Wednesday, April 30, 2014

More REITS! Current Thoughts

After spending a few hours tonight looking at all sorts of REITs, I think I've managed to find a few that I would quite like to own, based on their current valuations as well as their underlying properties.

Saizen REIT - Is extremely compelling given the defensive nature of their underlying assets. I actually like the narrative behind this REIT a lot, plus the word on the street is that their managers are very shareholder focused and have a stake in it as well, which is always a good thing to hear. (need to verify these claims) Strong balance sheets and freehold Japanese land, this is a story I like! The discount it is priced at is also very attractive, but similar to AIMS AMP, their portfolio is geopolitically concentrated in just one country.

Fraser Comm Trust @ $1.23 looks to me like a nice lovely buy. Fundamentally, I would buy it now, but the technicals are telling me that if I hold out a bit more, I would be able to get it at a slightly better price. $1.23 looks like the ripe price to me. I quite like their underlying assets, especially the ones in Australia. Their assets in Singapore are poised to grow, and it does seem like they have a vision of what they want from the future. Not to mention, a nice NAV discount

AIMS AMP Capital Industrial REIT - This REIT surprisingly has the best UL yield, but it is concentrated in a specific sector and has only geopolitical risk with no diversification of risks. Definitely have diversification of assets though. With a slightly bigger discount, I think this would be good grab, especially for the yield.

Starhill Global REIT - Very good underlying fundamental assets, with the exception of their Japanese properties. However, it is less than 5% of their portfolio, so I guess that can be overlooked. Again, a nice decent discount is present, and a further fall in price would make this even more attractive.

All their technicals are pointing towards a dip in the future, I would consider a lot in all of these, as well as an extra lot in Saizen!

Other tempting choices but with strong caveats are:

Ascendas Hospitality Trust - While I like half of their Australian assets, the other half does not look to me like they have any edge going forward into the future. Australia is where most of their income is coming from as well. Their assets in Japan does not looks to be in a good location at all, but their longer termed service apartments might be a good turnaround for them. Their assets in China does not look to be performing well too. Perhaps the bright spark about it is their Singapore asset which takes up a heft 23% of their portfolio. Valuation looks rather fair but downside seems much imminent than the upside.

Soilbuild Business REIT - Assets are almost entirely fully occupied, leaving upside only due to rental revisions and valuation seems to be very fair. Room for growth seems limited to me.

Mapletree GCC Trust - Only 2 assets in their portfolio, and they do not look like stellar underlying assets. The valuation discount is there, but it still does not seem like a value buy to me, especially with it's lack of diversification. The concentrated risks does not seem to be compensating enough

OUE Hospitality REIT - Similar to Mapletree GCC, this trust only has 2 assets under their portfolio. Although their underlying assets are much more sound and stable-looking to me, I do not have much faith in their sponsor to channel down assets to the trust to acquire. The avenues of growth looks very limited to me for the next few years.

Lippo Malls Trust - Very fairly valued, I think there is a lot of potential growth and room for asset enhancements here, but I would wait for more margin of safety before taking the plunge. They have a strong sponsor and it seems to me like this could be a good investment in the future.

Tuesday, April 29, 2014

US ETFs Updates from OCBC and DBS

In my previous post, I talked about US listed ETFs as well as the brokerage charges of trading them. Since then, I've sent out a few emails (instead of calling, so that they can direct my mail to the right person instead of me hanging on the line) and I've got back some answers.

Truth be told, both DBS and OCBC replied decently quickly, though I must say that OCBC wins in terms of clarity and dis-ambiguity of their answers. So, let me start you off with the currency conversion costs:

OCBC: 60bps bid/off or about spot + 0.23% per buy or sell

DBS: spot + 0.18% per buy or sell
spot ref on 22/4/14 at 11.22 was 1.2544

Personally, I find both of these direct currency transaction costs rather favourable.

However, there can be only one winner, because I am only going to invest with one broker to consolidate my holdings and minimize the custodian fees that I am paying per ticker! All things considered, DBS is the final winner because of:
- lowest currency conversion costs
- lowest commission rate (tied with Phillip)
- mid range minimum commission (US$25)
* potentially even better currency rates if investing over SGD 50,000

Next, what about the ETFs that I am interested in?




So there you go, all of them have the Cambria ETFs that I am interested in, so I guess it doesn't really matter then, right? Anyway, not going to get into that for a while, I would like to see some more track record on my both GVAL and FYLD, as well as max out the $50k cash limit in my OCBC 360 account before I decide to start taking on more risks in this crazy investing environment. I hope this posts helps anyone trying to figure out what to look for in a local broker when thinking of making US trades!

SCB Online Equities Trading Shortfalls

Hi all,

As much as I like SCB for being the only bank / broker in Singapore to offer no minimum commissions on trades (as opposed to about $20-$35 with the other local brokers), I do find that they have some shortfalls.

1) Currency conversion is a rip-off, with around 1% conversion cost to buy, and again to sell
2) Preference shares cannot be traded
3) Retail bonds / SGS bonds cannot be traded as well (okay, not really their fault, this is fixed income after all)

It would be have been great if they could have also included preference shares as an offering, I think it would really mix things up.

Lastly, I am waiting for their response regarding the treatment of USD dividends from dual-currency ETFs. Hopefully they even know how to answer me!

All this considered, no minimum commission is a godsend. I've made 2 trades on SCB already, and I've paid less than $5 in commission while being able to say that I am a proud owner of some equities! Definitely the broker to go to if you are starting out small and only planning to trade on the SGX with just SGD!

Dual Currency SGX ETFs

Above are the dual currency ETFs listed on the SGX. There are other SGD ETFs as well, such as the Nikko STI and the SPDR STI. There is also the UOB China ETF, ABF Bond ETF and the Australia Cash ETF. The last few are not very enticing options. The full list of ETFs can be found here.

The good thing about SCB Online Equities Trading is that they do have all of these ETFs to be traded without the minimum commission as well. However, there is an interesting part to note, which is:

So, the dividends are paid out in USD? That is very confusing, especially since I do not have a USD account with any of banks or brokers, so how would I be credited the dividends? Auto converted at the prevailing rate and deposited into my account?

Since I am specifically only trading SGD denominated SGX tickers with SCB, I have decided not to bother the other banks with my questions as long as SCB can give me a satisfying answer to my question. Ideally, they would do just that - convert the dividends to SGD and credit my bank account or securities account that I have with them.

If that is the answer, that I would actually consider strongly investing in the fixed income ETFs very strongly! That would mean that with a slightly higher capital outlay (about SGD$1,200 for 100 shares of those ETFs), you are able to get (1) less lumpy cash flow of quarterly instead of semi-annually and (2) diversification of underlying assets!

I would definitely strongly consider in investing in them then! I'm very excited to find out SCB's answer to my question regarding this!

More information about the dual currency listings can be found here.

Monday, April 28, 2014

Saizen REIT [Portfolio Buy] April 2014

Just one of the many places under the portfolio of Saizen REIT. In fact, they have 139 properties in 14 different cities.

So, a month after I decided to take the trade in my SCB account with Croesus Retail Trust, for some reason I felt compelled to get a stake in Saizen REIT I shall list the rationale below.

Current dividend yield based on the forecasted DPU will give a yield of 7.22%, which is pretty decent. Above average I feel

Based on Price/NAV, the Trust is currently selling at a 23% discount!!! Now, this is just crazy!

Based on the 104 week low, the lowest price ever recorded was 0.867. This represents a downside risk of 3.6% based on capital gains loss.

Of course, there is no gaurantee that the 104 week low will hold and people will buy in at that price. However, if it really is capped to the downside here, the risk reward-ratio is still insane, since you're going to be getting a yield of 3.6% every half a year.

