Friday, October 31, 2014

[STI Statistics] October 2014

Hi all, this is my monthly post analyzing the STI.

Feel free to send me requests for more statistics, especially if you have the raw data for me to work on. I am looking quite desperately for the old data on P/E and P/B monthly values of the STI before 2008. If anyone can get me the P/E and P/B statistics of the STI OLD from a Bloomberg terminal, that would be greatly appreciated and included.

As of 31 October 2014

STI Closing Value: 3274.25
P/E Ratio: 13.56
P/B Ratio: 1.3

Monthly Data Series from 2008

Mean P/E: 12.13
P/E Standard Deviation: 3.24

Mean P/B: 1.48
P/B Standard Deviation: 0.22

% of time when the STI is cheaper based on P/E: 67.05%
% of time when the STI is cheaper based on P/B: 20.66%

Comments

The P/E and P/B ratios are still telling conflicting stories about the index, however both ratios have come down from the previous month, which seems to have peaked in end July. The STI looks to be in a topping pattern to me.

Considering how the index has not pulled back substantially yet, I am still waiting for an opportunity to enter some long positions. Still no rush.

*Straits Times Index values from Yahoo Finance
** P/E and P/B Ratios from SPDR STI as a proxy

***Data Series 2008 - 2014 from Bloomberg
****Data Series 2014 from SPDR STI as a proxy
*****Probability calculated with http://stattrek.com/online-calculator/normal.aspx

Japan Goes Full Metal Retard

Update EOD 31/10/14: The Nikkei has blown up from 15671.4 to 16962.1 in 24 hours (my time is different from most people) representing a ridiculous 8.2% move. Whut. The. Fukushima.

The news is crazy. The world is crazy. Good is bad. Up is down. Nothing makes sense anymore.

Markets Explodes As Bank Of Japan Goes All-In-er; Increases QQE To JPY 80 Trillion


As you know, who cares if the market blacked out last night and no one could trade the SPY, DOW or IWM for over an hour? There's always the Nikkei&USDJPY500 which has a correlation of 10 with all the US indices that will help you express all your leveraged long trading needs. 



Japan knows it cannot afford deflation with all its debt. Deflation is good for lenders, bad for borrowers. Inflation is good for borrowers, and they are huge ones, so they are going all out to force out inflation.

The BOJ is outright buying anything that can be bought, JGBs, ETFs and even J-REITs. I wish MAS would look at my portfolio and engage in a monetary policy to buy and push up the value of the assets I own. Shit, I should've been born in Japan.

They are crazy, driving their currency and economy straight into the ground. More currency doesn't make people actually richer (delusions and feelings though, that's another issue), only an increase to the actual goods and services that can be consumed will. Shit, what kind of dumbshit economics are they teaching in Japan? Unless policy makers know that all they are doing is forcibly stroking people to think they are richer (which people aren't buying it because they are not), they are digging themselves deeper down their already very deep hole.

I am hoping for a summer visit to Japan next year, maybe the Yen can reach more stupid levels like SGDJPY 100. We were at 6X from 2009-2012, and now we are at 86. A nice cheap Japanese summer holiday and good food for me soon, I suppose!

Thursday, October 30, 2014

Yes, I'm a Crazy Gold Person

Flame me, I don't care. Gold has been performing like crap, but that is exactly why I love it so much. If it didn't look like shit, I wouldn't be looking at it.


Looking at the 5 year chart of Gold in SGD, doesn't that look quite tasty to you? But now look at silver, heck isn't that even more ridiculous?


This is the 10 year chart of Silver in SGD. Silver was trading at this prices back in 2006 and 2007! I wonder how much inflation has been since then...

Anyway, I suppose your brain has to be wired up wrongly and be in the contrarian setting for you to get excited about it. But for me, looking at these fugly charts, boy does it turn me on.

Throwing away the longer-term factors for now, short-term precious metals have been weighed down and kept in check by the ridiculous ascent of the US dollar along with QE expectations. Tonight though, I am expecting the GDP print to disappoint and start the retrace of the USD and perhaps all the inflated expectations of the US markets as well. But hey, I'm no fortune teller, just vomitting out my train of thought and a probable outcome.

I'm no market guru or financial wizard. Heck, I've barely crossed the 1 year mark of investing and I must admit that my overall portfolio is negative. But what I do know is to buy low and sell high.

Can it get lower? Yeah. I'll probably buy more then. As long as I do not compromise on my own financial needs, I will never be forced to liquidate and realize any losses. I'd just hold until kingdom come. Isn't that how most people in the market made money? Be it gold, bonds, Keppel, APPL or the STI? Buy low, sell high.

Wednesday, October 29, 2014

Contrarian Bones Aching

S&P500 is at 1976 right now. From the intraday low of 1820, this represents a MASSIVE 8.5% gain over just 10 trading days.


The SPY from early September has been selling down on large volume, while the "bottom" in October has since seen the opposite. Rising prices with declining volume. No volume, no confirmation.

The R2K is even more cray cray. From the intraday low of 1044, the index is now at 1142. This is a even more disgusting 9.5% gain over 10 trading days. Same story for the volume.

Breadth is waning, divergences all over, overbought conditions on every single timeframe. Unsustainable fundamentals and massive investor delusions. The only thing that is keeping me from betting the whole house is risk diversification and knowing that the markets can stay irrational much longer than my account can stay solvent.

This is totally not recommended, but I'm doubling down my short punts at this level for a short-term reversal at least, if not a steep move lower.

#stubborn

By the way, no surprise, but if the US markets close green today, you can bet your sweet ass your that the STI opens green tomorrow as well. I don't understand why people are in awe of "market gurus" being able to predict if the STI opens green or red. Look at the US close and I would say 8/10 times it follows through. The whole equity trade globally is practically based on the US markets these days, with the exception of major domestic market news like elections and what-nots. This isn't healthy at all.

Then again, my views have been explicit and stubbornly steadfast for the longest time. Don't mind me, I'm just another crazy person.

Monday, October 27, 2014

Screening with the SGX Dividend Champions?

From my research, what I understand is that within a broad market over time, 30% of the stocks will increase in value, while 70% of the stocks will decrease. However, the gains of the 30% is larger and will offset the losses of the 70%, which is why the broad stock market tends to increase overtime due to this net gain.

My rationale for stock picking is to form broad screens that is able to at least narrow down my investment universe by weeding out companies with the tell-tale signs of poor performance. If I can remove the bottom 50% of stock performers, I might end up with 25% winners and 25% losers in my available universe. The odds would be in my favour to not only perform positively on an absolute basis, but to also beat the broad market. I would be diversified, but not "over-diversified". I would have cut out most of the bad apples and I would just diversify my bets with the more likely winners.

I believe that Value, Quality and Yield are the better factors that determine long-term outperformance.

Value means buying a company that is relatively cheaper to similar companies.
Quality means buying a company that is making profits and generating cash.
Yield means buying a company that returns profits to and creates value for shareholders.

