Rude Shock - DBS increased Fixed Deposit Rates

Woke up to a rude shock today....DBS bank has increased the fixed deposit rates! The US federal government increased their interest rates on 16 December 2015 and after 7 calendar days, DBS bank follows suit. Within 2 months of repricing my home loan at a repricing fee of $500, my home loan has increased.

Previous loan if i had carried on = 0.96%(1 month sibor) + 1% spread=1.96%
Current loan = 1.1% spread + 0.675%  average of 12 and 24 months ( in red box)= 1.775%
Total interest savings for first three years = $3700
Net savings after including repricing fee = $3200.

Comments
Still quite ok savings given that there is stability and i have no lock in for any of these 3 years, without the need to take a mortgage insurance.

Recently, DBS changed their FHR from the average of 12 and 24 months to one that is based on the 18 months one(FHR 18), with a higher spread, a lock in period and the need to take a mortgage insurance.
It seems they are trying to narrow the difference in total interest between current customers with new ones(FHR 18). Furthermore, who really keeps a fixed deposit for 24 months with DBS, so i guess raising the 24 months rate by a large amount increases their net interest margin between  what they charge for home loans and what they charge for bank fixed deposits. Interesting space to watch.

Buying a brand new car - What i learnt.

I am not a lawyer and this is just what i learnt. Believing everything below and not doing your due diligence is like believing a tiger gives birth to eggs under water.

Actually, it is very easy to learn about the workings of this industry and the gimmicks they play. Just go to the PIs and say you went to his competitor and they will start telling you the gimmicks their competitor play. Go to another one and they will do the same. After a while, you will be wiser as they have revealed everything there is to be revealed by bad mouthing their competitors.

The most important thing. If you don't do this, don't blame people for cheating you.
Everything must be written in black and white. Ask for company stamp and receipts of any payment or deposits and always ask them for a copy of any agreement and read the terms and conditions carefully, Any amendments must be signed and ask for company stamp again.

Insist on the 1)Refund policy 2)Exchange policy 3)Cancellation policy 4)Amendment policy and always put a timeframe. ALWAYS put a date!
Exercise your right to "WALK AWAY" if none of these is given to you and of course you need to put yourself in the position of power by not doing last minute purchases.

Booking fee
PIs will ask for a deposit which includes the COE bidding deposit($10000) as priced by LTA + booking fee. Market rate for deposit is $15000. Some will ask $20000 and some $12000. If they ask for too much, ask yourself why. ( tell tale sign)

Loan or no loan
PIs always take it for granted you want to take a loan with the max tenure (5 years) and max amount.
Taking no loan the price will bump up by a market rate of $3000. Some will ask $4000 and some $2500. Again, why are some asking for $4000? (tell tale sign)

Insurance
This is a non issue as their commission is really low, like about10% of 1 year insurance, maybe $100 thereabouts. Besides, they will give u a list to choose from and whether you take directly from insurer or through them, its the same.

CaseTrust-SVTA accreditation
PIs will tell you this accreditation is rubbish as " they pay money to get one". If i hear him/her say this, i immediately switch off. (tell tale sign). Let me tell you why.
1) Accredited car companies have a $50000 bond with CASE, so this can be drawn down to settle disputes.
2) It is true they need to pay money BUT they also need to meet a series of best practices process such as stating refund policy , exchange policy, e.t.c clearly. There are many PIs who want to pay money BUT still can't get the accreditation.
3) Let's say you go to CASE to complain.  If a PI is not accredited, CASE can only invite them to come voluntarily for mediation. If PI is accredited,  it is compulsory for them to come for mediation or lose the accreditation.

It is enlightening to see that only 31 PIs are accredited out of the numerous PIs which is a reflection of the sorry state of affairs in this industry. See list of accredited companies here. As consumers, we have the power to make a difference only through collective effort. Go to such companies and let the shady ones go bust. Having said that, there are sure to be some black sheeps among the accredited companies which i have personally encountered but the risk is less.

