Should I Buy Stock Now? (Part I)

Is This The Right Time?

God know! The obvious answer is god know! But yet this is the most frequently asked question from my friends and colleagues. The prices of most companies are quite cheap now as compared to end of last year. For one thing, I am currently sitting on an unrealized loss of approximately S$10,000!!!

“I thought you are a guru?”

Firstly, I never claim that I am a guru; I am still learning. Secondly, even the experts can also bankrupt let alone suffering losses. Let me share a part of the story from the Romance of Three Kingdom ( 三国志 ) with you. After retreating and avoiding Cao Cao’s (曹曹) attack, Zhuge Liang (诸葛亮) finally decided to defeat Cao Cao once and for all at Chang Jiang (长江) – with the help of Dong Wu (东吴). To persuade Sun Quan (孙权) to partner with Liu Bei (刘备) to repel Cao Cao’s forces, Zhuge Liang presented his strategy that guarantees success.

All the ministers contributed their fair share in trying to topple Zhuge Liang's plan. One of the ministers countered his proposal by asking Zhuge Liang – “if you are that good, can you explain why your forces were defeated and escape from Cao Cao’s forces until you reached Jing Zhou (荆州)". To this question, Zhuge Liang answered, “there is never an undefeatable army in this world. Being able to protect our people, to bring them along until we reached Jing Zhou is already a great success paving the road to greater victory. We won the heart of our people; this is the greatest victory".

In the War of Chi Bi (赤壁), Cao Cao lost nearly one million soldiers thus equalized the three forces in the Central. We called it 三国鼎立.

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And lastly, my losses does not affect my daily life at all. In fact I am planning for a holiday next month. Yes I am upset but the loss will not upset my life. The reason is simple - I didn't gamble and the companies I invested in have reasonable fundamental plus yield.

The Threat

I will not beat around the bush. IMHO, the uncertainty in US economy is very real and probability of a recession seems to be getting higher. US consumer confidence is dropping and we just don’t know how deep this subprime problem is. So for anyone who claimed that US recession will not affect us is telling the biggest lie – our products exported mainly to US and Europe. China and India is not big enough (does not have a large stomach) to replace US demand. So how can someone say taht it will not affect us. Economic downturn will cause the stock market to clash which recent correction (since end of 2007) is already bad enough. And I think that it’s about time for the bear to sleep.

And not forgetting that oil price still hovers around $100 mark. One of my friends who is current working in a fund house believes that high oil price is “OK”, i.e. not a concern. I totally disagreed with his views even though he is working in a fund house and I am not. Why? Because I have commonsense. Like my lecture used to say, “commonsense is the least common human attributes. High oil price will increase production that will ultimately pass on to the end consumers. And so the workforce will demand high pay rise to cope with high living costs. And when labour costs went up, businesses will……. The whole chain effect, if uncheck, will finally explode. I mean it has to be.

Reported in Business Times dated 20 Feb 2008, MAS MD Heng Swee Kiat said that a sharp and deep recession in the United States will hit Asian economies. The following is an excerpt of the newspaper report.

"Wading into the debate on whether Asia has de-coupled from the US, Mr Heng said the region has significant links with the world's biggest economy through trade, investment and finance. Only if these linkages are significantly weakened can Asia be said to have de-coupled from the US, he said yesterday at a fund management conference.

Still, the short-term outlook for Asia remains generally positive barring any sharp deterioration in the global economy, he noted. The current forecast is for Asia ex-Japan to grow at a fairly healthy pace of around 7.8 per cent in 2008, one percentage point lower compared to last year."

So Is It The Right Time To Buy Share?

In my opinion, you should shun away from the stock market until the sky is clear. However, personally, I don’t think it is going to be cleared this year. There may be bull-trap but I have no faith that all this economic problems can be completely resolve this year. Having said that, and unfortunately, you also can’t place your spare cash in the bank. I strongly discouraged you from doing so. For many years, local banks have been giving out pathetic interested rates; rates that are below the inflation rate. And now this problem compounded with inflation rate at all time high. Putting large amount of spare cash in whatever bank account will ensure that you suffer a lost in money value.