-------------------------------------------------------------------------------------------------------------------------

Jun Hao from The Asia Report compiled a fantastic list of SGX companies that have been consistently playing dividends over the past 5 years. Excluding financial companies, Chinese companies, REITs and Trusts, he has managed to generate a list of 153 companies listed on the SGX that has had this good dividend track record.

If you click on the link to his page, he has a direct link to his google doc where you can see and view the companies, as well as some other metrics, such as dividend yield, PE, PB, payout ratio and market cap. I shall let you go over to his site to access the google doc.

What he has done is created a list of companies that have had dividend yields over the past 5 years. Make no mistake, although dividend yield is positive, total return could be negative if there is no capital appreciation. If dividends are just being paid from the capital itself, then you are just lying to yourself. Left pocket, right pocket. This is one of the main reasons why I do not particularly like dividend yield - it is not comprehensive enough.

I think shareholder yield is a much better metric. However, it is also made up of dividend yield, which makes Jun Hao's list still a very good starting point to begin with. Dividend yield could be insignificant, but I also believe that companies that even pay a token amount of dividends are much more well-run than those with no dividend policy.

After running a few filters, you can greatly narrow down the research that you want to do on companies that you feel comfortable with. For example:

If you screen for companies with PB under 1.25, you already get just 97 companies. 
If you run another screen for companies with PE under 15, you've narrowed down to 65.
If you run another screen for companies with DE under 0.3, you've narrowed down to 51.
If you run another screen for companies with payout ratio under 1, you've narrowed down to 48.
If you run another screen for companies with yields over 3%, you've narrowed down to 26.
Etc, etc.

I'm not saying that you should just use these metrics that is provided on his list. But at least you already have a list of 153 companies out of 700+ stocks on the SGX that have been consistent with their dividends. With some extra work here and there, I'm sure you can do your own screening and form a nice watchlist. At that point, just monitor Value. If the stock that you've already done all your fundamental research on is now attractive on a price basis, why not pick it up?

That is what I am planning to do and this will be my homework for the next few weeks!

The Most Interesting Week of 2014 is Here

Why do I think that this week is going to be the most interesting week ahead?

1) The Very Last QE Ever (that we know of)


Monday, October 27, 2014 is going to be the last day that the US Federal Reserve will conduct their POMO.

Why is this important? Personally, I am in the camp that QE is the outright propping of assets in the US financial market. I know, very conspiracy theory-ish, but that's just what I think it is. I think it's a horrible and stupid programme for the economy, but it's fantastic for asset prices. Yay, more money, who doesn't like that?


With Monday being the last day of QE ever, and liquidity of US stocks being at historical lows, things might get very interesting. Without volume, there is no confirmation. We haven't been seeing much volume and breadth lately. Another "correction" starting after Monday? Who knows.

2) FOMC Meeting to announce end of QE (or extension of it?)


2pm US Eastern time, we will be getting the FOMC statements about their supposed end of QE. I think many market participants are expecting massive jawboning and "forward guidance". If the Fed announces another round of QE, I'm taking off my short positions, it would be ridiculous.

Edit: NOVEMBER 30TH, not October!
3) Swiss Gold Vote

If you haven't heard much of the Swiss gold vote, don't kick yourself over it. With gold being one of the most hated investments over the past few years, it is no wonder it has fallen completely off the radar. No one even bothers to report about it anymore.


Honestly speaking, the chances that the Swiss vote actually votes yes is actually extremely realistic. I don't think anyone would have the guts to go with the no camp here. This isn't like the Scottish vote when the poll results were bouncing around the midpoint. It's definitely not as close, but there is a slight tilt.

What would happen if the Swiss votes yes regarding their gold? I think the Sober Look has a fantastic write-up about it. Summary: Gold goes up.

So Monday is the last day of QE.
Tuesday and Wednesday is the FOMC meeting.
Thursday in the Swiss gold vote.

As a gold cheerleader, I would love to see the gold vote go through. As someone who has been bearish on US equities given their ridiculous valuations, I would love to see QE finally stopped, especially since "the market has recovered and everything is going so well". But alas, the market does not move as I wish, if not I would be a bazillionaire. I'm just trading probabilities here now folks.

Any thoughts about the effects of the end of QE and the impact of the Swiss gold vote? Would love to hear them!

Saturday, October 25, 2014

Asset Allocation isn't the same as Diversification

Today, I will be talking about Asset Allocation and Diversification.

Intrigued by the recent post of Teenage Investor touching on asset allocation under portfolio construction, I decided to think more about it. Ladykiller also piqued my interest with his post on quants. I think appreciation of asset allocation and their branching disciplines are best appreciated by quants due to the myriad amount of mathematics involved. I was personally drawn into the finance world by asset allocation strategies.

Diversification to me is simply spreading out your risks. However, most people tend to think of diversification exclusively within the asset class of equities, hence the words "ETFs" or "funds" keep popping up. To clarify, there are ETFs that cover many broad and niche asset classes. There are even ETFs that branch across multiple asset classes! Of course these people are correct to say that ETFs and unit trusts have less unsystematic risks because there are many individual securities and exposure to each of them is capped.

However, I do not agree that ETFs are "duh, no-brainer, of course safe investments because they are DIVERSIFIED". Investors that are charmed by the allure of ETFs with their cheap and simple diversification must understand that they are only removing away the unsystematic risks within that specific asset class. Most people don't tell you, but risks goes two-ways. Downside risk, as well as upside risk. Diversifying not only protects you from the downside of owning some bad apples, but it also caps your upside on owning the really goods ones as well. By actively choosing an ETF of an asset class, you are only merely removing the unsystematic risks within the asset class. Other risks have not been "diversified" away! Don't make this mistake!

For example, rising interest rates might affect long duration bonds, REITs and Utilities.
Currency volatility might affect any foreign holdings that are unhedged.
Recessions would affect the junk bonds and equities of the country being affected.
A global recession would hit both equities and high-yield bonds everywhere.
Etc, etc.

Just because you own an ETF, that doesn't mean that you no longer have any risks. I have met many people that tell me "ETFs are the best since they are very safe because all the risks are diversified away, right?". Too many people worship ETFs these days. They are GREAT and AWESOME, but they are not perfect, which many "followers" fail to point out.

It has been shown (mathematical theory) and proven (real world examples) that diversification need not be 500 different companies to reap the "diversification benefit". In fact, based on Jacques Lussier's book, "Successful Investing is a Process", he illustrates in a graph that diversification bonus exponentially decreases with more securities added into the portfolio. In other words, diminishing returns. Equally weighted, 2 assets give 50% of the bonus. 4 assets give 75% of the bonus. 7 assets give just over 85% of the bonus. 12 assets is about 90% of the bonus. And how much is this diversification bonus worth? According to this thread by on Bogleheads, it is about 0.5% - 1.5% in the long run as mentioned by Rick Ferri. I am still in the midst of reading his asset allocation book, but I have yet to come across that number, so don't take it as factual.

