Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Tuesday, 13 March 2018

How Warren Buffett Convinced Me to Invest & Not Speculate

10:10 Posted by cheez 1 comment

This quote was the reason that convinced me to invest instead of speculating, to invest long-term instead of short-term. Investing to me is putting money to work to build the future. That is why we say "invest in infrastructure", "invest in human capital", "invest in healthcare" etc. It is because it is not a guess or gamble. Investing has a purpose, has an output, and is beneficial to the economy. Imagine someone saying "let's speculate in our infrastructure, human capital and healthcare". How scary is that!

Using Warren Buffett's example, imagine you are stranded on an island with another 99 people (total 100 people on the island). In order to survive, the people are grouped and allocated different tasks:

10 wheat farmers
10 corn farmers
10 pig breeders
10 chicken breeders
10 cow breeders
10 fishermen
10 dig wells and cleanse water
10 build houses
5 auditors/accountants
5 police to ensure law and order
5 leaders to govern the place
5 traders

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The leaders created a currency (stranded dollar) to facilitate the business transaction between the people living on the island. You know what 95 people on the island do: they produce some sort of output that ensures that 100 of us survive. There are people making food, water, homes, security, etc. But there are 5 people who produce no economic output. They basically come together every, sit at a round table, and start betting with one another how many pigs is the pig farmer going to have by end of the year, how many fish will the fishermen catch etc. These "talks" create no positive economic output to the society.

Today, a large number of people are participating in this form of mindless activity. Not everyone on Wall Street is speculating, they are also providing a form of service - a positive economic output. They provide us with insurance, facilitate money transfers, provide retirement advice etc. But way too many are speculating on asset prices and other assets.

For the average mom-and-pop investors, I would recommend investing for the long-term, invest instead of speculating. It is really not that difficult, it can be as simple as a savings plan except instead of money accumulating in a savings account, it gets invested in the stock market. But that is beyond the scope of this post. Read up on why it is easy HERE.

Recommended Post: Infographs about SG Budget 2018 that You Should See

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Wednesday, 21 February 2018

Infographs about SG Budget 2018 that You Should See

17:39 Posted by cheez No comments
Budget 2018 was announced 2 days ago on 19 February 2018. Took us a while to digest everything, especially the 2% GST hike despite the budget surplus we got. Nonetheless, after 2 days of reading, these are some of the infographics that we thought you should know about Budget 2018 that will affect you. The list is not exhaustive, there are many other things that we did not include like 10% increase in tobacco products and increase in maid levy because they don't really affect the majority of the people. But if you want to know more, there are 2 links below you can click to find out more.


SG Bonus for all Singaporeans above age 21.
I guess this is the most important part of the whole budget. The part that we are waiting for where the government will announce how much it will be giving us back. This time it is called 'SG Bonus' and is given to all Singaporeans based on their annual Assessable Income. 

GST Voucher (Cash)
In addition to giving you a 1-time cash bonus, Singaporeans above the age of 21 will also be getting a GST Voucher (Cash) this year. If you own not more than 1 property & its annual value does not exceed $21,000 and your Assessable Income for FY2017 (which is income for the year 2016) is not more than $28,000, then you will get this extra money in August 2018.

Source: GSTVoucher

GST Voucher (U-Save)
The utility bill rebate scheme. Those who own more than 1 property or private property are also not eligible for this GST Voucher. This voucher will be paid in April, July, October, and January.

Source: GSTVoucher

Enhanced Proximity Housing Grant
Families buying a resale flat near their parents or children will now receive $30,000 (previously $20,000) worth of grants. Singles who buy a resale flat WITH their parents will get grants of $15,000 (previously $10,000) and those who buy resale flat NEAR their parents will get $10,000 in grants. The definition of 'near' has also been revised from '2KM' to '4KM'

Source: Channel News Asia

Service & Conservancy Charges (SCC) Rebates
Households living in HDBs will receive at least 1.5 months of SCC rebates from Budget 2018, the same as last year.