That means if you hold on for just half a year and get your dividends, you will almost definitely be in the green as long as the bottom can hold for this stock. But trading at more than a 20% discount to its NAV? Insane still!

With an invested position now, I will waiting for their annual report to come out. If this continues to weaken, I really feel very tempted to build up an even larger position with this stock! We shall see first, all right?

For some reason, the transaction costs were $4.87 this time around. That is about 0.54%, much higher than the 0.25% commission 0.04% SGX fee and 0.0075% clearing fee of SGX. It should be about 0.32% with GST included. Anyway.... it's just a few dollars, so I won't think about it this time. I will wait for my account to update all the transactions and send me my confirmation before I pursue this matter. I must admit that I did confirm all the charges in a jiffy because I was busy at work.

Bought T8JU.SI @ $0.90

Monday, April 21, 2014

REITs Valuation Methods

Well, after reading about Shareholder Yield, I felt horribly inclined to go and put that knowledge to the test. Since its annual reporting season here, I took the liberty of checking out a few locally listed REITs and dug through their annual reports to find the numbers that I was looking for.

I applied what I learnt regarding shareholder's yield, finding out the dividends paid out, debt paid back and net share buyback to a few different REITs. Somehow, I feel that the debt portion of this equation might not be suitable for REITs considering that a large part of REITs is knowing when to take advantage of cheap debt and when to pay it down. Paying down debt is not necessarily a good thing all the time. Some of the REITs had massive increases in debt taken up, while other paid them down, in the same environment. In a sense, I feel that regarding REITs, the debt component is too much of a wildcard to be used as a reliable indicator of shareholder value creation or destruction. I wonder if anyone can shed some light on my thoughts about that.

A brief search on Google about "best ways to evaluate REITs" led me to multiple articles citing that the "best" method to according to most people is Funds From Operations (FFO). Many see it as the REIT alternative to EPS, since it takes into account a more real estate biased perspective. The Adjusted FFO is also considered the superior upgrade of the FFO. FFO should in theory be increasing every year, similar to EPS. Also, dividend per share / FFO per share should also not consistently be over 90% to ensure sustainable payouts. Well, that's what this article and a few others state.

Another article was a bit more pragmatic and talked about the recently publish NAV valuation method that Green State Advisors made public. The rationale of using NAV is that:

"Investors elsewhere would use NAV if they could, but the concept doesn't translate well to companies that are not in the business of owning hard assets. Because the value of a REIT is, first and foremost, a function of the value of the assets it owns, NAV is a great starting point for a valuation analysis." - Green State Adviors
Perhaps the biggest takeaway that they had that stuck with me is the important of the UAV (Unlevered Asset Value). I have many times since reading this article try to hide away the effect of gearing of REITs unconsciously. Only when I see the slides do I remember why I think it is so important to look at UAV instead of NAV.

They also use bond yield spreads of HY minus BBB to observe the premium/discount band. According to them, the tighter the yield spreads, the smaller the observed premium/discount will be. That means in a tightening market, it makes more sense to purchase high quality REITs, while in a large yield spread market, low quality discount ought to be better.

They also reaffirm what many REIT investors fall slave to, which is the focus of yield. They claim to be yield agnostic, rather focusing on quality, safety and growth since they are always on discount compared to yield. I would highly believe this claim, since all REIT investors talk about is the current yield of their investments.

General and Admin Expenses (G&A) is also demonstrated to be largely overlooked by the industry, allowing. G&A should be closely linked and divided by the Capitalization Rate (cap rate = income / value) to see what is it's warranted premium discount over UAV. Since this variable is largely overlooked, it is possible to also find good bargains based on this metric. Usually smaller REITs have higher G&A expenses due to lack of economies of scale.

Lastly, they talk about Franchise Value, which I decipher more plainly as the manager's skills. Included in this is Total Shareholder Return, cost of debt (unsecured debt and preferred stock are plus points), blended leverage ratio (which is very complicated, so see picture below)

I realized that this post is really very haphazard with no organization whatsoever. I'm just having a typing diarrhea all over this page, I hope you don't mind. It's hard to refer to pdf files on another screen, type and think at the same time, at least for me. Anyway, I think that Green State has really provided a very good and strong framework starting point for me to use to analyze REITs. I feel especially enriched thinking about UAV and G&A.

I highly recommend checking out the full slides here!

[XMM STI ETF Investing] Moving out STBF

Hi all!

With the advent of the OCBC 360 account, things have changed.

I would like to withdraw all my sister's money from the STBF or sitting in idle cash (SCB) and help her to get at least 2.05% or 3.05% just being cash in my own account.

However, since I already purchased the UOB bond fund, I will just stick to it. There should not be much difference and slightly more upside. The main reason is due to the sunk cost of the 0.75% sales charge. The OCBC interest rate promotion is not a guarantee to be offered for a long time, so I don't think it's wise to cash out of the UOB investment.

However, I have sold out of the Nikko AM STBF now.

Purchased @ $1.3737 for 727.97 units = ~$1000.01
Sold @ $1.3758 for 727.97 units = $1001.54

Gain on investment is 0.153%. Investment was held for 2 weeks, so annualized gain would have been about 4% based on those past 2 weeks, which I think is rather high and unrealistic for the fund. Anyway, so the good news is that I made a small tiny profit on this transaction.

I will be moving her $1,001.54 to my OCBC account to enjoy the high interest rates there.

I will also move her $1,000 cash from my SCB to my OCBC account as well. With the new FAST transaction protocol that the banks have taken up, there is no lead time, and hence almost no opportunity cost. Therefore, it is optimal to leave your cash in the highest yielding bank account.

Portfolio recap

Cost and Location:
$8,000 is UOB fund
$2,001.54 in OCBC 360

Current portfolio value:
UOB Fund = $7,958.92 (sales charge was $60, but have gained $18.92 since then, or 0.24%)
OCBC = $2,001.54
Total = $9,960.46 (down 0.4% on the whole because of the sales charge of the UOB fund)

Expected year end returns should be about 1.5% upwards as a conservative estimate now. That would mean ending 2014 with about $150 worth of returns. We shall see!

Sunday, April 20, 2014

Rethinking Strategy

I think that GVAL and FYLD are probably 2 of the more market neutral equity strategies that I am personally very inclined to invest in for the long term. The only problem I feel that is hard to manage is the currency risk of the USD against the SGD.

In late 2005, the USDSGD rate was at 1.700. Today it is at 1.252. Assuming we just take it as roughly about 8 full years, the USD/SGD has steadily gained in the SGD favour for about 3.9% a year!

That means, nominally, the difference between holding any investment in USD has to yield 4% more annualized returns a year to equal that of a SGD investment.

In late 2005, if you made a $10,000 SGD investment that yielded 1% in a FD over 8 years, it would end up being worth $10,828.

A similar $10,000 SGD investment into USD would convert to US$5,883. Then it would have to get annualized returns of 5% a year for the next 8 years to be worth US$8,690. Converting back to SGD at today's rate, it would be $10,881.

Roughly the same end result! Anyone who decries the Singapore government and the MAS should really learn some finance before they say anything. Singapore has a currency appreciating stance which creates wealth for its citizens. Throw in the ridiculous high CPF risk-free rate 4% in the SA and MA accounts, SGD sitting in those CPF accounts are straight off the bat earning 8% more than USD in cash, and it's risk-free!

I hate uneducated people talking about CPF like the "gubbermint iz stealin all ourz money".

That was very OT, but back to the main topic now. Which the SGD appreciation policy is especially good for Singaporeans and those that keep their wealth in SGD, it is also a double edged sword. That means that any investment in other currencies would be substantially biased to underperform just due to currency exchange rates. Therefore, I feel that people deciding to invest overseas must be prudent to hedge themselves accordingly so that they can be appropriately rewarded for the risks that they are taking in other countries and currencies.