Example of Rick Ferri's 60/40 portfolio


To me, asset allocation is a very specific kind of diversification. Asset allocation diversifies the risks that affects specific asset classes. By having asset allocation (which means, by default, minimum of 2 asset classes), what the investor is doing is actively deciding how much does he want to be exposed to each risk factor that an asset class might expose him to.

Mebane Faber just came out with a new post in reference to much of the research that he has personally done in asset allocation. One of the things that struck me is his final sentences.
As you can see, they all performed pretty similarly. People spend countless hours refining their beta allocation, but for buy and hold, these allocations were all within 200 basis points of each other! 
A rule of thumb we talked about in our book is that over the long term, Sharpe Ratios cluster around 0.2 for asset classes, and 0.4 – 0.6 for asset allocations. You need to be tactical or active to get above that. 
Now, where did he get the sharpe ratios of 0.4 - 0.6 for asset allocations? From his previous research, but here is the table:


Perhaps only quants might appreciate this, but I find it quite comforting to know that pretty much any strategy that uses asset allocation does relatively well in the longer run.

However, are you just happy with a pure asset allocation strategy? Many people do not even know more than 4 asset classes or how to get exposure into these asset classes, let alone the discipline required to monitor, rebalance and inject in capital in an efficient manner. On top of these issues, its human nature to try and be above average. I am no exception. Although I have left the large chunk of my portfolio to a basic asset allocation strategy, I still run a small active portfolio of local stocks to practice my "stock picking".

At the end of the day, the debate between passive and active will never cease to end. Just know that statistically, passive investors that STICK to an asset allocation plan generally outperforms the active investor. Why? I reckon its because of diversification and not having concentrated holdings.

Friday, October 24, 2014

Looking at some Preference Shares

Hi guys, the markets have been feeling increasingly boring to me. It's just a mind-numbing grinding process that is moving entirely based on the news of what central banks are doing. Throw that book on fundamental analysis out of the window. Companies with crappy balance sheets have been massively outperforming well-capitalized businesses in the US the whole of the current market cycle. Pick up the book once we are well into the bear market and then make a watch list for pieces to dust off and pick up.

While I just sit on my hands and wait for opportunities, I decided to go and look at something which I've always been intrigued by, preference shares. Here is my "cheat sheet". Don't count on all the info to be correct, it's just rough info that I extracted for myself.


There are actually 7 preference shares listed on the SGX, but I have removed UE because they basically have no liquidity at all.

I have split the list into 2, the banks and the rest.

City Dev is a bit interesting because it is perpetual until it is called in for conversion. There are some more info about the conversion, but from what I read somewhere, this is probably never going to happen. But hey, who knows.

Hyflux is another interesting one because it gives the highest coupon payment of all the preference shares, at a nice fat 6%. After 2018 if it doesn't get called back in, coupons will bump up to 8%. I would guess that they redeem these shares.

The banks are a different interesting class by themselves. I don't know about you, but I personally see these guys as amazing stalwarts. I actually see them as the "risk-free rate", and on average it is about 4%. Let's be quite frank. If either of these banks are in trouble, the whole of Singapore is probably in shit!

DBS 4.7% and OCBC 4.2% actually gives 4.4% and 4.0% respectively. OCBC 4.2% is actually callable any time now, but it hasn't been called yet. I reckon that they are unable to get a lower cost of borrowing from the market, so they are content paying out a 4.2% coupon. DBS is callable from 2020 onwards. I reckon the reason why it is trading at a higher yield is because people suspect that it is more likely to be redeemed at maturity since it has a higher coupon. Totally zero basis for my speculation though, I'm just working through my own logic now. The good thing about these 2 preference shares are that their coupons after maturity date does not change, they continue to pay out the same coupon until redeemed.

OCC 3.93% and OCC 5.1% are different because they will have their coupons adjusted after they have passed the maturity date. They will be adjusted to the 3months SOR + 1.85% or 2.5%. Guess what is the SOR at now? 0.24%. So, after maturity, they will yield about 2.1% and 2.74% respectively. Which of course gives you a super measly return of just over 2% if bought at current prices. However, the good news is that they will probably never call back these guys ever since the coupons are so low! Maybe someone might want to correct me if my logic is wrong.

Personally, if I were to invest in preference shares, I would invest in the current fixed DBS 4.7% or the OCBC 4.2%. I would be getting 4% forever until they decide to call back these shares and then I get back the face value. And then I figure out where I want to park my money. I think this is about as risk-free as you can get without paying excessive premiums to the Singapore government to hedge away default risk.

However, if you're the kind that is really looking for the rock bottom "risk-free rate", I think that the OCC 3.93% and 5.1% offer a good rock-bottom place to look at. However, they may never get called back, meaning you would have to sell them back on the market. They would probably be trading less than face value to boost up their actual yield since their coupons are so low. This might means capital losses, unless rates are extremely low. I would imagine that only investors that are looking for certain recurring cashflows may find them interesting.

With that said, to me the "risk-free rate" is 4% when you look at preference shares. However if you are more concerned about the hierarchy of claims and want to be higher up as a creditor instead, looking at bonds you would probably get paid about 3% for an investment grade bond over 7 years. I wrote about corporate bonds a while back ago. Personally, I will gladly assume the risk of the company going belly up if that means I will get an extra 1% of yield. Perhaps others may not have that much of a risk appetite, but really, what are the odds of DBS or OCBC being driven into the ground?

Beans, mmmmm

While the US markets remains so expensive, over-valued and over-bought, I feel that there really isn't much for the long-term investor to do other than sit on their hands or accept more defensive options at the expense of higher returns for now.

However, as a trader, options are aplenty. Oil is whipsawing up and down, so is Gold (strangely, disconnected from Silver). The major indices just went turbo overdrive the past week. There's actually a lot of things to trade if you're looking out for opportunities.

Personally, since my post back in August about the situation of Soybeans, I have been back in the bean trade almost following the seasonal graph exclusively. Good chart from Signal Trading Group.


Based on the last 5 years, Soybeans is going to hit a major high within the next few days. I'll be looking either for a pop or signs of weakness to take profit from my position soon. The trade has been working out quite well for me. Hopefully me talking about it before I close the position doesn't jinx it.

Other than this, I don't really have much going on at the trading front. Other than the good ol' shorts that I've been holding for weeks (epic squeeze the past week), things are pretty boring for me. I feel the markets has gone from oversold to overbought massively in the past few days. I am still adamant that this is just a bounce and that we will see the next leg lower soon, if not immediately. If we don't breach the previous lows, I might be easing off my short positions and admitting a small defeat. But, I shall remain vigilant and opportunistic, because I will win this war!

Wednesday, October 22, 2014

Dead Cat Bounce? Meow

This bounce back don't feel right to me.

S&P500: 1932
Nasdaq: 3942
R2K: 1106

00.46AM, 22 Oct 2014

#timestamp

I gotta admit, I was a bit greedy to not take profit on my shorts last week when we were clearly oversold, but I was holding out for the waterfall decline, which of course, might never come.