Know your rights
I am proud to be a Singaporean as there are many safeguards in place to protect consumer interest, but one has to take the effort to help themselves by learning them.
Consumer Protection (Fair Trading) Act - Read the 20 specific unfair practices to know what is deemed as an unfair practice which you can then know whether you will win in the event of litigation. This is applicable for claims not exceeding $30000.
Lemon Law - mainly for defective goods and you must make sure to have  black and white your correspondence with the PI within 6 months. In this way, the onus is on the PI to prove that his goods is not defective. After 6 months, the onus is on you  to prove.

CASE
Let's say you have a dispute with the PI. Go to CASE first. Let me tell you why.
1) It looks favourable on you in the event you want to sue them under civil court or if you go to the small claims tribunal It would be really very favourable on you if they don't turn up after being invited by CASE. Why did the PI not turn up?
2)This is a quick way to settle disputes and reach a settlement. Time is money and let's move on.
3)CASE is also useful as after seeing them, you may have a better idea of whether you can win if you decide to undertake litigation. Seriously, you don't want to go the litigation route if you are not certain of winning as its expensive as the loser has to pay all the expenses of both parties.

Small Claims Tribunal
Well if the PI still doesn't settle after CASE, you can go to the Small Claims Tribunal. You need not have a lawyer if you go this route. Some conditions must be met.
1)The dispute must be less than $10k and you report it within 1 year.
2) If between $10k and $20k, the PI must also agree.
3)Above $20k SCT has no jurisdiction.

Engage a lawyer 
Sue them in civil court. This is expensive, but if you are sure you will win, after going to CASE, or seeing that it is among the 20 unfair practice as specified in the Consumer Protection (Fair Trading) Act, just  do it. I know i will. The loser pays it all. But play your cards right. If the PI has no assets , how does he pay your expenses? Again, this boils down to going to a PI who has much to lose, which are usually CASETrust-SVTA accredited car dealers.

Buying a brand new car- the minimum considerations

A car is expensive and hearing horror stories about car dealers, it is best to be armed with knowledge and information when dealing with them. I don't like cars, i hate them but due to circumstances my family needs it and having to buy one due to the old one ending its 10 year lifespan gives me some motivation to learn more about it, not so much about the specifications of the car but more of the money side like OMV, Tiered ARF,Parf, CEV e.t.c. Thanks to the Land Transport Authority, they have tremendously increased transparency to car buyers.

What a beauty!Zipping through the urban jungle without the care of the opinions of the world ( everything is blurred in the background to depict this.)

What i have learnt:

1) From onemotoring, LTA has provided the breakdown on the cost of each car model. (check the bottom of the page).With this, one can easily find out the  basic cost of the car without COE, thus finding out the gross margin of the authorised distributers(ADs). Note, only the list for ADs are available, not parallel importers(PIs) . Use this list to bargain down the price.

2)So what if i want to buy a model from a PI which is not found on the list. It is easy to calculate the basic cost without COE, just using excel and key in the formulas shown. You have to ask the PI for only 2 information, the CEV and the OMV.

Excise duty - This is 20% of OMV.

GST- This is 7% of the sum of excise duty and OMV.

Tierd ARF payable -

CEV - This stands for carbon emissions-based vehicle scheme. 

If your car is less pollutive, there is a rebate, which you can offset your Tiered ARF payable. Put a negative CEV value in the CEV field.

If your car is pollutive, there is a surcharge which you need to add to your Tiered ARF payable.Put a postive value in th CEV field.

Net ARF (after CEV) - this is what is added to the basic car cost. This is also used to calculate the PARF rebate at the 10 years mark. The lowest the Net ARF can go is $5000.

Regn Fee- This is a flat $140

3) Don't forget the road tax! You can use the road tax calculator provided by our wonder LTA.

Interestingly, petrol cars have the least road tax. Road tax for petrol is slightly lesser than CNG which is much much less than diesel. Diesel is bullshit man. Unless you drive damn lot like a taxi driver, its not worth it to buy a diesel one as the savings in fuel is not enough.

