Top Reads this Week (29 Sep)


Rounding up top reads from around the web, including articles shared by fellow investors in the Financial Horse Facebook Group.

Why There Are No Easy Answers in Investing (Of Dollars and Data)

Lived experience cannot be replaced by numbers and charts just like the complexity of investing cannot be simplified with a few soundbites.  The world is far messier than that.  Yet, most of the mainstream financial advice out there is premised on getting rich with a few simple tips.  But, it’s never that easy.

Take me for example.  You want my financial secret?  Be born at the 90th percentile of IQ and work ethic.  Have good parents that love and support you.  Start getting straight As in 3rd grade and don’t stop.  Get into a great college that offers generous financial aid.  Get a high paying job after graduation.  Save 35% of your after-tax pay.  Invest in a globally-diversified portfolio of income-producing assets.

Of course this took hard work, but it took just as much, if not more, luck.  But that message doesn’t sell, does it?  And no this isn’t some fake humility.  I’ve just had a gift since I was a little kid.  Plain and simple.  But, who wants to hear that you have to get lucky and that hard work is the new tables stakes?  No one.

I am guessing this advice is somewhat like preaching to the choir, but you would be surprised how many times I have fallen for “simple” solutions in non-investing domains.  It’s probably because my guard is down when I have little familiarity with a topic.  So, don’t make my mistake.  Stay on the alert, especially in those areas that you know little about.  That’s where they will try to get you.

Liquidity Scramble: Fed Announces Overnight Repos Every Day Next Week, Introduces Term Repos (Zero Hedge)

Yesterday we reported that Goldman now expects the Fed to restart Permanent Open Market Operations, i.e., bond purchases, i.e., QE some time in November. For those who missed it, Goldman assumes a roughly $15bn/month rate of permanent OMOs, “enough to support trend growth of the balance sheet plus some additional padding over the first two years to increase the size of the balance sheet by $150bn”, in the process restoring the reserve buffer and eliminating the current need for temporary OMOs.

That strategy would result in balance sheet growth of roughly $180bn/year and net UST purchases by the Fed (the sum of the red and grey bars) of roughly $375bn/year over the next couple of years.

Vanguard to launch robo-advisory platform that removes all human advisers (Market Watch)

Indexing giant Vanguard Group plans to launch a robo-advisory service that cuts out human financial advisers completely.

Vanguard is pilot-testing the new platform, in a sign of how the world’s second-largest money manager is aiming to capture younger, tech-savvy investors.

Vanguard’s robo-advisory push would increase the competition with companies including Charles Schwab Corp. and Betterment LLC for the money and data of this younger demographic. The automatic service would target fees of 0.15%, or $15 for every $10,000 invested, a price that undercuts many rivals. The total cost is expected to be about $20 on every $10,000 for individual investors once investment fees on the Vanguard funds the service will use are factored in.

Alibaba buys a third of Jack Ma’s Ant Financial (The Business Times)

Alibaba Group Holding has bought a third of Ant Financial, the online financial services giant controlled by billionaire Jack Ma, five years after proposing a deal to strengthen ties between the two internet giants.

Since starting as Alipay in 2004, Ant Financial has grown into a US$150 billion behemoth that offers micro-lending, insurance, credit-scoring and the country’s largest money-market fund. The company is now acquiring assets overseas via deals in India and Thailand, en route to a potential initial public offering.

SoftBank in talks to boost WeWork investment by US$1b (Business Times)

SoftBank Group Corp is planning to invest an additional US$1 billion or more in WeWork, altering a warrant agreement struck before WeWork postponed its IPO plans, the Financial Times reported, citing people briefed on the matter. SoftBank initially planned to invest US$1.5 billion in the US office-sharing startup as part of a warrant agreement, giving WeWork the right to receive the money in April next year in exchange for Class A common stock.

A new deal would reduce the price per share at which SoftBank acquires WeWork stock, giving it a larger stake in the unprofitable property group, FT said on Wednesday. The investment could unlock more financing options for WeWork, which is in talks for a US$3 billion to US$4 billion loan from a consortium of banks, FT added.

Assessing My Worst-Performing Singapore Stock (Motley Fool)

Raffles Medical Group Ltd (SGX: BSL) is currently the worst-performing stock in my portfolio. I added the healthcare company to my portfolio back in 2014 at a split-adjusted share price of S$1.31 per share. Today, the private healthcare provider trades at S$0.95 per share, which translates to a total loss of around 27%, excluding dividends.

At the time of writing, shares of Raffles Medical Group trade at much more palatable valuations. Even with the Raffles Hospital Chongqing pressuring its earnings over the last two quarters, Raffles still trades at around 31 times its annualised earnings. This is much lower than it used to trade back in 2014. On top of that, the company looks poised for growth.

The two new hospitals In China could become significant contributors to the group’s profit in the future. When you consider the fact that its one hospital in Singapore now contributes more than two-thirds of the company’s profit, imagine how two new hospitals could affect its earnings in the future.

If you invested $1,000 in McDonald’s 10 years ago, here’s how much money you’d have now (CNBC)

McDonald’s has recently upped its drive-thru tech, taken a stance on harassment in the workplace and partnered with delivery service GrubHub. As the company continues to reinvent itself, not only is it good for business, but it’s also proven to be a positive for longtime shareholders.

If you invested in McDonald’s 10 years ago, that decision would have paid off. A $1,000 investment in 2009 would be worth more than $5,000 as of Sept. 20, 2019, for a total return of around 400%, according to CNBC calculations. In the same time frame, by comparison, the S&P 500 earned a total return of nearly 250%. The fast-food giant, which went public in 1965, has a current share price around $212.