Source: Channel News Asia


Increase in GST by 2%
GST will be raised from 7% to 9%. While GST increase is bad - there is no doubt about it, it won't be coming anytime soon. The increase is scheduled to be implemented between 2021 to 2025. Meanwhile, shop till you drop while you can before the increases kick in! Although GST will increase, more money will also be set aside to help those the middle and lower income household cope with the increase in GST. An extra $2 billion will be set aside for GST Voucher schemes to help the lower-income households cope with the increase in GST. Despite the increase, our GST is still one of the few lowest among the Asian countries.

Source: Bloomberg

Increase in Buyer Stamp Duty (BSD)
If you are looking to buy a home that cost more than $1million, then you better be prepared to pay extra 1% of BSD for any amount above $1million. This is to ensure that those who can afford to buy a more expensive home pays more taxes to make society more equitable. This probably affects more for those buying private properties and less on those buying HDBs. Then again, HDB prices are also rising, so maybe it won't be soon before HDBs also hit that $1million bracket.

Source: IRAS

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Monday, 19 February 2018

#ICYMI: Uber is planning to sell majority stake in its Southeast Asian unit to competitor Grab

07:16 Posted by szcszc No comments

After years of fighting for dominant market share, Uber has finally thrown in the towel and deciding to sell Grab a majority stake in its Southeast Asian unit to its regional competitor Grab. This decision will have important effects in the market especially for existing players such as current taxi operators. This trend is not its first as Uber is losing its market share against region-focused players such as Lyft, Didi Chuxing and Grab. A good case study to evaluate its market impacts is China.

China market
Several years before Uber conceded its Southeast Asian territory, it lost its fight in China against Didi Chuxing. The China taxi industry is huge with an estimated of 1.1 billion daily commutes. Even with such market size, the ride-hailing market has since consolidated largely between traditional taxi operators and tech platforms such as Didi Chuxing. Different from Singapore, the China ride hailing market has consolidated with Didi Chuxing being the main player, possessing more than 80% of the market. This could likely be a key movement after Southeast Asia's consolidation.

Having a monopolistic market as a ride hailer, Didi Chuxing has reigned in on discounts and bonuses for both drivers and consumers. The discount-centric model was unsustainable and the company is transiting back to profit-focused model. Consumers previously attracted by the lower fares are now looking to switch back to taxi operators as they are more affordable comparing to surge pricings. Ridership dropped by 40% for some time after subsidies were withdrawn. Although the national government has lifted regulations governing ride-hailing, local cities implemented their own rules specifying stringent criteria to qualify as a private hire driver. For example, Beijing and Shanghai require all drivers to have a local residence permit before they can drive. This resulted in a significant drop in supply of drivers and indirectly raising the price paid by consumers. Consumers are also finding it more difficult to hail a ride on the app. There is prevalent negative consumer feedback where 81.7% of consumers find it more difficult to hail a ride. As such, consumers are slowly turning back to taxis as a solution. This can potentially increase the growth of China taxi market to moderate as parties look to negotiate deals that will appease the majority.

In the taxi industry, there is strong network effect where consumers tend to look for the largest taxi company as this assures them the least waiting time and highest chance of getting a taxi. Being a taxi driver (potential leasee of the taxi company), it is best to go to the largest taxi company which can reach the largest pool of consumers. This cycle reiterates itself, allowing the taxi company to grow.

The current SG market
Comfort Delgro (CDG) owns the largest fleet size in Singapore of approximately 17,000 taxis or 61% of the market. As a result, it has strong network effect present in the Singapore market. There are also low competition rivalry from other taxi rental companies, as taxi annual fleet growth is capped at 2% enforced by LTA. CDG is likely to remain the largest taxi company in Singapore.

Traditionally, there is low competition from other taxi companies such as SMRT and TransCab. However, when the disruptors entered the market, it has faced structural challenges where Uber and Grab are offering heavily discounted prices to consumers and drivers. In addition, Grab has formed strategic partnerships with other taxi companies, such as Prime and SMRT. This has eroded CDG’s market leadership where its traditional competitors now have a higher combined fleet size.