“I’m still waiting for your recommendation.”

I propose three options to maximized your returns:

1) Pay up whatever debts you have as much as possible. In times of high inflation, where money value eroded, clear your debts with all your spare cash unless you know of alternative investments that yield even higher returns with calculated risk. For example, try to pay up your car loans or housing loan as much as possible if the financial company allows you to do so. Let your creditors deal with the high inflation problem.

2) Transfer your spare cash into the CPF. Thereafter, you can move some money from the Ordinary account to the Special account. The Special account gives out at least 4% rate currently and is meant for retirement planning. However, remember that by doing so, your spare cash will be locked up in the CPF.

3) Buy high yield and fundamental stocks but this requires strategy. Although the stock market is quite risky now, there are still a few fundamental stocks that give out good and presumably stable dividends yield. One such group of companies is the REITs.

In my next sharing, we will look at some of the REITs that look attractive. Before I close, just to give you a hind, Suntec REITs looks attractive to me.

When Inflation Is All Around Us

Inflation! Inflation! Inflation!

If you’ve been following the news, you should know that we are in an age of inflation. Many countries including Singapore are facing the pressure of inflation and worst still on basic needs – food, transport, housing etc. And doubly worst still, the poor felt it more than the rich. Recently I went back to office during Saturday to do some work. And then I was having a breakfast with a driver. I ordered my usual Nasi Lemak (Malay’s coconut rice) but the driver was eating bread. And it was suppose to be his lunchtime, as according to his schedule, he needs to have early lunch. I advised him to have proper meal especially when he is a frontline operator. He replied that the Nasi Lemak price when up by 20% so he rather take bread. In any case, he will be off-duty after next trip and he can eat at home if he is still hungry. When I looked at the price again, then I realized that it was indeed inflated by 20%.

And if you think that I don’t bother with the price because I am rich, get real! I banned a few food stalls near my place for inflating their price ferociously. Fortunately for me, not every stall adjusted their price. So nowadays I tend to patronize those stall that maintained their selling price.

“Isn’t that stressful as you need to monitor food prices and ban this stall and that stall?”

No really. I don’t deliberately monitor food prices but if I happened to find out, then I will make necessary adjustment. And anyway, I am indifferent when it comes to choosing food in the hawker centre. Rice or noodles, duck or chicken makes no different to me as long as the quality and quantity is reasonable.

The following are excerpts from Business Times to you a feel of the inflation problem worldwide.

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Business Times - 20 Feb 2008

Inflation in China hits 11-year high, set to rise further

(BEIJING) China's inflation rose to its highest level in more than 11 years in January after devastating snowstorms worsened food shortages, according to data reported yesterday, and analysts warned there might be sharper increases to come.

Consumer prices in January climbed 7.1 per cent from the same month last year, driven by an 18.2 per cent rise in costs, the National Bureau of Statistics reported.

Economists warned that despite efforts to ease food shortages, China faces pressure for prices to rise across the board due to higher wages and costs for coal, iron ore and other industrial materials………………

………….Surging food costs are a political concern for Chinese leaders because they hit the poor majority hard in a society where families spend up to half their incomes on food.

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Business Times - 20 Feb 2008

Higher food costs push up US consumer prices

WASHINGTON - Rising food costs helped push US consumer prices up for a second straight month in January by 0.4 per cent, more than offsetting a moderation in energy price rises as inflation showed signs of gaining steam, according to a Labour Department report on Wednesday.

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Business Times - 25 Feb 2008

S'pore's Jan CPI jumps 6.6%

SINGAPORE - Singapore's consumer prices rose 6.6 per cent in January from a year earlier, government data showed on Monday, as high food, transport and housing costs kept annual inflation at a 25-year high.

From a month earlier, consumer prices rose 1.5 per cent on a seasonally adjusted basis, the Department of Statistics said in a statement.