I've surfed the net, and this is the best and clearest article that I can find regarding USD/SGD hedging. It is a short and sweet, simple article that cuts to the chase and illustrates very clearly what hedging is about.

The underlying principle is rather easy if you try to simplify the view. If you are purchasing an asset denominated in USD, to hedge yourself against any fluctuation, you must create a liability of similar value.

Therefore if you are buying US$10,000 worth of shares, you should sell US$10,000 worth of currency and buy Singapore dollars instead.

If the USD/SGD rate goes up, you make more money selling your shares and having it back to SGD. However, this is offset by your loss in the forex hedge. The same vice versa.

From looking at CMC, the cost of hedging is going to be roughly less than 2% a year, which works out to be $200 a year.

However, I have decided that being the greedy ass that I am, I am going to obviously be a prick and take on much more risk.

Instead of hedging throughout my investment period, I will only hedge myself when the market is trending against me. Therefore, I will only sell USD/SGD and cover my position once the trend has shifted upwards. If it starts a downtrend again, I will place my hedge accordingly. I will be using my magical secret moving average to help me identify trends, on a weekly basis.

Always wait for a second day for confirmation in deciding to remove a hedge, but always immediately place it as soon as possible. When hedging is concerned, it's better to be slow and hedged for longer with less returns, then quick to be out of a position and suffer downside loss. That's what the hedge is suppose to protect you for!

I am very very intrigued to get this all figured out and start investing into the Cambria ETFs. Am I naive thinking that it's a better way to allocate funds than the traditional methods of throwing it at a benchmark? I feel like I'm right, but all the pundits out there would try to sway me and tell me that I'm wrong. We shall see soon!

Cambria ETFs and US Broker Rates

After reading Meb Faber's books, I have to say that I'm a real sucker. Why? Because I feel so compelled to invest in his ETFs that he has, namely GVAL and FYLD.

I have to say that I have great reasons for not wanting to, but I also feel compelled to because of logic.

Currency risks
Currency hedging
Set-up hassle
Dividends withholdings

Probably superior returns
Access to obscure markets
Dynamic strategic
Hands-off investing

Given that I feel that these 2 strategies are very solid and diversified approaches to investing, I would really like to capitalize on their more market neutral strategy that goes where the rest of the herd isn't going. I like the appeal of a small and nimble ETF that isn't weighed down by popularity.

So, how do I go about doing this? I suppose the best way is of course to figure out which of my brokers are the best. Of course, again, being biased, I only did a comparison of the current banks and brokerages that I have available to me. As much as I believe in a good deal, I also think that having too many accounts is just a drag on management. So here's the table I came up with:

SCB is definitely out of the contest with its RIDICULOUS exchange rate. Nigga please. SCB's only use is a cheap way to constantly invest small amounts of capital over a period of time on SGX counters, taking advantage of the lack of a minimum commission. However, once local SGD trade values start inching up over to 5 digit numbers of $10,000 or around that range, it would make a lot more sense to trade with the alternatives. I think perhaps a likely action in the future is that when enough stock has been accumulating and small capital purchases will not be the norm, you can pay a fee and move all your counters held with SCB to your CDP account and consolidate all your holdings and operate from one bank. (not sure regarding the costs and feasibility of this strategy though! Must check with CDP and/or SCB regarding this)

As you can see, it is not really a clear cut winner between the DBS, OCBC and Phillip. They all have different minimum commissions, commissions rate and most importantly, currency spread rate. The rates that I put from DBS and OCBC are actually from what I snooped around on the internet for. I have to go and check and confirm what is the actual premium % over spot that both Vickers and iOCBC are offering.

Given that the rates that I have so far are indicative, it's very hard to make a decision. However, if I can get confirmation from iOCBC that the spreads are tight (less than 0.3%), I would highly consider them as my first choice for US ETF investing. If not, I think that strangely I might have a preference for DBS then.

Personally, I hope that OCBC's spreads are good. I would like to distinctively have OCBC meant for overseas ETFs, SCB (and DBS in the future) for my local counters, and finally Phillip for my Unit Trust holdings. That would make things easier to manage. We shall see!

Follow up action required:
Check with CDP/SCB regarding eventual counter transfer out of SCB
Check with OCBC for stocks exchange rate spread, specifically USD/SGD
Check with OCBC availability of Cambria ETF GVAL
Check with OCBC regarding opening of trading acount
Check with DBS for stocks exchange rate spread, specifically USD/SGD
Check with DBS availability of Cambria ETF GVAL
Check with DBS regarding opening of trading acount

Saturday, April 19, 2014

Applying Shareholder Yield to SG REITs?

I've just read the book by Meb Faber, Shareholder Yield: A better approach to dividend investing. I must say, I find that it is a very big eye-opener for me.

I highly recommend this book, not just for people interested in REITs, but also for people interested in dividend investing, especially for people investing in individual stocks overseas. One of the other big revelations is how companies shift their shareholder returns from dividends to capital gains based on the prevailing tax laws, which, of course is the most prudent thing for a manager with the shareholders in mind to do. Therefore, withholding taxes and base country tax laws can play a big role in your investment strategy regarding dividends.

That aside, let me talk about the biggest lesson I've learnt from the book. While I've read literature supporting higher dividend yielding companies as opposing to the lower yielding ones, what surprised me is that companies can be paying out decent dividend yields, but be destroying value elsewhere to fund those distributions.

What use is getting dividends gains at the expense of direct capital losses? No use at all, if you asked me.

Therefore, with this new insight in mind, I am thinking of creating a basic framework regarding the REITs in Singapore, at least to classify them based on some logical rules, to help myself identify which are the ones out there that really have the shareholders benefits in mind, and avoid those operating as a beautifully disguised "pump and dump". Not saying that they are doing it purposely, maybe they are just bad managers who incidentally destroy shareholder value.

A bevy of annual reports will be out in a bit, I think it might be a good time to come up with something that can capitalize on the fresh information.

Dividends: the total trailing 12 month distributions
Net Share Repurchases: value of shares repurchased - value of shares issues
Debt Paydown: reduction in liabilities - addition to liabilities

(Dividends + Net Share Repurchase + Debt Paydown) / Market Cap = Shareholder Yield

For some strange reason, it took me a long time to figure out the calculations in my brain, so I had to go reference a few sites. This one gave the clearest definition to me, along with an illustration to make things even clearer.

The other two that I have here and here are just repetitions, but maybe it's clearer for other people if said in the different way. I do like the 2nd site's way of showing the different parts of the shareholder yield coming from which aspect in a absolute monetary terms. I would have done it in percentage terms, but I think absolute terms help to show growth quite well!

Anyway, I think I might be signing up for a ShareInvestor account. I will try the free trial soon after my CFA. If I do find it very useful, I will probably be thinking of paying for a year's worth of services. It does seem to be very on the ball and information rich. Anyway, let's see how it goes. I do really wish that I had a partner to help me smash through all these data crunching with me, as well as keep me focused and motivated along the way.

One of the next things I will do in the near future is to calculate my retirement plan, haha! 24 and thinking of retirement already, all the old birds would say. Anyway, it might be a fantasy with too many variables, but I do believe in the random saying that, 1 hour of planning saves 100 hours of execution!

Wednesday, April 16, 2014

MY Simple Plan

"Everything Should Be Made as Simple as Possible, But Not Simpler" -Albert Einstein

Well, whether Einstein did actually come up with the quote is actually debatable, but many people that use this quote like to give credit to him. Not the point of this post.

So, I am drawing inspiration from this post by Market Anthropology. Honestly, I love his posts. I always read it slowly and in detail whenever he makes a post. 

His post starts out like this...

A simple question deserves a simple answer. 

Are 10-year yields headed higher or lower through the balance of this year?

