming in well below that.

Perhaps the only person's view that I respect is Gundlach's. He did call out that this September will not be a hike.

But until anything interesting happens, I'm just sitting back on my itchy hands and watching this whole shit show from afar. It's tough not doing nothing, but thinking about all the risks that are just about everywhere, it's enough to scare me to remain focused and disciplined to my style and strategy.

Wednesday, September 14, 2016

Sleep September Updates

The market has been boring as shit. It has been for a while, and it still is.

That 2.5% move in the US indices last Friday sparked "markets in turmoil" headlines. Seriously? 2.5% down is considered turmoil? I still believe that we are in a global financial shit show and I've already cast the first stone, or flung the first poop.

I'm short to the neck with my CFD account. The guy that has to do the margin calls already knows me. "Yup... you've been in margin call for a while now so... yeah, please monitor your positions carefully".

Maybe I'm a pessimist, but I think the US indices are absurd and the fallout will spread. As cheap as Singapore stocks are, I think they can get cheaper, especially in certain sectors that are obviously doing terrible. I have no idea why their stock prices are still holding up to some extent. I definitely think that there is plenty more room for stocks to fall if there is a global crisis.

And as always, I'm still holding out to get my own place because prices of property are still ridiculous. It's funny to see how transaction volume has vanished, yet sellers are still steadfast on their crazy pricing. With the market supposedly lower, I see some projects with every single listed psf price higher than the actual transacted price at the market peak. Again, I think we can head lower. I know a lot of people think that we have already flatlined and we are poised for blast off. I disagree, but hey, it's my money and my positioning. You do what you gotta do, I'll do what I wanna do.

I'm like a broken record. I've been talking about the overvaluation of the US markets, the fallout and the effect on the Singapore market and the high property prices for a very long time now. Pretty much just repeated everything that I said in August. It's okay though, I'm very comfortable with all my positions and with every month passing, my war chest grows bigger and bigger.

Interestingly, BullionStar wrote an article on the expansion of the GST-free policy on investment grade precious metals. I've also started looking at SilverBullion's P2P loans, which I personally find very tempting. Compared to crowdfunding which is all the rage now, this is something that I would prefer.

AK just posted one of the most asked questions I get about insurance and I really wish more people read a post like that before committing to whole life / 99 years old insurance products. Sadly, people will not. Oh well.

I have also received my PAssion card (free 5 year membership) and I have already qualified myself for the $20 cash rebate! Now I can accumulate Tap and Go points and also get merchant discounts. I like to eat Makisan and with the PAssion card, I get 20% off! This is probably the best membership card that I didn't pay for.

I will also be setting it up so that it is my ATM card and my auto-loaded EZ link. After that, I can retire my POSB Go! Card, but not before getting a refund of whatever is inside my NETS Flashpay wallet. My razor thin wallet will then drop to only 2 plastics (other than IC and driver's licence), the other being my OCBC 365.

Lastly, I received my SCB Singpost card which should come with $138 cash rebate since it is my first and only SCB card. I plan to buy my plane tickets and book my accommodation with it for my next trip. I've found pretty cheap tickets from Kayak.com and I'm still looking out for my accomm before I decide to spend on my trip. I'm looking at rebates of $198 ($138 promo rebate + $60 rebate from the 7% spending) when it is all done!

I've been busy with work, though my big project of the year is ending next week. After that I will be looking to train up for my IPPT (get cash reward!), try my hand at being an Uber driver (depending on the sign-up incentives, I think close to $500 is up for grabs with a weekend's worth of work), refine my freelance portfolio and take on some jobs, discuss my next business plan with my partner and also lots of my own personal rest, recreation, study and self-improvement!

When people say that they are so bored, I really wonder what they do in their free time. Hmm.