The Rich Have Money Work For Them

Lesson From "Rich Dad Poor Dad"

I was reading Robert K's "Rich Dad Poor Dad" again recently. Just like the Bible, we should frequently revisit these teachings to remind ourselves of things that we know but may have forgotten due to our “busy schedule”.

Some of my friends asked me if I have earned my first million after all these readings, sharing and philosophy. I told them I am still working on it. I don't even have a few hundred thousands in my bank account, talking about millionaire! But that does not means I suppose to be ignorant; that does not stop me from reaching that goal – financial freedom. I guess it's like watching TV. My all time favourite ACCA lecturer Mr Fred Keer used TV as an example to illustrate that not knowing how something was constructed does not stop you from using it.

……ok may be this is not a good example. Pardon me.

Solving Long Term Problem

Let me quote page 49 of “Rich Dad Poor Dad” to you – “Remember what I said before: a job is only a short-term solution to a long-term problem. Most people have only one problem in mind, and it's short term………”.

Recently, one of my colleagues mentioned that her husband intends to switch to another company for job security reasons. I overheard it and I kaypo (nosey) and asked her whether if her husband's decision will make any different. This is because job security problem occurs everywhere and everyday. Remember those days when we used to say that the SAF (the Army) offers iron rice bowl? Not any more. Today and most of my ex-SAF colleagues are in the commercial sector. I asked my colleagues again whether if she knows the bigger problem? I ask her why would she (and her husband) wants to earn a higher income? Is it for bigger house or car, or to maintain bigger monthly bills?

Fortunately, she replies that she is aware of the bigger problem – the long-term problem as described by Robert K. If you ask me why I work hard for promotion or seek other sources of income, I assure you that it is not because I need it to support my bills. In fact, my close friends know that I am debt-free. My living cost is extremely low and I can survive working in MacDonald – yes I'll be poor but I can survive.

I want higher income so that with extra money, I can use it to “create” more money. I want to use a short-term solution (higher pay) to solve a long-term problem –financial freedom. Unfortunately, fortune god has not been kind to me during recent S$10 million TOTO draw. I'll try harder next year. Having said that, you must also know how to make your money work hard for you. Otherwise, even if you are rich, you money will leave you someday, somehow.

“The Poor and the middle class work for money. The rich have money work for them” – Rich Dad Poor Dad.

Example Of My Uncles

This afternoon, my uncle came to my house to deliver his son's wedding invitation card. This uncle is my mother's 2nd elder brother. The wedding will be held at in a restaurant in Boon Lay Shopping Centre. For those who stay at western side should know that Boon Lay Shopping Centre is a rather old shopping centre and a little bit run down. It is definitely not like Jurong Point or Causeway Point. I don't mean that couples need to show off and hold their wedding dinner at Fullerton, although I had been encouraging my colleagues such as Kim Song and Valarie to do so. Anyway my point is that all my friends and colleagues will usually hold their wedding dinner either in a respectable hotel or at least a restaurant in town. Any place but a restaurant in Boon Lay Shopping Centre. And please do not think that I am despising them. Let's me share with you a little history on uncles and you'll understand what am I talking about.

When I was still a boy, my four uncles were relatively rich. I don't think they were millionaires but certainly, they were cash rich and had very strong purchasing power. They were able to spend on big car/house, visited big restaurant frequently, and gave bigger red packets during Lunar New Year etc. I understand from my mother that these uncles were doing construction work. I don't know the details but I presumed that they were sub-contractors. Before the slump of the construction sector (that recovers now), many people had earned big bucks by just bidding for a small portion of a construction work and then employed foreign workers to get it done. It was a highly lucrative work and as a result, all these sub-contractors were relatively rich. Big house, big cars, holidays and nightclub were common phenomenon.

Unfortunately, most of them didn't make it today. After the slump of the construction sector, many either bankrupted, or back to the “employee community”. In fact, many listed construction companies had either gone busted, delisted or re-structured. One of my company's drivers also used to be a sub-contractor. He shared with me that those years, his annual income topped $100,000. It was easy money and he spends more time in nightclubs. Today, he is a driver earning a humble income now.