  • If you believe long-term interest rates are headed higher, sell precious metals and the broader commodity complex and buy the dip in equities - especially the banks.
  • If you believe long-term interest rates are headed lower, sell the banks and the SPX and buy the dip in commodities - especially precious metals.
Personally, I am in the camp of the second thesis for a variety of reasons.

I have already been stacking precious metals since December 2013, however, quite indiscriminately of dips or not. I guess I am not that much of a seasoned investor yet to be patient enough to wait for a dip and I'm too scared of missing the boat. I will try to maintain and be more disciplined.

Shorting The F***ing Rips (STFR) is the opposite of Buying the F***ing Dips (BTFD). While BTFD is the main strategy in a bull market, STFR is the main strategy in a bear market. I am quite a believer that we are in topping phase of this current bull, meaning that it's going to be a bear party soon. Hence, STFR mode-on.

So far my STFR has not been going well. I have finally realized why. When looking at the daily timeframe, not enough information can be extracted out to where a execute a short on a rip. On the hourly charts, the problem is the opposite. Too much noise on the hourly makes for messy entries on rip shorting as well. However, I have come up with a much prettier solution, the 4 hour chart.

I've always though the 4 hour charts were useless, but I think it is the perfect balance that I am looking for now. It gives multiple entries to trade, without too many false flags. If you don't believe, go look back at the SPX charts on the 4 hour timeframe. The past 2 peaks were almost perfect, and currently at GMT 07.41, it looks like we're at the next interim peak as well.

I am going to try and force myself to be a lot more nimble in taking profits once a trade as run well, and also to give a bit more leeway for error (only if I am disciplined enough to stick to my rules, since the risk-reward ratios would be very nice on those set-ups). This is opposed to my previous train of thought of just holding on to positions as long as I'm in profit. I think I have missed massive opportunities so far and my account is basically back to square 1 now.

Oh, the greed.

DBS, OCBC, SCB Bank and Branch Code

Howdy everybody!

Are you trying to make a bank transfer now to someone else's bank account? Or your own account in another bank? Do you not know what is the Bank Code and the Branch Code? Did all they give you was just a string of numbers?

Well, then I've got a quick and dirty tutorial for you just for these 3 banks! Why these 3 banks? Simple, these are the 3 banks that I bank with, haha!


where BBB is the 3 digit branch code and X's are the rest of the digits of the account

Bank Code
DBS - 7171
OCBC - 7399
SCB - 7144

Branch Code
DBS - first 3 digits
OCBC - first 3 digits
SCB - "0" + first 2 digits

Account Number
DBS - full 10 digits
OCBC - minus first 3 digits
SCB - full 10 digits

I hope this helps at least some people, because I was trying to add my bank accounts as payees for each other so that I can move my money around from each account easier, and I realized that I found this part of the process very confusing.

Don't believe me? See these references! link 1 and link 2 and link 3.

Tuesday, April 15, 2014

The Yield Curve

I honestly found this simple 4 minute video very very educational for me regarding the relationship between the bond market and the stock market. Very interesting stuff!

The COMPLETE Lo-Down on the OCBC 360 Account, Maximising Your Benefits!

12/5/14 Update: Received my bonus interest for the first time, OCBC 360 is awesome!


Hey there, this is MoneyHoney here to give you a review preview, the complete lo-down, the 411, the in's and the out's of this newly announcement promotion on this account that has been around for a while. (while having yet to actually see any of the benefits, the promo just started and I just opened my account)

Now before we start getting into the details of this OCBC account, the first question you should ask yourself is: Why bother with this? Is this even the best account on the market?

With that, I will answer to you a resounding YES!

Fixed deposits in Singapore gives promotional rates of between 1% and 1.5%, depending on lock-in period and also a minimum lump sum. I'm not dissing the FD as a cash management tool, but I think that this 360 Account can be a very strong supplement for your first $50,000 cash. Since the account only gives 3.05% interest on the first 50k, if you like to hold on to more cash than that, it makes sense to park it in a fixed deposit.

Now, what about other current/savings/hybrid bank accounts running around? I did a brief comparison of the DBS Multipler and the SCB Bonus$aver just last week. However, for the sake of brevity I will recap the main points of each account.

DBS Multiplier
- $50,000 eligible for bonus interest
- 0.98% interest with $7,500 cashflow a month
- steps up to 2.08% interest with cashflows above $20,000 a month
- cashflows ONLY include Salary credited by GIRO (PAL or SAL code), Housing Loan, Credit Card payment and Dividends cashed into the account.

SCB Bonus$aver
- $25,000 eligible for bonus interest
- 1.88% interest with $500 SCB credit card spending a month 

As you can see, SCB is really no-frills, but there is a lower cap on the amount eligible for bonus interest. For DBS, the amount cap is same as OCBC, but the requirements are much more complex. You need a rough income of about $7000 and a housing loan to realistically hit the lower tier AND live. Yes, you still need to live, getting 0.98% interest is nothing to hoot about.

So, okay, whatever. Those are the other banks requirements. What are the requirements to get the 3.05% interest on this 360 Account? Nothing in life is free, so we also know that there is some catch to it.

The catch is just fulfilling 3 criteria. You will get 1% interest for every criteria that you fulfill, and a base 0.05% regardless. So the 3 criteria are:

1) Salary credited by GIRO
2) Spend $400 a month on your OCBC Credit Cards
3) Pay any 3 bills every month

Now, you can apply for the account very easily. At the bottom of their 360 Account page, they even list down the ways very simply.

Even though there are 3 ways, I'm going to assume that all you folks here at my blog are IT-savvy enough to apply online. Interestingly enough, there are 2 ways to apply online. You can apply either through your browser and uploading the required files as attachments, or you can download an OCBC App that was created just to apply for this account!

I must admit though, I tried using the App, and it was very clean and intuitive to use. Sadly, the App kept crashing when I tried to submit my information. In the end, I just applied the old fashioned way online. I applied for the account on Tuesday last week. One day later I received an SMS telling me that my account has been successfully opened and I will be received a mail package in a few days! I already have an OCBC Frank Card with a security token, so I was a bit worried that they will send me a whole new token and I will have 2 separate accounts, one for my credit card and one for my 360 account. However, OCBC is very smart and they of course recognized that I have an credit card with them, so when I logged into my iBanking, I immediately saw that my 360 Account has been added to my home page, success!

That was it folks. I applied online and attached the relevant files, it took me less than 30 mins. The next day my account was approved and opened, and the day after that the bank account was linked to my iBanking. Very fast, very simple, very easy, I like! The best part about it was that I didn't have to go down to any branch, bring down any documents, wait in a queue or do anything like that!


First, Salary by GIRO.

It's a bit self explanatory, but I will just write it in my own explanation. Maybe you like my English better! Your salary must be processed by your company and paid with the correct transaction tag of SAL. If you are being paid in cash, cheque or old-fashioned Interbank GIRO from your boss (it could be a small business, it is possible), then unfortunately you will not be able to get this 1% bonus interest!

However, for most people working in companies with a more structured HR department, the next hurdle is making sure your salary being credited is more than $2000. Please take note, that this is the net salary that will be credited to you, after you have been deducted for CPF, SDL and donations! That means your take-home pay must be more than $2000 to qualify! I know there will be some people now that will also not be able to qualify for this 1% then.

I think that this 1% from crediting your salary is the easiest 1% of the 3 criteria to get, so I would encourage everyone to try and credit your salary properly through your HR department! Also, if you take-home salary is not $2000, I hope you can get a promotion soon so that you can meet this criteria!

Second, spend $400 on OCBC Credit Cards

Now, I have a big big secret for you! This $400 on your OCBC credit card expenditure per month can be for MULTIPLE credit cards! That means you do not have to try and purposely shift your spending from one OCBC credit card to another OCBC credit card to cumulatively spend $400. As long as the total amount spent on your credit cards is over $400 a month, you will qualify for the extra 1%.