In response to obtaining the network effect, disruptors also offer steep discounts and incentives, compared to taxi companies, to attract potential drivers or existing taxi drivers. TODAY has reported that at least 3,000 CDG drivers have switched operators [TODAY, 29 September 2017]. CDG has also responded by offering similar discounts to taxi drivers and consumers, increasing its marketing efforts and investing into its booking apps.

The taxi industry also faced an uplift in marketing costs to match the discounts and promotions offered by disruptors to retain its market share. This has extensively eroded the competitive advantage of network effect and increase the overall supply of drivers who can fulfil the need of private transport. These increased its operating costs and squeezed margins, while losing its competitive advantage of network effect. It is now the second largest private transport fleet, behind private hire companies, Grab and Uber. CDG and Uber previously announced a partnership to enhance user experience where Uber can tap on CDG's existing fleet to boost driver supply. With Uber's new decision, there is likely to be changes with the partnership and possibly, negative impacts on CDG as Grab nabs more market share.
There are massive synergistic revenue generation from its automotive engineering business with CDG’s taxi fleet. Previously, with high taxi fleet utilisation, CDG enjoys high engineering revenue as more taxis are being brought for maintenance and servicing. CDG also sells diesel to its taxi drivers. However, with Uber and Grab attracting its drivers away, CDG is facing a drain on both businesses as they are highly correlated.

What is unknown now is whether Grab will transit to a profit-focused strategy, similar to what Didi Chuxing is employing. If so, the consumer preference shift might also be witnessed and CDG could prove to be an attractive buy right now. However, only time will tell as Grab is also focusing on its e-payment platform and may continue its discounts to synergise that area. What is known now is that consumers will flock to whoever provides more value for lower prices and who has the biggest coffers to sustain that will survive.

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Friday, 2 February 2018

Good Stock Market Performance in January = Good Stock Market Performance for the Year?

16:43 Posted by cheez No comments
January 2018 is a great month for the stock market, and probably a good start too!
The Straits Times Index (STI) is up about 3.4% for the month of January.
The S&P500 is up about 5.6% in the same month.
But does this mean that stocks will continue to do better for the rest of the year?
Here's a short video clip to explain if this will happen.

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Saturday, 27 January 2018

Is EZ Link Too Late for Cashless Payment Push?

11:54 Posted by cheez 3 comments

The Straits Times reported a few days ago that EZ Link Cards will soon be accepted in hawker centres and subsequently with other merchants. This is all in a bid to move Singapore towards a more cashless society. Although this is a good initiative - and one that has finally arrived, it really came a bit too late.

For those of you who have been to Hong Kong before, you would know that they have a really good cashless payment system, the Octopus Card. It was created in 1997 mainly for payment of public transport but subsequently expanded to become Hong Kong's main wireless smart card payment system when the Government allowed it to be used for more than just transport payment in the year 2000.

Meanwhile in Singapore, although we have a similar card that does that does the similar function, EZ Link was never promoted to be used for anything more than transport (maybe 7-11). Or maybe it did try to mimic what Hong Kong's Octopus Card did but fail badly, and this time it is attempted to try it again. But, with the push from NETS' Flashpay, Mastercard's PayPass, Visa's Paywave, and many other cashless payment services coming out, can EZ Link succeed its push this time?

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Thursday, 25 January 2018

Netflix's Stock January Pop

11:44 Posted by cheez No comments
Netflix released their latest quarter's earnings results and it exceeded Wall Street's expectations for it.
Shares of Netflix went highly by nearly 15% yesterday and it is currently now worth USD 100 billion.
You can refer to more of the results HERE.

What we are going to talk about instead is an article that we had posted 3 years ago on Netflix.
The link to that article can be found HERE.
But we have highlighted the key points below:
January is a good month for Netflix for many years!

Netflix's stock went up by 15% after it reported good earnings results yesterday!