That said, with today being the 3rd last day ever of POMO unless QE4EVA is unleashed, things might take a fundamental shift very fast and very soon. I just read a DB report by the cool-headed Jim Reid about the amount of CB money that has been injected. Looks like the party might be ending soon. Perhaps then, bad news might actually be bad news once again.

Technically, we're not oversold anymore, but neither are we strongly overbought.

Anyway, don't mind my ramblings. I'm being squeezed now like nobody's business! Sour grapes, probably, haha!

Tuesday, October 21, 2014

Are Stocks Cheap? You Wish!

These beautiful charts are from GaveKal Capital. If you think equities offer value now, perhaps you just skip this post.

Deviating from the standard P/E ratio which is so often bastardised by the media and financial pundits using "forward estimated earnings", how about we look at something a bit more cold and hard, like cash flow?


Yikes, it don't look pretty to me. The World looks horrible, probably partly because of the huge weightage of North America and Europe, which both don't look rather good to me either.

But, this time is different, isn't it?

Monday, October 20, 2014

Annuity Alternative?

A month ago I was wondering about annuities and I shared my thoughts out loud in this post. The reason why I have come back to revisit this topic again is because I have finally got the Benefits Illustration (BI) from the insurance agent that was assigned to service me.

After reading through the BI, I bunkered down with my calculator and I was.... SHOCKED. For a relatively straight-forward deferred annuity, the returns on this is very very disappointing.

Cost of distribution was 8%. Cost of deductions was a massive 30-50%, depending on the age, since the underlying insurance cost is a moving target.

Projections were of course based on the standard 3.25% and 4.75%. Guess what was the actual 3 year annualized return? 2.35%. Surprisingly, the expense ratio was 0.17%. If it was higher, the annualized return would be slaughtered.

Of course, I don't know too much about typical insurance costs, so I naturally went up to read up on it. This article from MoneySmart that was posted on Yahoo was very informative to me.

After looking at the huge costs of this insurance product, I went to do research on "creating your own annuity". Check out these few links, they gave me good insights. WSJ, Wealthy Retirement and MarketWatch, thanks for the great articles and videos guys. Their points are all very logical and give a good mix of totally against, as well as some plus points in favour for annuities.

I thought, heck, why don't I run a simple simulation and compare my results from the BI.

Using totally realistic stock market returns of 7% and bond returns of 3%, by age 65 income is the same the annuity, but with a capital outlay of just 20%!!! (75% stocks, 25% bonds mix)

Using mega conservative stock market returns of 4% and bond returns of 2% (50/50 mix) with the same capital outlay, income at 35 is the same as the guaranteed amount of the annuity but it grows at 3+% a year! By age 65, monthly income from just $170 at age 35 would now become $440! The annuity even with the most rosy projections will never ever cross $350 I would wager!

My personal preference that looks pretty good to me is the cookie cutter 60/40 stock and bond mix. Monthly putting aside $300 and $200 into stocks and bonds respectively every month from 25 for 10 years and not putting in a single penny anymore, you should be getting income of $325 a month at age 65, while this income continues to grow as well. Take in mind that this is using crazy conservative numbers (4% stocks returns, 2% dividends, 2% bond returns).

Using more real world but still realistic numbers (7% stock returns, 3% dividends, 3% bond returns), income at age 65 would be $1100 a month! And growing!

Anyway, way too many numbers and examples I suppose. The bottom line: It is EXPENSIVE, VERY EXPENSIVE.

Given that not only is returns MASSIVELY more if done by yourself, you can also have a very conservative allocation using very conservative projections and still achieve very similar results, with one very very big plus points for the DIY guy. Flexibility. You can choose to skip a month if cash is tight, then double down when the bonus comes. You can change your plan midway and go more aggressive if you realize that your circumstances have changed. You can increase your contributions and beef up your retirement income. You can "tweak" your asset allocation and "time" the market if you have the skill.

Although I was enamored by the idea of having hedged away longevity risk, simple mathematics shows me plainly and clearly that the cost of an annuity is definitely not worth its benefit. The only tool that I would advocate to hedge away longevity risk would be CPF Life. Given the costs involved, it really is more beneficial in the long run to take risks and get the higher returns.

Too much words, not enough pictures, sorry. Anyway, this post is just for me to rationalize my thoughts out loud. Recap: Annuity? No-no.

Saturday, October 18, 2014

Why Capitalism, Not Socialism? Because Milton Friedman

Honestly, I have been a proponent of the free markets sans government intervention after I was enlightened by the simple logic of Austrian economics. After watching this issue being debated by David Hannan a few months ago, I have been won over by the capitalism camp and I have come to agree with his very simple statement: (10.08 - 10.18)
"Don't make the mistake of judging socialism as a textbook theory, but judging capitalism by its necessarily imperfect outcomes."
I have been doing some personal education recently to give myself further reasoning to substantiate my position, reading many articles from both camps (even the communist camps) and I really have to admit, as much as socialism is a lovely idea, it just isn't logical or practical at all.

However, I will concede that socialist policies within a country can be useful, but rarely in the purely economic sense. Their benefits, even though economic in nature, usually provides for other less tangible benefits, such as social stability and harmony.

Amongst my research, I very pleasantly stumbled upon a series of lectures given by Milton Friedman. This guy blew my mind.

If anyone can argue against the points he brings up without bringing in hippie logic into the equation, I would be very impressed. I find his arguments very logical and rock-solid.


Responsibility To The Poor

Q: "Have you ever been on welfare or poor?"
A: "Of course, more so than the people in this room....

That is irrelevant. Is there one of you who is going to say that you don't want a doctor to treat you for cancer unless he himself has had cancer?"



Equal Pay For Equal Work

I have to admit, when I was still a student, I thought that this was a no-brainer policy that should be legislated. It only seemed fair. However, after I became more mature, entered the work force and understood economics, business and simple logic better, I now understand why this should not be the case.

In this video, he used the examples of women and minority races. In the Singapore context, we can think of it as foreign workers and even older workers or low-educated workers. In an equal pay for equal work regime, all these discriminated people would never get a job, ever. In fact, it encourages discrimination and also discourages labour productivity. In a free market society, a cost is introduced for discrimination. I doubt how many people would ever understand this concept. A free market protects the marginalized people by giving them the option to compete on cost. A regulated and enforced society of rules takes away their only weapon to fight with.

With all this said, I want to end with this picture which I find as a very simple, straightforward and refreshing reminder about why capitalism and why not socialism:


Oh, and also here is some monetarist humour for all you nerds out there with reference to point #4!


I hope you all have a great weekend!

Friday, October 17, 2014

n00b mistake

Today I saw that Lippo Malls have gone down a bit. I like Lippo Malls for a variety of reason. It is a retail trust, so it should technically be trading with a slight premium given its sector. However, because its assets are in Indonesia and people are skeptical of it, along with currency fears, the stock is trading with a discount to NAV. Lippo Malls also has a strong sponsor, which is Lippo, duh. Big name by the way. I didn't know how big they were til I saw the huge Lippo Centre in Hong Kong. Personally, I am a huge believer of the Asian story over the next few decades. In SEA, that bulk of that growth is going to be coming out of Indonesia. This is a good way to get some good strategic exposure without taking too much risks, I feel.