Please note that when they say OCBC credit card, they mean OCBC credit card. Other banks credit cards will not count. Debit card spending will not count. Also "fake" transactions will not count, such as balance transfers, fund transfers, cash advance and other similar group of "transactions". As much as we want to beat the system, I think OCBC also knows what is not really transactions, and will therefore not give you the bonus 1% if you "real" transactions do not add up to $400.

Even though I did not explicitly ask, it is my understanding that your supplementary card holders spending will be recorded under you, as the principal. So if you give supp cards to your wife, girlfriend, children... all their spending will make up the $400 spending that you need. Not very hard to achieve right?

Thirdly, pay any 3 bills every month

Now, here is the biggest way to "game" or "cheat" the system! I know someone that used to work for OCBC, and he told me that every different OCBC credit card cards is recognized as one unique bill payment!




Therefore! For all those people who are currently paying their recurring bills through other means and methods, they can continue doing so. The easiest way to rack up 3 unique bills and pay them hassle-free is to apply for 3 different OCBC credit cards, and remember to charge a total of $400 in total through the 3 different cards!

Some people will say, "Hey, MoneyHoney, like that not very boliao meh? Still must manage the credit cards, force yourself not to be tempted to anyhow spend, plus must make the annual waiver phonecall." And to you, I say that I agree. I think it's damn lehchey to do keep track and manage 3 different credit cards. Also, you will look very silly with 3 credit cards from the same bank, plus your wallet will become so thick. People with thick wallets don't need penny pinching, interest-maximizing methods, right?

Okay, don't have 3 credit cards then. We will just have 1 credit card (we will need one no matter what, to get the $400 credit card spending 1% bonus!). However, being 24 and living with my parents, what bills do I pay? My father also settles all the recurring household bills for the family though the allowance I give. What then can qualify for a bill payment?

Good news though, I also have more information to share! After calling up the customer service hotline at OCBC, I also got confirmation on some super easy transactions that most people can apply for to be able to get some simple monthly transactions posted on your account!

The first one is Income Tax! This one is bopian, no choice, must pay. However, if you are not being rewarded by any of the other banks to GIRO with them, why not move your GIRO arrangement to OCBC to settle this instead then? Of course, choose the monthly installment plan. It is interest-free, and it also creates a monthly transaction for you, which is exactly what you want!

The second is Insurance Premiums! I was quite unsure about this, so this was the first question that I asked the service agent. She initially said insurance premiums will not count, but after checking again, she said that they would. As long as it is a monthly GIRO arrangement that deducts from your account, it should register as a bill payment! I have AVIVA insurance, and for my product, there is no benefit from paying premiums annually in a lump sum, so this again works out perfectly for me!

So for me, those would be my 3 bill payments. My income tax, my insurance and my credit card spending. All of them can be arranged to be automatically paid through GIRO every month, so you don't have to worry about missing bill payments, as long as you have money in your account. And you will, since you are crediting your salary into the account!

Other possible bill payments which I have thought about is getting a supplementary insurance through and also to make monthly GIRO donations to a charity of my choice. However, I have to disclaim that I did not check with anyone if these transactions are considered "bill payments". It is likely that the DirectAsia monthly premiums will be considered, but I am unsure about the donations. Can anyone comment?

If you have a $50,000 cash balance in your account, every successful 1% hurdle that you complete will give you $500 a year, or $41.60 a month.

If you have more than $12,500 cash in your account earning interest and you would like to get the bonus 1% for making 3 bill payments, I would suggest exploring into arranging monthly GIRO donations, but first checking if it counts as a bill payment. At $12,500, you will be getting $10.40 interest a month. If you donate $10 a month, you will still gain 40 cents, but you also would have made a donation to charity! Not only will you feel good about yourself, but you will also be eligible for a tax deduction when tax assessment comes around :) As your wealth increases, you will earn more interest too, but you are also sharing your wealth! It is a win-win situation! The charity helps make up one monthly GIRO "bill payment" and get a monthly donation, you will get the excess interest earned and also help out a charity! Maybe all 3 transactions could be charitable donations if you have enough recurring transactions and pay your bills with other banks!

In Conclusion

I would like to encourage anyone who is serious about saving money in a relatively risk-free way to consider this account, especially for those young working people. As I have demonstrated with my examples, hitting all 3 criteria to get the maximum 3.05% bonus is not actually as hard as it looks!

The account opening process is simple, fast and easy. The product is currently the best on the market. What are you waiting for? Wake up your money and make it work for you!

I would like to add that the DBS Multiplier and SCB Bonus$aver should be tools used after maximizing your benefit in your OCBC 360 Account. Especially if you have any excess cash that you would like to still have in cash equivalents, but still earn higher rates than current fixed deposits. However, as I mentioned earlier, with more accounts and more credit cards, your life can get more tiring and very messy trying to keep track and manage all these accounts and expenses. For now, I think most people do not have $50,000 liquid cash, so this OCBC 360 Account should be very useful for most people!

Disclaimer: I have still not received my OCBC 360 Account package as of 15/4/2014, which is the timing of writing. However, I should be receiving it within the next few days. I am not paid by OCBC or anyone in any form to speak or share my opinions on their product. This post is entirely my personal opinion on this subject and you should do your own research to supplement the "things you read on the internet". I have not enjoyed or received any of the bonus interest payments offered by OCBC yet. I do not know if any the transactions that I plan to incur monthly will qualify as bill payments, so please do not do anything rash without checking with relevant people. I do not promote any of the other products that I have spoken about here, and I do so only for the purpose of sharing the information that is made available to me. I am not trying to misrepresent nor profit from this post or the content in it. Please see ANOTHER disclaimer on the left bar of my blog, thank you.

Monday, April 14, 2014

Friendly Personal Self Reminder

I will be looking most likely to be sticking to the SPX short, but if the IWM or QQQ show potentially good risk-reward set-ups based on resistance levels, I might consider to take them out on a date as well.

It is not easy monitoring the different indices. As related as they are, they don't behave the same way day to day, hour to hour, making them imperfect substitutes of each other.

For now, I will try to stay disciplined and STFR comfortably, until we reach the 200 DMA. I'll see how things go then, hopefully I don't get shaken out by my nerves and the volatility!

Sunday, April 13, 2014

Possible 2nd Credit Card?

I found this Singaporean blog very very very useful! The author is an expert on credit cards and all the promotions related to them. He is also quite well versed in the different bank promotions too. You should definitely check it out if you're living in Singapore. He highlights so many good deals!

Anyway, after reading through some of his posts, I am thinking of getting a 2nd credit card to supplement my OCBC Frank card. I am thinking of the CIMB Platinum MasterCard.

Firstly, it is a MasterCard, while my OCBC Frank is in Visa.

Secondly, it gives you a immediate direct 0.5% cash rebate on any spending, with no monthly spending or rebate cap. (same as OCBC)

Thirdly, there is also a 1% cash rebate for overseas spending. This is useful, especially since overseas merchants will have no tie-ups or promotions with almost any other card.

Fourth, the rebates are immediately used to offset the current month's spending. Therefore you are saving in real-time, not one month in the future.

Fifth, the card has no annual fees, so there is no yearly hassle of needing to waive fees.

Lastly, as a bonus, a 3.3% bonus rebate (cap at $50 rebate per month) will be given to big-ticket spending items under Insurance, Education or Home Furnishing and Appliances if the transaction is more than $500. This means any transaction between $500 and $1500 will qualify for the 3.3% bonus rebate, while transactions over $1500 will hit the monthly $50 cap.

The appeal of this card to me is essentially it's fuss free disposition. I wonder if I can get approved for the card and use it when I go to HK later this month. I shall think about it tomorrow!