Hotel investment volume declines amid muted hotel performance: CBRE (Business Times)

Asia Pacific ranked second worldwide in terms of international tourism growth, reporting an increase of 6.0 per cent year-on-year. Growth was driven by Korea, which received a total of 8.4 million visitors during the period, representing growth of 16.9 per cent year-on-year.

Singapore continues to be the top performer in Asia Pacific, with RevPAR standing at US$198.41 for the 12 months ending in July. Strong performance was recorded during the period, particularly in July when occupancy rose above 90 per cent for the first time on record amid steady growth in visitor arrivals and shrinking supply.

On the investment front, transaction volume registered approximately US$10.9 billion in the 12 months to July 2019, a decline of 23 per cent compared to the same period in 2018.

No, not profit; The biggest driving factor behind investment is something else – Find out (Financial Express)

Fear: A strong determinant of investor behaviour

A powerful force guiding your choices and approach in investment, fear can manifest from a lingering concern when you are unable to find answers to.

Investment sage Warren Buffet once famously remarked, “Buy it thinking you will hold it forever.” However, that’s easier said than done. Often in fear of making a loss or losing out on a market rally, investors tend to make irrational decisions, which later become a roadblock in achieving financial freedom.

It’s important to avoid being the victim of herd mentality and decisions for market transactions should be based on facts. Optimum return is guaranteed by holding on to the right instrument for the appropriate tenure.

Mother and son jailed for faking her death to get millions in CPF, insurance claims (CNA)

To settle his financial problems, a man plotted with his mother to fake her death and get payouts from the Central Provident Fund (CPF) Board and various insurance companies.

Abraham Rock, 36, made claims amounting to about S$3.77 million in relation to his mother’s supposed death in a Pakistan traffic accident, and about S$129,300 was paid out by the CPF board and NTUC Income.

For his crimes, Rock was jailed on Thursday (Sep 26) for three years and 10 months, while his mother Talat Farman, 54, was jailed 13 months.

Ikea Singapore revenue dips to $341m for fiscal year; South-east Asia turnover up 20% (Straits Times)

Swedish home retailer Ikea generated a turnover of $341 million in Singapore for fiscal 2019 ended Aug 31, inching down 0.3 per cent or $1 million from a year ago. “The overall healthy and largely flat turnover was in line with our expectations,” Corinna Schuler, head of corporate communication at Ikea South-east Asia.

According to Singstat’s July figures, the country’s retail industry saw sales shrinking 8 per cent year on year for the category of home furnishings and household equipment, Ms Schuler pointed out.

Singapore’s home sales soar in one of the world’s hottest real estate markets, driven by demand by Hong Kong, China investors (Asia One)

Singapore sold more luxury homes to foreigners in three months ended June than any other quarter during the past 12 years, as Chinese and Hong Kong investors sought a safe haven to park their money amid the escalating US-China trade war and deteriorating public order in Hong Kong.

Up to 140 super luxury homes, those priced at more than $8 million, or $3,000 per square foot, were sold to foreigners in the second quarter, even with a 20 per cent additional buyer’s stamp duty imposed on foreign buyers.

How To Become A Millionaire In Your 30s (Forbes)

Commit to Becoming a Millionaire

Get Your Spouse on Board

Surround Yourself with People Who Can Help

Live as Far Beneath Your Means as Possible – And Even a Bit Lower

Save an Uncomfortable Amount of Your Income

Your Debt Has to Go

Keep Your Investments Basic

It’s often believed that people become millionaires by making exotic investments. Nothing could be further from the truth. The typical self-made millionaire is more likely to be aggressive with his or her career, but much more conservative with their investment portfolio.

Invest in Yourself

One of the best investments you can make is to invest in yourself. At least until you reach the point where you have a seven-figure investment portfolio, your earned income is likely to be your biggest source of wealth. The better you can be at whatever you do, the more you’ll earn, and the faster you reach millionaire status.

Lottery millionaire still lives in a trailer in Maine (New York Post)

Bobby Stuart became a millionaire with two lottery wins in just four months — but still lives in a beat-up old trailer in Maine. “Ain’t nothing really different,” the 65-year-old tractor driver told the Boston Globe. “I do the same thing over and over.” He also admits to occasionally treating himself to a lobster roll for dinner rather than the usual burger or hot dog. “It’s only $10.99 with fries,” he stressed. “Pretty big, too.”

His son Greg, who once won $250,000 from the state lotto himself, says his dad has no intentions of moving. “Everybody I talk to says, ‘Why doesn’t he buy a new house?’” the 46-year-old said of his dad. “I say, ‘He doesn’t want one.’ ”

Peloton wipes out more than $900 million of investor wealth in its 1st day of public trading (Business Insider) 

Peloton joins a slew of unprofitable unicorns now trading on public markets. Uber and Lyft, two of the largest companies to go public this year, have both fallen below their IPO prices as they struggle to turn a profit.

What Can History Teach Us About Investing? (Seeking Alpha)

Investors like to invest only in good times. That’s understandable. But those good times are generally not predictable.

What we do know is that the “good times” can follow the frustrating sideways times. This pattern repeats even on a shorter-term time frame.

Markets do tend to move in this stair-step pattern. Identifying when a market (stocks, in this case) are in a sideways market continues to be a challenge.

For active investors, these frustrating sideways periods can become periods of potential opportunity.

Based on our experience, we believe one should invest more money during periods of a drawdown, not get overly enthusiastic after long periods of rising markets, and stay the course after periods of boredom or stagnation if the investment is still sound.

Looking for a comprehensive guide to investing? Check out the FH Complete Guide to Investing for Singapore investors.

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