Back to my uncles. Of the four brothers, the eldest passed away a few years ago. According to my mother, he was the ringleader and after he passed away, the rest could not survive. However, I think the slump is the main cause; the outcome is most likely to be the same even if my eldest uncle is still around. The remaining uncles now earn a humble income as a taxi driver. It will be very difficult to revert back to employee status after being a “boss” for many years.

Robert K's Lesson #1: The Rich Don't Work for Money

IMHO, my uncles used to be rich but they continued to work for money. When they are rich, they are not suppose to keep working for money; they should let their resources work hard for them. Instead, with more cash then, my uncles enlarged their spending power and enjoy life in the short term. They failed to divert extra cash into a “money-printing” machine. So even if you are a millionaire, without sound knowledge in financial planning, you can easily re-join the “employee community”. All it takes is a collapse of the stock market, property market, business prospects, economy etc. That's why it is hard to believe that today, the 2nd uncle's son is holding his wedding dinner in a small restuarant.

And please, nothing wrong with that restuarant, ok? It's perfectly fine to hold wedding dinner in that restuarant. My sharing focus on the lesson - financial planning to snowball your resources. Remember – knowledge equals to power. This is the mother of all truths.

Life Insurance

Is Retiring In China The Solution?

Two years ago during our ICT, an ex-colleague in the SAF told me that he planned to migrate to China by the time he retired. He said that with his CPF money, he is able to convert it into lots of Chinese’s Yuan and retired comfortably (in a village). I find his mindset “ostrich” and I educate him. This is because the correct approach should be that he work hard (and smart) and improve his current income-earning situation. Hiding in China for the purpose of comfortable retirement due to favourable exchange rate is definitely not the secret to success.

Successful retirement plan takes more than that. I told him then that by the time we reached retirement age, China’s economy may have reached a state that the exchange rate is on par with the Sing$. And the living standard then in China could be so high that there may be no difference at all. What are you going to do then for the fact that you cannot “undo” or rewind” everything?

Recently, Business Times reported that China’s inflation up to 7.1% in Jan 2008. Food prices, which make up a third of the consumer basket, rose 18.2% cent in January from a year earlier. Non-food prices rose 1.5 per cent. However, authority attributed the acceleration in inflation to the timing of the Lunar New Year holidays this year and to fierce winter weather. Rising food price is a big topic here in Singapore; it is a bigger problem now in China especially in big cities.

Lifelong Income Scheme

Therefore, we should solve the fundamental problem instead of trying to get around it. Besides being personally responsible for one’s retirement plan, here in Singapore we are really fortunate to have capable government taking steps to help Singaporeans to be prepared for retirement. It is important for me to clarify here that I am not in politics, nor am I a glass-root leader or having any connection with any political party. But let’s be real and objective.

On 12 Feb 08, Manpower Minister Ng Eng Hen announced a Lifelong Income scheme that promises a regular income for as long as a member live. I will not go through the detail here. The feelings among our countrymen were mixed. While some cursed and swear, people like me praise the authority. I just had a chat with a friend and we talked about this issue. She said that some of her friends were unhappy about it as more CPF money were shifted away thus they will be getting lesser. I advised her not to be influenced by people who do not see the bigger picture. What’s the bigger picture? Well, if I am the government, managing a country, I could choose not to do anything to help the people to plan their retirement needs. I still get paid (large income) monthly.

Is it better with the new scheme then? Let’s do the following test.

Assumptions:
1) Retirement Account at 55 = $80,000
2) Life expectancy = age of 90
3) CPF RA rate = 4%
4) Any balances in Retirement account goes into estate.

According to my calculation, with the current scheme, you can withdraw $631 per month from 65 – 90, and that’s it. But with the new scheme, you will collect $652 per month (under refund option) as long as you still breath.

Therefore, IMHO, Singaporeans are better off with the new scheme. According to the National Longevity Insurance Committee, “CPF members are likely to receive higher income from their Minimum Sum account without more top-ups, thanks to the extra one percentage point interest on the first $60,000 which CPF is offering and the benefit of pooling”.