But this is not the first time this has happened.
Over the last 6 years, this has happened consistently.
Every time after Netflix announces its fourth-quarter earnings results in January, its stock tends to pop higher.
Is this a consistent and reliable trend to invest in?
Is this just pure coincidence?
Or is this a potential fraud?

Tell us what you think about this!

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Thursday, 4 January 2018

#ICYMI: Crytocurrency movements/trends observation and explanation

Just a few days into the New Year of 2018, I think it would be apt to review the movements in the cryptocurrency market in 2017. After all, the buzzword for 2017 was "Cryptocurency". A self-proclaimed "early adopter" of cryptocurrency where I started mining for Bitcoin before it became cool, cryptocurrency has reached new hypes where more people are entering and identifying themselves as "experts and fanatics" of cryptocurrencies or Blockchain technology. Effectively, all "moms and pops" are now entering the market in search of easy riches (note this sentence).

There have been several major movements in the cryptocurrency markets in 2017. Bitcoin shot through the roof where it reached a price tag of USD$20,000, giving an amazing return for its believers. There was also a major correction to nearly USD$10,000 where people are speculating whether the bubble for cryptocurrencies has burst. Just a few days ago, Ripple (XRP) has increased by more than 1000% in the past month. It has also replaced Ethereum as the second most valuable cryptocurrency based on market capitalisation, after Bitcoin. While Bitcoin became an obscurity, Ripple news are now all over the internet.

However, similar to all asset bubbles that are identified in history (retrospectively), a common symptom was the overvaluation and excessive confidence in the asset that made investors believe that the asset prices will only keep increasing. Referring to the previous statement where everyone was jumping onto the cryptocurrency bandwagon, is this scene replaying itself in another form or cryptocurrencies are inherently worth the price tags?

I believe this question is a huge one for anyone that wants to determine whether to invest in cryptocurrencies. As any investor, one needs to determine the real value of any assets based on assumptions, be it future cashflows or underlying asset valuations. One problem of cryptocurrencies is that they do not have these components to be valued. I do agree with Mr Damodaran's classification of cryptocurrencies as currencies instead of assets (duh, hence the name) (you can read more here: Then how else can we value cryptocurrencies or even attempt to value them?

One convenient way could be modelling fiat currencies with cryptocurrencies, assuming that they are going to convey the similar valuation concepts with identical functionalities. With all forms of fiat currencies, a big component of valuation is trust and number of users adopting the currency. Just referencing to the US dollar (basically because the greenback is the most widely adopted currency), we can see these 2 components being incorporated. Negative news of the country's economic performance or countries abandoning its USD-based reserves trigger devaluation of the currency. Even identifying all components, it is extremely difficult to identify a single valuation for fiat currencies. More commonly so, price tags are all based off market demand and supply pressures from investor expectations as a reflection of the major market movements. Cryptocurrencies also seem to react on these factors where Ripple has been surging as Coinbase, a major cryptocurrency exchange, is considering adding it to its platform, opening access to a wider audience. This essentially increases the number of users adopting Ripple.

Offering my "2-cents" opinions, I do believe the cryptocurrency market is moving towards overvaluation as we have yet to see the implementation of its proclaimed functionalities and remove key cost barriers that are present in traditional banking systems. Even so, there are examples of inefficiencies and problems arising from its volatile prices. One of such is Steam, a gaming platform behemoth, removing Bitcoin as one of its payment methods citing reasons of high transaction costs.

The symptoms where people are turning to cryptocurrencies as a quick way to riches are also worrying. Loads of institutional and retail investments are been thrown into "alt-coins" and Initial Coin Offerings are now the norm. Without regulations, such incidents are likely to increase risks, adding instability to the market.

While this post is not to demerit the advantages of blockchain technology and the promises of cryptocurrency, I believe the media hype and market speculation is likely to derail the market where the community is looking at it for pure profits rather to improve it to benefit the society. Only time will tell whether this is to be true or not..

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