Although I have bought this ticker before at $0.405, I refuse to anchor myself to a price point. If something gets cheaper and it still looks good, I'm going to buy more of it. Or at least that's what I thought until I saw this message.


Panic! I sold instead of buying? Whuttttttttttttttttttt. I was freaking out.

I calmed myself down and then placed a buy order for double the size at the same price. A few hours of being anxious, and I get another SMS:


Phew. My silliness and recklessness to act fast almost cost me some pain! At the end of the day, the only pain I have is the roundtrip transaction costs of the needless sell and buy trade. Total cost of my mistake? Probably less than $3. But I think it is a lesson well learnt about being more careful with your money! What a rookie mistake to make. I'm still mentally beating myself up for being so careless!

Thursday, October 16, 2014

You Gotta Know When To Hold 'Em, When To Fold 'Em


 He said, "If you're gonna play the game, boy
You gotta learn to play it right"

This song is dedicated and goes out to my unknown trading shifu, Dale Pinkert who helms FXStreet's Live Analysis Room. When I was just a young buck in the trading game more than a year ago, this wise sage got me all sorted out when I just on a streak just burning away all my money. I sat in his room for months, just absorbing all the information that was so freely exchanged there.

You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
You never count your money
When you're sittin' at the table
There'll be time enough for countin'
When the dealin's done

One day, I finally mustered the courage to quit the room, hit the road and make it for myself. I wasn't going to get anywhere if all I did was stay in the room and look out for trades to copy. I had to be an independent learner and trader.

And when he finished speakin'
He turned back toward the window
Crushed out his cigarette
And faded off to sleep
And somewhere in the darkness
The gambler, he broke even
But in his final words
I found an ace that I could keep

I have finally broken even from all my losses. It took me just a year to claim back all the tuition fees that I paid to the market, but I've done it. I know how to trade to keep profits and not lose money anymore.

Thanks Dale for all the wisdom you've imparted to me and many other traders. You might not know it, but you made one of the biggest impacts to me in my trading journey so far. I hope your chair stays squeaky, you enjoy all the puffs you take and you continue being happy doing what you're doing.

Nostramoney Mid Oct


Welcome back to my Nostramoney series, where I look at my ball (the crystal one), and give you a funny prediction of the future that we might see in the possible future. Before I give my premonitions, perhaps we should recap how crazy I have been in the past, shall we?

Jan 2014: Bonds and gold positive, equities negative

Mar 2014: Equities negative, gold positive, Singapore property market for a bottom end 2015

May 2014: Equities negative, gold positive

Jul 2014:  US market top, EM bonds, commodities, precious metals positive, Singapore property market for a bottom end 2015

Well, how did I do? I have been wrong about equities so far, it has just been slowly grinding up. Only this last month we are seeing some action that is giving me validation, but I am looking for something more than just a 10% correction. It looks like the first few margin calls are already being hit. Soon with nothing else to fund margin calls, things might get ugly really quick.

I still remain positive on gold, just because it is an asset that I think is cheap relative to other assets. Couple that along that it is a financial insurance tool as well as a hard asset, those are some plus points. Throw in the huge derivative markets, debt issues and currency expansion, the story for this asset is almost as sweet as it can get.

Bonds have been doing quite well all year long (except for the HY bonds as of late). I still think yields of investment grade are going to grind lower until this market crashes and resets itself. At the bottom of the next upcoming equity crash, I will be looking to lighten up my bond holdings. I reckon the "great rotation" that was supposed to happen late last year and early this year will only come to the developed markets at the start of the next decade. So, still quite a few more years of low rates ahead of us.

I am expecting the global equity markets to accelerate to the downside soon, even if the Fed does do something stupid like QE4. The game is up, people are not going to play the next round. I am looking for a bottom to be had in markets in Q1 or early Q2 next year. Although the US market will be the most affected, I reckon it would drag down the STI with it as well.

With that in mind, looking for an equity bottom in Q1 or Q2, we can expect a property bottom roughly between Q3 2015 and Q1 2016. However, I still think Q4 2015 is going to be the sweet spot. Why am I looking at this time frame? The property market usually lags the STI and bottoms out a few months later. This time lag, along with the surge in supply hitting the markets, a possible recession, this really might be the perfect storm to flush out any overstretched and unexperienced property investors out of the market.

How am I preparing for this? My equity positioning is... pathetic. It's a small fraction of my total asset allocation. My SGX portfolio is quite deep value stocks (at least to me) which would also make me scratch my head if they went down even more. However, knowing that my equity exposure is small and that my picks are mostly the more defensive stocks due to their deep value nature, I will be fine holding these stocks all the way to the bottom of the market.

My bond positions are quite broad and diversified. Although they have been doing well and further gains are possible to imagine, I will not be adding more positions in them because I feel that cash is going to be the better asset class to be holding on to.

Precious metals allocations is very healthy. I sleep like a baby every night. Looking to accumulate a big haul in one physical delivery purchase, then continue to accumulate periodically on dips.

I have already scouted out property picks. I have done extensive research on the land plot bid, the average cost of construction during that period, the launch sales price and the historical sales price. Save for visiting the property itself, I think I have collected most of the information that I have needed to help me fight for a good price for this property that I am eying. I will be heading down to the actual location soon when I am more free, to scout out the property as well as the neighbourhood. I'm quite excited about that!

Finally, cash. I am holding onto to lots of it. I have to beat my itchy hands from buying more precious metals or trying to pick up cheap SGX tickers. I will continue to build up my cash position so that hopefully I can take advantage of some fantastic opportunities in the near future.

What do you think the near-term future holds for us and how are you preparing your portfolio for it?

Wednesday, October 15, 2014

Danger, Danger! High Voltage!



When I was a younger man, I was backpacking my way through Malta and I managed to coachsurf in a fantastic place with great hosts. I will always remember one of my hosts, he showed me this ridiculous video while we were totally drunk, guzzling litres of cheap wine.

The point of this video is this that, danger danger, high voltage!

As much as the markets have corrected quite nicely and seem oversold, it is possible to stay oversold for a while. Just like how we have been overbought for the better part of the last 2 years.

Treasury yields are signalling bright red warning signals. As I have highlighted before, the bond market is MUCH larger than the stock market, so perhaps this might be a good time to heed it? What happened to the higher bond yields that every mother, son, grandmother had been predicting? Bob's rule #9: When all experts and forecasts agree, something else is going to happen. And it did. 10 year treasuries under 2%? Wow, who could've seen that coming? (my bond positions are up 3.87%)


However, the biggest risk that I see isn't a market plunge. Au contraire. The biggest risk that I see is instead a massive, swift V-shaped rally up, killing off all the late short-comers (pun, hurhur). Personally, I think any rallies should be shorted, but hey, don't listen to me, do what you want to do. I will do what I want to do. I am going to be continue being skeptical of rallies. (I added more shorts to my Russell trade yesterday)

Stay nimble traders, seems volatility is creeping back into the markets! Long-term investors? Continue watching from the sidelines. I'm sure the bloodbath is much more entertaining when you don't get any blood on yourself.