So if you target to have $2,000 per month for your retirement plan, about 35% of it has been settled and secured with Lifelong Income Scheme. The remaining will depends on your unclaimed living policy, endowment plan, cash balances, stocks and funds and lastly, your house.

Having said that, there are still some other details that I don’t really understand. I need to meet up with one of my friends who are very analytical. After we analyse the new scheme vigorously, I will update my blog again.

Your Eyes Test

Try to read this:
If you can't, then follow the guidelines given below .
You won't believe it......it's really amazing.

Now try pulling the corner of your eyes as if you were Japanese...........................
It works n u can read it......Check it out! OR,
Close yor eyes almost 90% so that you can actually read it, & If you still can't read, than you really have bad eyes!
Go and see a good doctor if you fail to read.

When Market Clash, More Mental Illness Patients

There is an interesting article on the Chinese paper. It was saying that more people seek medical help when market clashes during recent months. To put it correctly, the market hasn't clash yet. It merely softened and surfers a correct. When it clash, many people (punters) wouldn't need a doctor. Not anymore if you lost everything.

The Line Is Up Again!!!

Finally! The god damn internet line is up again!

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It has been three weeks of testing, repairs and retifications. Initially when my line was down, I thought that the modem broke down since I had such experience before. So, I went to Singnet service centre at Westmall to check if I can renew my contract. Contract renewal comes with free modem. Unfortunately, I was told that I can only re-contract after 21 Jan. So I waited. At the meantime, I asked my colleague to check my old modem to confirm that it is indeed spoilt. Unfortunately, after many checks, she was not 100% sure - no conclusion.

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On 22 Jan, I visited the service centre again and asked the information counter (that distributes Q-number) to confirm my eligibility. It was a yes and I got my Q-number. The counter advised me to go for a coffee as my waiting time would be at least an hour. I was given a 50% discount coupon to Kopitiam and that they will call me on my mobile phone when it is about my turn.

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Finally, I was called up and a gentleman was helping me to process my request. He told me that usually re-contract should be done online. I replied that my modem is down and that's why I was there. Then suddenly, he told me that I can only re-contract after 29 Jan based on the date of contract (29 Apr). Now I'm pissed. But before I retaliate, he smile and said that since the information counter guys made the mistake, he will help me to register for early re-contract. And I got my new modem free. But that's not all. Singnet was having a promotion then and I got 50% discount on my monthly bill for the first year. But that's not all!!! I also got $90 worth of New Moon abalone, birdnest, sharkfin etc.

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Woww!!! Anyway I am more interested on getting my line up than the goodies which I gave it to my colleague. And guess what? I could not complete the installation process with the new modem - "unable to detect ethernet"!!! "Could it be some virus imbedded", I asked myself. So, I reformatted my harddisk. And I try again but got the same old shit - "cannot detect ethernet". After I cool down, I discovered a way to bypass ethernet card - the USB!!! I connect the modem to the USB and voila, I passed this stage of test. But the joy is short-lived. I got stuck again with the next test of DSL. the DSL led light on the modem kept blinking no matter how I check/change/swap the cable. Finally I gave up and call Singet technical support. They made an arrangement for technician to come to me place.

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A few days later, a young chap came to do the necessary. He concluded that the ethernet card had spoilt and the new modem is also faulty. He gave me a service report and advised me to change a new one. And so I visited Singnet service centre again to change the new but spoilt modem. Interestingly, when I was at the customer counter, I was told that to change modem, I must go to the manufacturer - the information counter screw up again!!! But since I am sitting right in front of him, he will do it for me. Happily I went to home to install the new modem but I got the same shit again! The DSL still blinks! This time, I called an expert - a friend who is good in IT. His advise was simple - isolate the problem, cut all other nonsense and get Singnet to focus and resolve the phone line problem. So I did and another appointment was made to get technician to check the phone line.

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At last, it was found that there was a short circuit. And after the repair, my internet is finally up. And now I can continue with my blog. I knew the market was in a mess lately, plunging like no tomorrow. However, since my internet was down, I see no evil, though heard evil.