Supplementary Retirement Scheme (SRS) and Income Tax

The Supplementary Retirement Scheme (SRS) is, I suppose, a Singaporean solution to the US' 401(k) or the UK's SIPP (not ISA which is taxed on entry and not exit, the opposite of a SIPP). It is a retirement account aimed to help grow savings by offering to waive tax off the voluntary contributions into the account, with the catch that you can only withdraw these funds with special tax treatments after a certain age.

The tax relief is dollar for dollar for every contribution made into your SRS, up to a pre-determined yearly limit (which is $12,500 now).

However, given that income taxes in Singapore are considered low by global standards and that the costs of living is expensive by global standards as well, there is a thin line between deferring current spending to save on taxes and have a larger retirement amount, versus contributing too much into these accounts that your current way of life is crippled and you may have no choice but to pre-maturely withdraw some of your SRS savings and get slapped with a higher tax! However, I will give my personal opinion regarding when and how much I think is the optimum amount to to be placed in the SRS.

I think it is extremely important to accurately forecast your expenses and ensure that the money going into your SRS is exclusively meant for your retirement needs after age 62. If there is a good chance that you need the money before then, do not put it in your SRS! The 5% early withdrawal penalty and the taxation over current income will definitely be an extra burden that you can do without. Only spare what you know you will really never need in a long time into this SRS account.

Singaporeans have no withholding taxes, well because, we are from Singapore! Since my brain is of limited space, I have exclusively decided to refrain from absorbing any information regarding SRS and foreigners, sorry people.

The last reference that I have is regarding the withdrawal of SRS funds and how they are treated tax-wise. The most important thing to know is that you are able to withdraw your funds over 10 years, so there is no need to withdraw it all in one shot. The benefit of withdrawing your funds periodically over these 10 years is also so that you can get the maximum benefit of the specialized tax treatments.

Optimally, your SRS account will only have $400,000 when you retire. This is because the most optimal annual withdrawal rate is $40,000 a year. Only 50% of the withdrawn income is subject to tax, meaning that $20,000 of your SRS withdrawal will be tax. Good news, income under $20,000 a year is NOT taxed. That means, $40,000 a year, tax-free!

My Personal Opinion

Please take note that this is just my personal opinion, and I am just pulling numbers out of a hat right now. I'm trying to use numbers so that I can make this easier to understand for everyone.

To optimize tax benefits, value at age 62 should be $400k. Let's be crazy. Let's assume no capital gains growth because no investments are made, and that this SRS account is just purely used as a tax deferred cash savings. To reach $400k, you would have to max out contributions for 32 years. If you're planning to work until 62, that means you have to start maxing out your SRS from age 30.

Now, assume you contribute the maximum limit of $12,500 and have a conservative 5% growth in your SRS account while you actively contribute. Using Excel and working backwards, your first year of maximum SRS contributions should be when you are 43 years old.

Now, what if you want to retire early? I would personally like to retire when I am 55. That means after age 55, there will be no more capital additions to the SRS account. The value of the account will then have to appreciate to $400,000 by the time I turn 62. Using Excel and working backwards, my first year of maximum SRS contributions should be when I am 39 years old.

Tax-deference only, no investments: Start maximum contribution at age 30
Work until 62, 5% returns: Start maximum contribution at age 43

Work until 55, 5% returns: Start maximum contribution at age 39

But what if nominal returns were 8% instead? The STI returns 5% capital gains and 3% dividends and their compounded effect can bring returns up to 9%. Assuming friction, what if we can get 8% returns then?

Work until 62, 8% returns: Start maximum contribution at age 46
Work until 55, 8% returns: Start maximum contribution at age 44

As you can see, the larger the expected compounded returns, the bigger the difference that starting investing early does. By starting just a mere 2 years earlier, that is equivalent to not having an extra 10 years of contributions. Therefore, probably the most optimum time to start contributing the maximum amount to your SRS account is around 40.

However, now the real question is, is it more cost effective (tax-wise) to occur capital gains in your SRS account and therefore make early contributions? Or is it more cost-effective defer SRS contributions until the optimal age and make cash investments instead?

To tackle this question, I will be fixing some parameters. Assume that a person only makes an investment of $12,000 a year. If it is going towards his SRS account, the entire sum will be invested tax free. If it is not invested in his SRS account, it will tax at the prevailing income bracket rate.

Calculating the total after-tax returns of investing $12,500 into your SRS account every year from age 25, you would get $2.65 million over the 10 years after age 62. If you were invest after-tax balance of the $12,500 until age 45, and started maximum SRS contributions at age 46, then the final amount to be received at age 62 over the next 10 years is dependent on the tax-rate.

If you are being taxed over 7%, it would make more sense to be invested with the SRS instead. However, the biggest difference is that $2.25mil will be always and immediately available for your usage when you are aged 62, with no restrictions. The $400k in the SRS account will slowly be paid over 10 years.

Therefore, considering the fact that the SRS account is locked and frozen until you're 62 to withdraw without penalty and with preferred tax treatments, it is only a small price to pay in the final ending value to be able to have the flexibility and the ability to be able to use your investments whenever you want.

In conclusion, unless you are really very very very rich (no need to worry about meeting liabilities), it is not advantageous to lock up your money in your SRS account for the preferential tax treatment instead of doing cash investments. In the most extreme case scenario, if you are being taxed in the 20% bracket from age 25, you are only losing 15% to have this benefit. If you are in the 11.5% bracket, you are only losing 6% for the flexibility. However, realistically since most people are not in the 11.5% bracket in their early 25s, there is no practical benefit from starting very early to fund your SRS account. The SRS account should be ideally aimed to be withdrawn at age 62 at the optimum $400,000 amount.

PS. *Do note that the lower the expected compounded returns, the larger the difference between the accounts and the more it makes sense to be tax deferred. Therefore, if returns are expected to be good, do not contribute to SRS. If they are expected to be low, SRS contributions makes a larger difference.

Wednesday, April 9, 2014

Everybody, Shorts Shorts Shorts!

Here's a picture of my current active trades in the DJIA 30 and the S&P 500.

I only took DOW trade today after seeing that RUT and QQQ were showing much more strength and diverging from the DOW and the SPY.

Turns out my hunch was pretty legit, which the DOW showing the most downside today while the QQQ is showing strength. It was the first to sell off, it's been sold off the most violently and it has reached a logical support. I fully expect it to linger before either making a weak bounce, but I would wager it's more like to break to the downside. I am on that QQQ short bet by the way, so I do put my money where my mouth is at.

Just wanted to share with you just how close my stops have been lately. Both of these charts were just a breath's hair away from being stopped out, but it did a U-turn just before it would have. I have to say, I've been pretty lucky lately.

One more thing, you can see that I took the SPY short at 1894, and I took it with a nice big fat position. No matter what happens, my stop losses have all been strategically placed that I will at the worst case scenario, be as poor as I was on Monday, haha.

One of the things that has been surprisingly me actually is the strength in the STI. I took a short position earlier today, but looking at how things are going, I have a feeling that I might get stopped out tomorrow. Oh well.

Sorry for the uninteresting posts lately, I've been busy at work and pretty tired trying to be agile and responsive in this market. Anyway, time to sleep, long day ahead of me tomorrow. Stops are in, it's going to be a nice babies sleep tonight!

Tuesday, April 8, 2014

TIGHT Action

Just look at how TIGHT my stops were today! I think I'm getting a lot better at placing stops these days. Or maybe I'm just lucky, or it's a combination of both.

As usual, I was playing the short side today. I loaded into IWM, SPY and QQQ shorts and I was almost massacred by the QQQ spike you see there.

The IWM and SPY were much more well behaved, leading me to believe that the QQQ is quite overdone, and I should be looking towards either the IWM or the SPY to load up on more shorts.