[SGX Portfolio] Buy: Valuetronics

Actually to me, I have never really thought about Valuetronics until I saw this latest piece about the recent fuss over this ticker.


Now, that is one fugly chart. In less than 3 months, the stock has been cut down from its high at $0.59 to $0.30 today. Now, that's about a 50% smash in stock price. I was reading the article and I was curious about this company, so I went to look at it's annual reports.


Looking at it, this is a company that has been having a very steady growth to their overall profit. Gross profit has been dropping, but Net profit is still holding up. With the increased revenue, that's all pretty good stuff to see! So earnings-wise, looks quite steady.

Total equity and NAV (pretty much the same thing to me) have been increasing as well. It's always nice to know that you stand to gain capital appreciation on top of dividends.

Debt actually FEELS pretty high to me, but the however, they look like they have good debt. Their debt is almost exclusively current liabilities, which is much nicer than long-term liabilities in my opinion. Most of their debt is payables and accruals, two sorts of good debt in my book! So although it looks like a heavy debt company, the risks of these debts do not feel as risky to me.


Their dividend track record is pretty good, on top of their constant positive EPS as well! Now in 2014, they have also resolved to have a clear dividend policy moving forward. How can this be a bad thing?


However, with the share price dropping so rapidly, one of the things as a value investor that I think about is RETURN OF CAPITAL, not return on capital. In the worst case scenario, such as bankruptcy and liquidation, how bad can it get?

Looking at their balance sheet, I feel quite relieved by seeing their huge cash position, as well as positive receivables. Even if receivables do take a haircut, it seems like investors would still stand to receive the Net Asset Value of the stock, which is sitting at $0.33.

So to me, downside looks limited. I doubt the stock can get under $0.26, because based on my logic, that seems to be the value to just buy and own all the cash in the company, with all its other assets, expertise and goodwill thrown in for free.

So, what do you think for a company selling at just under NAV, assets largely in cash and receivables, earns a decent EPS of 20% of the share price currently and aims to pay out 30-50% of its profits in dividends? And not to mention, a pretty good 8 years of running a profitable business enough through tough times.

I think this is a rare gem, and I have got myself just 1 lot to have a bit of skin in the game. Any thoughts on this ticker from my fellow investors?

Singapore Finance Industry: Innovate, or DIE

I was reading this great interview by A Wealth of Common Sense with Patrick from Millenial Invest. Two of my favourite blogs to read actually. I actually feel like buying Patrick's new book, but I feel that it is probably very skewed and biased towards the US investor, which is his main target demographic.

However, reading the interview, I came across some fantastic financial products. They were Acorns, Wealthfront and Betterment. I have come across both Wealthfront and Betterment before, and how I wish that the Singapore market had such products. Just take a look at these products.

Acorns help you round up your purchases to the nearest dollar, then invest that fraction of a difference into a diversified portfolio. What. The. Fish. That's amazing, TAKE MY MONEY!


Wealthfront and Betterment are both robo-advisors. They are the PLUS version of Acorn. Instead of just investing your daily chump change (which honestly slowly adds up to be a substantial amount over time, trust me), both these products are more comprehensive. They can be seriously used (and are) for proper long-term investments. Think of it as a super-duper awesome RSP.




Not only do they allow you to invest regular amounts in regular intervals, they also allow capital injections. They have a wide variety of investment options. They do auto-rebalancing and dividend re-investing. They have rock-bottom fees for a superior product which is CHEAPER than transaction costs of the closest similar product here (0.25% vs 1%).

This is like the RSP investor's wet dream come true.

If Singapore had anything similar to this, I bet this will be a massive hit. POSB Invest-Saver is the closest product. Even with only 2 damn ETFs, they can't manage to allow percentage allocation, capital injections, auto-rebalancing, dividend reinvesting. Sorry sweetcheeks, I'm not gonna sugarcoat it, POSB Invest-Saver is the weakass version of their US counterparts. Not only do they have much much MUCH MUCH much much MUCH MUCH more better cooler awesome useful features, it's also way CHEAPER. What. The. Fish.

POSB Invest Saver is getting there, but it is still not good enough in my opinion.

My hopes and dreams: A company in Singapore comes up with a fantastic RSP option similar to WealthFront or Betterment. Even with just the STI ETF and the ABF, with all the features of the US products, I bet it would be a hit here. Add in more products, heck, add in all the SGD ETFs. Add in the USD denominated ETFs too, charge a small spread. Or offer hedging options. Maybe even offer direct feeds into index funds. Accept monthly giro and lump sum investments. You want to be a total comprehensive choice.

Once that is done, why not try the Acorn model since the infrastructure is already set up? Work with banks so that every credit card purchase is rounded to the nearest dollar and have the balance sent to your main account. Work with ez-link and have every transaction rounded up to the nearest 20c or 50c or even $1, and have the balance sent over. Work with the other payment options too maybe.

Hell. Maybe the government should develop and maintain something like this? Then they can also give a choice to CPF members / SRS account holders a decent alternative to invest their money in a relatively prudent way. Now, that would just be magical and amazing.

Singapore is massively lagging in the finance industry. The financial hub of Asia? I scoff at that title. Good financial services are still only offered to the highest net worth individuals, who are being charged arms and legs by having an AUM-based fee structure. Retail investors like you and me, have to deal with expensive, low-grade products along with inexperienced "financial advisors" who wouldn't even be able to tell you how many companies are in the S&P500 (the answer is 500). Mark my words, in 10 years time, the financial industry here in Singapore will HAVE to change, or else we will definitely lose out. We need to move to flat fees, based on the specific type of service done, not based on the amount of money clients have in their bank accounts. Financial advisors should be like lawyers, charging for the effort and amount of work done.

The finance industry here is still operating in the same unsustainable greedy ways of the pre-GFC. If your banker is driving a Porsche today and you aren't, maybe you should ask yourself why.

Tuesday, October 14, 2014

Planning Makes All The Difference: Alice In Wonderland

Alice in Wonderland (1951) is one of my most favourite and trippy movies to watch. Of course, this is the movie adaptation of the world famous classic written by Lewis Carroll back in 1865. If you have never read the book, shame on you! But all right, perhaps I could interest you to watch the original technicolour movie instead? It condenses the book and largely keeps most of the ideas intact, I feel.

Although there are many, many, many very famous scenes and ideas in the book and the movie, my most favourite scene that has always stuck with me in this scene with the Cheshire cat:


When I was a younger boy, my grandfather once sat me down and tried to explain all of this to me. He talked about maps, navigating in the sea or air, compass, directions, calibrations and a whole lot of stuff. Today, I can look back and I can quickly piece together the idea and wisdom that he was trying to impart.

You need to know where you are right now. You need to know where you want to end up eventually. Then finally, you need to know which way to roughly start heading towards.