4) Due to the value conscious streak in me, i don't give a damn about features, brands nor about new or old models. I care about practicality. Don't go for the cheapest car as the cheapest car may cost more than a more expensive car due to the existence of the PARF rebate at 10 years. Instead, calculate the annual depreciation, INCLUSIVE of road tax for the period up to 10 years. My friend actually bought a used Porsche Cayenne and it was actually cost-wise comparable to a Toyota as the Porsche PARF rebate was far greater than the Toyota's. I will omit fuel efficiency as a consideration as there is too much variables in this metric.Besides, can you really trust the fuel numbers?

I can then use annual depreciation, inclusive of road tax to compare with all the cars, including used cars and make a more informed decision. 

PARF rebate - this is 50% of the Net ARF(after CEV) at the end of 10 years.

5) Now, should i bid for my own COE? It's just a $2 admin charge and a $10000 deposit, refundable 1 working day after the Wednesday bidding. I can then ignore those confusing 6 bid,3 bid non-guaranteed, guaranteed,top-ups,no top-ups and various other jargon meant to muddle one's decision. 

Based on the list showing the breakdown of car cost as mentioned in point 1 above, it seems whether bidding your own COE is worth it or not depends on which brand of car you buy. Generally it seems if you want to buy Hyundai, Ssanyong,Volvo, Renault and certain Audi models, bidding own COE could save $2k-3.6k. For Japanese cars, like Toyota ,Honda, Subaru e,t,c, it is not worth it as the ADs jack up the price.

Now do take note that this is just based on a list that keeps getting updated.

6) Based on the list(again), continental cars have a gross profit margin for the ADs of between 40k - 174k! While non-continental cars(exclude Toyota's Lexus) have a gross profit margin of between 7k-50k. Continental car sellers better give me the MOON if i ever buy from you man. My expectations of every service quality aspect will be damn damn high for the margins you charge!

Now the one thing that i am lack of data at the moment is about car loans and car insurance referral earnings of the ADs and PIs. Normally, paying the full sum in cash should be cheaper, but due to this murky system of loans and insurance, it seems paying the full sum in cash is now more expensive. This really irks me as i can't have a peace of mind without knowing this.The digging continues.....

Virgin purchase of H-share Index ETF-2828:HK

Ever since the china stock market bubble and its subsequent crash correction i have been toying with the idea of thinking how i can unleash my greed. In a moment of absolute folly, i changed a sum of money into HKD without understanding the Hong Kong Stock Exchange, worse still, i didn't check the exchange rates given by my broker. Now i'm stuck with HKD with the broker with no interest given and just thinking about changing it back into SGD with their  lousy exchange rates puts me off. Better to see the glass half full now and thinking about what i learnt with this 'play' money.

• Hong Kong stock exchange really sucks man. Their board lots are different for its different shares. Now i know 2828:HK has a board lot of 200 shares, 00005:HK (HSBC) a board lot of 400 shares e.t.c.See convoluted exchange
• Hong Kong stock exchange don't have live prices, giving 15 minutes delayed prices. See super convoluted exchange. I have to go to aastocks to get live prices instead.

Anyway, i really hate adding another variable ( currency) into my speculations investing. I need things really simple as my IQ isn't high and i can't think fast enough and most importantly i'm immensely risk averse. But a trip to a particular toilet cubicle changed my life as i stared at this phrase scribbled in ink 'a life lived without risks pretty much wasn't worth living'  for 15 minutes. Damn this phraseee!!!

Looking at the AH Premium index, the mainland A-shares (only for domestic China citizens to purchase who are made up of mainly retail investors) is trading at a hefty 30ish% premium to the H-shares (shares that the international community like you and me can buy) for the same group of companies. Historically the premium for A-shares is roughly a 5ish%-10ish premium to the H-shares and there are times where H-shares trade at a discount to A-shares, below the 100 level. 

So what are the possibilities?