I've been incrementally lightening up my risk appetite when the charts goes against me, but I usually cover at breakeven points, while I let my positions with a better entry run longer. A kind of psychological buffer zone for myself, even though I know it's technically the same thing. I don't lose much, but I also don't win as much. Leveraged is a double edged sword, and it's not easy playing it right.

I've already set all my stop losses for the night, so I'm going to sleep easy knowing that I made some pretty good returns on my short bets so far. I'm looking for a night clean exit indications for the rest of my currency trades so that I can just focus on the indices shorts.

I will try to keep my stops tight enough that I get stopped out in the relief and final failing fake rally, but loose enough that I can slowly digest any downside as the market slips. What do I think? Fake rally will be due soon, followed by a nice slow and grinding unwind of all the leveraged bets in the market until Q3 or as late as end of Q1 next year perhaps. Who knows, we shall see!

Put your stops up so you can sleep easy tonight, I know I will. Good night!

Monday, April 7, 2014

Quick Peek at Retail Bonds

For some reason after reading a post by ASSI about Sabana REIT's 4% certificates, I was under the misconception that they were issuing retail bonds with 4% coupons. Silly me.

Anyway, in my mind I thought, "Wow, just a while ago CapitaMalls was offering 3.08% 7 year bonds. 4% for 4 years sounds great!". Of course, that prompted me to head over to SGX to check on the yields of the retail bonds offered there.

Here's what I came up with:

I used this website to calculate the current offer yield. (I didn't use the calculation for the SIA and LTA bond because of the short maturity and odd coupons, I calculated it roughly off-hand... I might be wrong!)

I purposely left out Genting and TigerAir because I didn't want to go find out when they were callable and other confusing details. I also left out Olam since the bond is in US$.

What's left is very slim pickings of just 4 retail bonds! I've added in what I hypothesize would be an average yield for other SGD denominated bonds if there were any to be issued with those kind of maturities.

Anyway, it was just an interesting experiment for me to do. The bond space in Singapore does not look attractive at all to me, haha.

PS. If Sabana REIT had really offered 4% 4 year retail bonds, I would sign up for the issue. Too bad I'm goondu!

GBP/HUF Exit, Finally

I've been holding this trade since the middle of February, for about 2 months! It's such a weird pair to be trading on, but the risk-reward level at that point of time made for a very favourable technical set-up, so I took it.

Initially, the trade immediately went against me. However, the two stop losses above are actually behind massive resistances from previous highs in late 2011 and mid 2012. Knowing that, that's why I doubled down on my position, but still kept my stops tight. After the second position, things got better and has since been pretty good to me.

The reason for exiting the trade is that the MACD is now under the zero line, the SlowS is oversold and the pair has stalled from going lower at it's mid March low. I've milked the trade for what it's worth, and I'm pretty happy about sucessfully trading this pair. I swear, I think I was the only person on CMC trading this.

Made a cool 3.68% risking only 3% initially! From about a week ago the risk evaporated and the question has only been, when should I take profits and how greedy should I be? I'll now be focusing my attention on playing the short side of US equities. I'm trying to look out for a dead cat bounce here, but we shall see what we get!

Sunday, April 6, 2014

SCB Bonus$aver, DBS Multiplier and OCBC 360

12/5/2014 Update: I got the bonus interest from OCBC 360 credited into my account!
15/4/2014 Update: New post regarding the OCBC 360 Account in detail!

When people think of risk-free options, people generally think of US Treasuries. But in Singapore, people don't really see it that way. Instead, risk-free options to people are only fixed deposits (FDs) or savings accounts (SAs).

For the past few years SA interest rates are beyond ridiculous. The local banks give only 0.05%. The other bigger banks like SCB give marginally better rates, between 0.1-0.2%. The best rates are in fact from the regional non-Singapore HQ banks, such as Maybank, CIMB, RHB and even BOC, with better rates at roughly 0.4%.

All-in-all, the SA playing field in Singapore has been pathetic, to put it nicely. The best rates are currently coupled with lots of additional requirements and don't really seem to be like a savings account. I'll write more about this after the Fixed Deposit rant.

So, FDs in Singapore are widely popular, especially with the older folk. Risk-free, but with higher interest rates, they just love it. A popular strategy for the ever fearful is to split up your savings to $50,000 lots and invest in different banks when they have different promotions. The main driving rationale is the fact that only the first $50,000 of any deposit in Singapore is insured under the SDIS.

All non-promotional FDs are never ever looked at by the average Singaporean. Unless it is a special rate, no one bothers. The standard FD rates in the local banks are worse than the SA rate in the non-local banks, it is really depressing to look at. However, there is a website, aptly named Singapore Fixed Deposits, that is regularly updated when there are FD promotions, alerting people about the latest rates offered by the different banks, as well as the terms.

Just eyeballing it, the average rate is about 1% for a 12 month deposit of minimum $20,000. Usually the rates can inch up higher with a larger minimum amount, but the marginal increase in interest rate is well, marginal. So, for the average person with $20,000, the best risk-free option seems to be putting it in a FD with a bank during a promotion, right?


Oh gawd, I sound so pompous and pretentious when I did that, haha. Don't mind me, I'm just a bit excited, haha.

Now, back to the Savings Accounts that are not really like savings accounts. Why do I say that? Well, some of the banks are offering bonus interest rates on account balances if certain criteria are met. The most common criteria is spending a certain amount of money. The extra interest offered is actually quite substantial in some cases. Let me list the options we have available today.

Standard Chartered Bank Bonus$aver

So, here is SCB and their account offering the added interest. Basically, all you have to do is charge $500 to a linked credit/debit card a month, and you will get 1.88% on the balance in your account, up to $25,000. Although the name sounds misleading, from my investigation, you are not required to credit your salary into this account to be eligible for the promotion.

DBS Multiplier Prgramme

By and large, this is the crappiest account ever. The interest rate received is pathetic and an insult to anyone who has these kind of cashflows. If your cashflows are less than $20,000, you're better off opening up an account with SCB and charging $500 to your SCB credit card. Only after you've cleared the $20,000 hurdle, do you get interest rates better than SCB. However, the plus side of this account is that the interest is payable on the first $50,000, as opposed to only the first $25,000 at SCB.

Personally, I think this account is a farce and only very specific individuals would be able to take full advantage of this account to its full potential. Definitely not even worth a look unless your monthly income is over $10,000.

OCBC 360 Account

Just announced today, this account has received the attention of Singaporeans almost immediately. Even my dad knew about it. The likes of 15HWW and InvestmentMoats have already given their 2 cents on this account.

There's no need to compare to DBS, they are completely blown out of the water regarding this. Compared to SCB though, the advantage is still very obvious. If all you did was to credit your salary to OCBC and spend $400 ($100 less than SCB!), you would already be eligible for 2.05% on your account balance. If you paid extra 3 bills every month, you'd get an extra 1%. The main kicker here is that up to $50,000 is eligible to earn interest on!

How to milk these babies for what they are worth

1. Credit your salary to OCBC
2. Pay 3 bills on OCBC
3. Spend $400 with OCBC credit card
4. Spend $500 with SCB credit card
5. Deposit $50,000 with OCBC
6. Deposit $25,000 with SCB

Annual interest earned on $75,000 cash = $1995

Therefore, as long as you have at least $75,000 that you would like to hold in cash, this is the most optimum way of earning the highest risk-free returns on them. It will only set you back $900 a month + 3 bills. It shouldn't be too hard if you are holding onto $75,000 cash instead of investing it! Cash holdings should not be more than a few months of living expenses. However, I must concede that given this strange investing environment, holding extra cash is not necessarily a bad idea.

I have been looking for a suitable risk-free alternative that gives me good rates. I will definitely be opening up an OCBC 360 account based on this, and I will get my salary to be credited into my OCBC account to generate 1.05% risk-free. Who the hell needs fixed-deposits now?