Even if you don't know exactly where is your final destination, it still helps if you know the continent, the country, the region, the town or even the road that you are heading to. And eventually as you progress closer, you will figure out the right and exact destination.

Some people think that not knowing their final destination and just doing SOMETHING, ANYTHING with their lives will eventually help them to realize their dreams when they one day want to. However, sometimes what you might be doing will be actually sending you in the opposite direction, making it twice as hard as ever to reach the place you want to be. If you are in Singapore and wanted to go to Bangkok, you don't fly to Australia for a transfer, right? That is the total opposite direction! Many people jeopardize their future dreams with their current plans and actions without knowing it. You can plead ignorance, but that still doesn't change how far you are to realizing your dreams.

I was actually going to write a more technical post today about the recent market action, as well as the long-term in-sustainability with such a huge disconnect between debt and economic output, but reading this post by Teenage Investor made me re-think why I firmly I believe in periodically taking stock of your life.

I would politely disagree with a dated post by SG Wealth Builder titled, "Why I would never advise young Singaporeans to plan for their future". Perhaps it is the philosophical difference of how we view life. I believe that fate and luck plays a part in our lives (some more than others), but it is possible for most people to do what they want with their lives. If you are in the camp that life has too many variables or scenarios, therefore there is no point planning, that can still be valid point. However, how about combining both? Plan and prepare for the most likely outcomes and finally also equip yourself with the skills to manage the rest of the outlier scenarios. That seems like a pretty solid action plan to cover everything. Who says that you can only plan outcomes or react to scenarios. Why can't you do both to mitigate risks?

I must thank Howard Marks for imparting this wisdom during a Bloomberg interview for this perspective. "Risk means more things can happen then will happen" (5.29). "You have to look at it like a probability distribution. You might want to prepare for the middle of the probability distribution, but sometimes you end up at the tail-ends." (6.56)  

Many of my friends are currently undergoing a quarter-life crisis. It doesn't help that many of my friends are graduates who cannot find jobs suited for them. Many of them seek my counsel when talking about their plans for the future. Rather than tell my friends what I think they should do (I don't think I have enough information to do that), I instead prompt them with a series of questions and guide them along a thought process which I think is useful. There are many questions that I can ask. But the gist of every conversation like this eventually boils down to the same few essential questions:

Job aside, how are all other aspects of your life?
Is this a field you can see yourself in when you're 50?
Will this job give you the experience or skills needed for the career you want in the future?

These are just the real-world, job-related equivalents of the Cheshire Cat scene.

Where are you now?
Where do you want to get to?
Are you heading in the correct direction?

Essentially, this is a navigation problem. You need to know where you are (current location), where you want to be (final destination) and the correct direction to go (compass).

However, you can be like Alice and don't know where you want to go. In that situation, then yes, it really does not matter which way you go. It's just a simple toss up whether you'd like where you end up, or not.

Rather than leave things to a higher power, fate or mystery, why not take the less exciting option, but perhaps a bit more practical and actionable, and think about those 3 simple questions today? They needn't be about jobs, they can be about relationships, ambitions... anything. Go ahead. It takes just 5 minutes. Then it's going to be the start of your new life, heading in the right direction towards your goals.

Sunday, October 12, 2014

Why All So Bearish Suddenly?

It hasn't been easy being a bear. I have even been silly and cocky and called for a market top back in late June when the S&P500 was at 1960 (I was short, it was painful). In fact, I have been bearish ever since the stock market went UP during the government shutDOWN back in Oct 2013! Although I have a short bias, I have been trading the market moves both up and down. If I had still been holding onto my shorts since October, I think I would have been bankrupt by the year end of 2013!

So even though I have always been largely bearish about the US markets since last year, just reading the headlines of news articles and blog posts over the weekend is enough to turn me short term bullish! Is everyone turning bearish all of a sudden together at the same time?

Looking at charts, it does seems to me that markets are actually technically short-term oversold. Can they bounce back up? Considering the VIX is at resistance and all the bearish talk out there, I think it's reasonable to think that a relief rally could happen here. The S&P500 is sitting at 1900, which is a good psychological level for people to come in to defend that level. This is actually the April and May high, so it could provide some support. The latest post by Tiho from The Short Side of Long actually also somewhat supports my theory of short term oversold and the 1900 being an interim support, but he has a lot of indicators and graphs with analyzes it from a different angle. Be wary of future rallies, he warns.

Rationally think about it, I feel like taking profit on some of my shorts. Odds of a short-term rally is much more likely than a further sustained down move. However, reading this post by John Hampton is stroking my inner greed. The toolkit of a long term buy-and-hold investor need not be very large. Just identify a time frame to work with and just buy the dips. The bigger the down move, the bigger the buying. However, the skills needed to trade and short an instrument is definitely not as straightforward. Also, shorting at the turning point of a multi-year rally is also different from shorting the rips in an established bear market.

I am expecting the decline to continue this week, and things might go from bad to worse. In line with the history of market tops, we still haven't seen a waterfall decline yet.


I am greedy and I am hoping that this waterfall decline does come soon, at which point I will exit and take profit on all my shorts. Wait for the recovery rally, then short the rip. If the market doesn't continue heading down, and instead starts looking healthy, I will decide to book some profits to lock in the gains and wait for another opportunity to add on shorts.

Currently, what are my short positions?


I have been short these positions since early August. I am keeping to my resolve to hold onto my shorts given that now I have quite a comfortable margin of safety since the trades are now in-the-money.

Trading the markets on leverage is a very psychologically taxing activity, and going short makes it even more scary. Oh well, let's see what the market is going to do and I shall try to act accordingly.

Saturday, October 11, 2014

Jason Zweig: Good Advise Rarely Changes

Jason Zweig is a columnist on the WSJ, and I would argue probably one of the most influential writers in the modern finance world.


The very first finance book I read was the version of "The Intelligent Investor" with his foreward. I am now halfway stuck reading his behavioral finance book called "Your Money & Your Brain", which is a great book about the human aspect of investing. Put aside your calculators and spreadsheet, this book is a great book to understand the less quantitative, but still very important, part of investing.

I was also quite impressed with his interview on WealthTrack with Conseulo Mack. He is very cool and clear headed throughout the interview, which to me, shows that he is totally familiar with all the topics and has firmly given deep thought about them. I quite like this guy.

I was very very pleasantly surprised to stumble upon and read one of his dated articles on WSJ. I think this article is one of the most brutally honest pieces about a guy sincerely trying to impart his wisdom to people who can only better themselves by hearing it. This article is a gem, and I implore anyone, ANYONE looking to reign in their behavioral bias to give his article a full read and perhaps some weekend contemplation.

I am going to pick out my favourite lines from his article:

My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly...
The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time.
... research by the psychologist Paul Andreassen showed many years ago, people who receive frequent news updates on their investments earn lower returns than those who get no news...
From financial history and from my own experience, I long ago concluded that regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.
My role is also to remind them constantly that knowing what not to do is much more important than what to do. Approximately 99% of the time, the single most important thing investors should do is absolutely nothing.
But this time is never different. History always rhymes. Human nature never changes. You should always become more skeptical of any investment that has recently soared in price, and you should always become more enthusiastic about any asset that has recently fallen in price. That’s what it means to be an investor.
The longer the odds, the greater the obligation to try to beat them. That’s why I keep at it, even though I have profound doubts that most people will ever learn how to be better investors. I never expect everyone to listen; all I ever hope for is to get someone to listen.
In summary: Good advise doesn't change, and reduced to its simplest form, it is essentially: Buy low, sell high. Tune out the market noise, reference past history and look at the long term. If everyone is zigging, think about zagging. Everyone can't all be right together because the market is not a win-win system, it's a negative-sum system.
This is a good and timely reminder to myself to always look at the big picture and not get caught up in the small daily blips when you are long term investor. 
This probably should go up in the hall of fame, along with Bob Farrell's 10 rules, which I think is another set of excellent advice reduced to digestible and actionable bits for the average investor. I hope maybe people might want to consider bookmarking this page, or his article directly, and give it a read through if you're at the crossroads of a major financial decision or choice.

Friday, October 10, 2014

Budget Bali?

Last week, I went away for a nice holiday. I went to Bali!


It's not the best picture, but oh well, it's 100% original. Sunset from Kuta beach!

Anyway, I'd just like to share how much my little holiday was. Sure, it wasn't the cheapest way possible, but I think it'd be helpful for anybody out there heading to Bali and looking for a rough feel of how expensive things were in 2014.

Airfare

Even picking the HOT FARES with Jetstar, which are the $29 tickets each direction, the amount of airport taxes and all the other charges brings up the total to $142 all-in, which is quite a large difference from the $58 you would expect. If you need check-in baggage, it's an additional $20 each direction. Not too shabby actually, but keep in mind that this is like the super promotional price! Why the promo? Rainy season. According to the people I talked to, rainy season is from November until January, and main tourist season is from March to October. Just take note!

My tickets to Bali was pretty much the best option that I could find. The cheapest one, taking into account stopovers and the timings. In total, I paid $360 to fly Garuda airlines, making a stopover at Jakarta. It wasn't too bad actually, there was food on every flight, very impressive! Well, not super great food, but hey, food! Also, there's 1 free check-in baggage, so that's pretty good. However, I would've personally preferred a direct flight, but all the direct flights were really expensive. I guess I just booked too late. Book early!

Accommodation

Honestly, there's tons of cheap accommodation all over Bali. Most of the people I know stayed up in Seminyak and booked entire private villas with private swimming pools. I heard that it can be as cheap as $120 a night to about $200, depending on property. Personally, I think it's only a good idea if you've been to Bali before and you're just looking for a nice quiet beach holiday and to just goof around with your friends you're with. I think many of these properties are not near the beach or the main tourist areas, meaning that you will probably need to hire a driver and split the cost between everyone, which the market rate is $50 a day.

I stayed in Kuta, which is the surfer area. Very messy, noisy and crowded... I loved it! I stayed along the main road, but in a huge property so although access was at the main road which was convenient, our actual living area was deep into the property and far away from the road. Didn't really hear any honking or much noises at all, except for the soft thumps of the club music which is just a block away. Staying in Kuta at my location was great. Beach, clubs, bars, massage, convenience stores, restaurants, everything was really near and accessible! Our private room with ensuite toilet, balcony and breakfast included? $32 a night. Nice big private swimming pool, personal balcony area to dry your damp clothes and free wifi in the communal areas. It's not anything fancy, but it was basic with all the main comfort perks. Hostels with shared rooms and no extra facilities are $20 a night, so why not pay a bit more and stay somewhere nicer, yeah?

Sightseeing / Activities

As mentioned before, hiring a driver is flat rate $50 a day. You'd need a driver as long as you're planning to leave the town that you're staying in. If it's your first time in Bali, I'd recommend definitely getting out and exploring Bali.

View from the top of Mt Batur

 A monkey in the monkey forest

 The rice terraces

One of the temples at Tanah Lot

There's hiking, the monkey forest, the rice terraces, the seafood restaurant beach, water sports and TONS of temples. Honestly, don't be put off by the temples, I actually really enjoyed the cultural experiences that I had there. One of the temple minders even taught us how to pray in the temple and all, it was very interesting to have such an upclose view to the Hindu religion! Most of these attractions have an entrance fee, which is anywhere between $1-3, which is really cheap I felt.

Water sport activities were not as cheap as I imagined, but nevertheless, I took the opportunity to try some activities that I have never done before. I rode the jet-ski, revved up and was rocketing off at top speed of about 100km/h, so that was really cool and fun! Gotta remind myself to buy one of those when I'm a billionaire. It was 30USD for about 10-15 mins just chionging and burning fuel on the jet ski with an instructor sitting behind you, just in case.

There was also parasailing, which was pretty cool, but much too short in my opinion. It was just 1 round a tiny lagoon, so it was maybe less than 5 minutes? It's an interesting experience though, but not value in my opinion. It was 40USD for 1 round.

Finally, the last activity that must be done in Bali is surfing! The beach is nice and long, the water is not very deep, there is not much debris and rocks on the beach and the waves are not too strong or too weak. I think as a beginner, learning surfing in Bali was a very good experience for me! One of the local guys manning their area gave me surf lessons. There are many of these areas along the beach, and all you have to do is to buy a beer from these guys, then you can grab a chair and just chill on the beach. If you ask them for surf lessons, they'd look after your stuff too, so that's pretty good. Local lessons from a good local surf teacher? $20. The guys were awesome.

If anyone is heading to Bali and looking for a good guide / driver / surf teacher, drop a comment and I can give you the info and contacts of the guys I know!

Food and Drinks

The bread and butter of Bali is really Nasi Goreng and Mee Goreng, either Ayam or Seafood. Prices vary widely and it depends on the place you're eating at. Eating deep inside at one of the places much less touristy, local dishes were between $1.50 - $2.50, very reasonable in my opinion! The beer that they drink there is called Bintang, and it goes for about $1.50 - $3 for a small bottle, again depending on the place you're at. Even at the bar with live music and dance, a beer was only $2! So, yeah for all you heavy drinkers, Bali is very reasonable place to go out and drink, since they don't mark up their drinks so much.

On average, most of the restaurants that we went costed less than $10 per person for a main and a drink. More likely between $6-8 actually. Most of the restaurants also have free Wifi too, so ask for the password, so you can search and plan your activities after your meal! At Kuta, there was all sorts of food for everybody, so it's really easy to suit a lot of difference preferences!

My Bill

Airfare: $360
Hotel: $160
Cash spending (Sightseeing / activities / food & drinks): $525

Total: $1045

Honestly though, I think I could have done 6 days in Bali for less than $600 if I really was having a lazy beach bum holiday. But considering we hired a driver for 2 days, saw so much of island and did so many activities, I think that I paid a really fair price and had a really good time. However, the next time I go back to Bali, perhaps a little less activity for me, and a bit more lazing around and soaking up the sun. I want to put my newfound surfing abilities to the test!