If I can, I will try to hit the extra 1% hurdle of spending $400 a month and earn an extra 1%. Each 1% is worth about $41 a month if the account has $50,000.

Finally, I think then I will move back all my cash equivalents to this account, selling off my STBF units and move back any cash balance into this OCBC account and earn a risk-free 1%. I will also get this OCBC account linked to my DBS, SCB and POEMS so that I can make quick transfers.

Sorry DBS, but your days are number. I will be looking towards downgrading my account completely to the DBS Remix eSavings Plus so that I will have no fall-below fee. I will have nothing but maybe $1000 dollars to cover my insurance deductions and for ATM withdrawals. Times are hard and you don't seem to be changing with the times.

Disclosure: I am a client of DBS, OCBC and SCB and I do have banking facilities with all 3 banks. I am not paid to review their products and my opinion on this matter is solely my personal expression on this subject. Please conduct more independent research before making any decisions that may have been unwillingly suggested from this blog post. Please read the disclaimer on the left side bar.

Update from Short Side Of Long

I know I harp on gold too much, but look at this yet another amazing chart from SSOL.

My main takeaway?

Gold has not been so crappy based on rolling annualized Y-on-Y returns since 1982.

Before this 1982 decline, gold was in the biggest gold bubble ever seen, which YoY returns over 200%. That's just crazy. Was that a bubble? I think so.

Now compare it to the past performances since the new millennium. YoY returns of around 50%, quite modest and sustained, but not crazy bubble-like returns.

So here's my beef, the annualized losses in the past decline seems extremely overdone, especially considering that pre-1982 was bubble-like, while pre-2013 was not bubble-like.

I honestly cannot expect further deep YoY performance from gold. That doesn't mean gold prices can't drop, it just means that we won't get the same kind of steep declines anymore. If it drops, it's going to be a steady grind down.

Not comforting at all, but way more comforting than the possibly of a massive drop!

Future Ang Pao? Post-Secondary Education Account

Earlier this month, I got a letter from the Ministry of Education regarding this Post-Secondary Education Account (PSEA) that I have.

This PSEA is basically roll over from any of the Edusave Account money that I had when I was a young boy studying in the Singapore school system. Strangely, I did not use up all the money in my account after I had left Junior College. I don't think any of the money was used to pay for my University tuition fees.

Anyway, the bad news about this PSEA is that I have some money in it. When I'm 30, the account balance will be transferred over in my CPF OA account. So, this money is money that I pretty much won't be touching for a very long time.

However, there is a plus side as well. The money in the PSEA account will also generate interest, and the interest rate is pegged to the CPF OA account as well! That means this small balance will be producing rates of 2.5% annually until I turn 30 and the money is transferred over to my CPF OA for custody.

Since I have 6 more full years before I turn 30, by my calculations... I shall be getting a very nice $1400 ang bao from my younger self, with help from the government of course! I'm sure I will forget this amount in a few weeks time and I will be pleasantly surprised when I'm 30. The money is better off compounding there, than just sitting in my bank account doing nothing. I'm glad that I have unseen money working for me. Huat ah!

A Golden Revelation

So I was reading an article on ZeroHedge about Chinese Gold. Yawn, nothing interesting, right? WRONG.

One link led to another, and I ended up on the website of Koos Jansen, a very smart Dutch guy who has been following this whole trend of Chinese gold. What was supposed to be just casual browsing and looking to see his style of analysis, I stumbled on this extremely interesting page titled: GOFO Turned Negative AGAIN: The Consequences and in the comments, it also led me to another page written by Turd Ferguson titled: Negative GOFO and Rising Gold Prices.

So what is up with this GOFO thingy, and why does it matter? GOFO stands for the Gold Forward Offered Rates, which is showed on the LMBA here. Just click on Table > GOFO. A negative GOFO means that the lending differential is now currently favouring NOT lending out gold. Of course, this means that either the supply has dropped, or demand has increased. Either way, one thing seems to be certain, and that is higher gold prices.

Don't believe me? The GOFO turned negative before in the past. On 7 days in history.
1999: Sep 29, 30
2001: Mar 9, 12
2008: Nov 20, 21, 24

So, in the last 5000 or so days, the GOFO has turned negative about 0.14% of the time. So the GOFO turning negative, well it is a thing. A big thing. Look at the long term chart below.

As you can see, clearly in the previous instances, being bullish on gold when the GOFO has turned negative has always been a good entry point in the long term.

Now, what has happened in the past year. Well, the GOFO been negative quite a lot of times. No, not like 5 or 10 times like the past 5000 days. More like 100 out of 200 times. And what did those turning points mean for gold? Let me show you!

Green shading is GOFO negative, Red shading is GOFO positive. Nice? Yes, I like it to. However, this chart is only showing until 3rd week of Feb. Let's look at this new chart of the same thing by Koos, but updated to include the latest flip-flop of the GOFO.

Aww yeah baby. Koos' chart is a much bigger close up of only the July period since the GOFO starting swinging in and out of being negative and positive.

All along, I've always been thinking, how does one evaluate gold? For stocks you can look at financial statements, for bonds there are interest rates. For gold, just the price? I guess I was wrong, this adds an entirely new dimension to help me analyze gold!

As Turd puts is, "Buy when GOFO is negative. Be cautious, sell or hold off on new purchases when GOFO is positive."

If only I knew this earlier.... I took positions in physical gold in late Feb and early March, just before and after the GOFO flipped positive again. Good news though, I did dilute my position by about 20% by buying in on the 2nd of April. Had I known about this relationship, I would have not added to my position in March, and also sell off to realize a small profit from my late Feb position. Oh well, anyway what's done is done. I have strong hands, so I'm not worried about it too much. This does give me a lot more confidence in speculating with commodities though.

Anyway, I like this newfound GOFO discovery. I'm going to consider using this is conjunction with other indicators to take a relatively low risk scalping position to play gold long/short until they correct themselves. I have to say, very interesting stuff!

Weekend Reads

This Saturday, I only read two articles of particular interest for me.

The first article is by Millennial Invest, and in the article it is discussing the alarmingly low risk tolerance of millennials, like myself. The cost of this low risk tolerance will be a huge hit to retirement portfolio values, so here's a few interesting graphs from the article.

The first graph is showing what the header of the graph says, the average real growth of $1 in the stock market given different starting points. I'm about 25 I suppose, so every dollar now ought to be $14 in the future when I retire if I invest aggressively.

Now here is something a bit more encouraging. If you're really a long term investor, as long as your investment horizon is over 25 years, you will definitely experience real growth in your investments even through horrible market scenarios. Things definitely look a lot more uplifting if it is extended past 30 years.

And of course, to give false hope, this graph shows the BEST case scenarios. Take it with a pinch of salt. The main point of me including this graph is to show the massive outperformance equities can provide if the time is right.

Moving on, the next interesting read is actually an SSRN research paper talking about the use of Utilities as a sector to rotate between high beta and low beta.

4% outperformance a year.... that is statistically very very relevant! Trying to replicate their method is rather simple as well. Just go onto StockCharts, add in the ROC and use 4 weeks. Click on this if you're too lazy, haha. If ROC is positive, XLU. If it is negative, VTI. That's it. Just looking at the last signal that the strategy would have generated, a sector rotation into XLU would be called for almost exactly at the start of 2014. YTD, the XLU has generated 9.39% of gains why the VTI has been sluggish and has only generated 1.41%.

I honestly find this strategy extremely interesting! The paper also talks more about what are the sources of this strategy's outperformance. Mainly, it is the fact that the Utilities sector is defensive, low-beta and more fundamentally focused than the rest of the stock market. Increased interest in the XLU points towards decreasing confidence in the VTI, which forewarns tail end risks and market volatility. I think it makes sense to me. I'm just amazed but the level of outperformance generated by this seemingly simple strategy!