1. H-shares rise  (A-share fall or stays the same)
2. H-shares fall by a small amount( A-share must capitulate, crash and burn to narrow the premium)

Well the above is just pure speculation based on price and the theory of mean reversion of prices. Anyway, since i have HKD AND H-shares index having a P/E ratio of only 7.77 and a dividend yield of 3% ( better than an interest of 0% on my dead HKD with my broker) and no dividend withholding tax on this 2828:HK. Heck lah..just buy.

Now, what to do with the remaining dead HKD?

Oxley Retail bonds 5% pa 4 years...in the wake of Trikomsel

Occupying my thoughts of late is whether to invest some money into Oxley Retail bonds..yes im yield hungry and a whore.

Lest you weren't aware. Trikomsel is an Indonesian company which is in the business of selling cellular phones in Indonesia. They issued SGD corporate bonds to mainly PB (mainly accredited investors a.k.a quite rich people) but now they are very likely to default on their SGD bonds. What sucks about this is they would rather default than to issue rights to raise funds. It seems they are going to give their Indonesian creditors priority over PB folks in Singapore. It's all still unclear at this stage but some lessons are to be learnt here.

1. Buying bonds from a foreign corporation is risky as they may not follow local laws and MAS can't do much. Besides, nearly all of Trikomsel's business is conducted in Indonesia, so it makes sense that they don't piss people in Indonesia.
2. Having powerful shareholders may not be a sign that buying the bonds are safe. Trikomsel has Softbank (Big boy) as its substantial shareholder and i guess by this token, many would have been led to believe that investing in their bonds are safe but it seems that Trikomsel is "protecting" the shareholders to the detriment of bondholders.
3. Being an accredited investor ain't a good thing as you get thrown junk by banks since you are believed to be savvy, so you are less protected by MAS, so to speak. Fortunately, one can opt-out of this "accredited" status now in Singapore.
4. Given the worst case scenario, how much can you liquidate by selling their inventory of handphones?

Now, about Oxley retail bonds. This is a Singaporean company, not like Trikomsel, so Oxley follows the laws of Singapore. It develops ,sells and invests in properties, not like Trikomsel . Properties keeps much better value than handsets.Sounds good, but the problem is i'm an ultra conservative,risk averse chicken who prefers to walk up stairs and take a ship, just in case the lift drops from the 28th storey or the plane crashes.

Financial Convenants

.

Balance Sheet

Part of the financial convenants (a.k.a terms) is that Oxley's consolidated total borrowings to consolidated total assets from 1 July 2016 onwards must be 0.70:1. Breaching any of the financial convenants, bondholders ( if more than 25% agree) can take action to demand return of capital and accrued interest.

Done by a risk-averse chicken

0.65 VS 0.70. 

This is too close for comfort for this chicken here, given that mark to market value of the assets could change rapidly especially when Oxley have lots of property development overseas, exposing itself to currency risk ( which i guess the fall in rupiah against SGD is a factor in Trikomsel's woes).

Goodbye Oxley.

Child Development Account (CDA) Comparison

So we have a baby and since Standard Chartered has this priority banking feature for the whole family, i thought let's sign up the whole family to be under the scheme and along with it came the Standard Chartered Child Development Account (CDA). A few weeks later, they announce they were exiting this business which coincidentally, many local banks started to come up with a slew of promotions to entice one to sign up for their CDA accounts.

POSB CDA 

UOB CDA

OCBC CDA

Summary

POSB - 5 year guarantee of 2% pa for first $12,000 and 0.05% pa, thereafter.

UOB - 1.7% pa for first $20,000 amd 2 % thereafter.

OCBC - 2% pa for first $36,000 and 0.05%pa thereafter.

Seriously, UOB can go fly kite, since who in their right mind will put in so much money to be locked up in a CDA account just to reach that "promotional" 2% pa.  For a single baby family, the optimum amount to put in will be $12,000 ( i place in $6000 + the maximum government matching of $6000). POSB and OCBC is similar for the optimal amount but i went for POSB instead for their transparent guarantee of 5 years.

Thankfully, the process to switch CDA account was painless and surprisingly quick as our fabulous government made it easy to switch online through this link.

Time to look for a breast pump as the hand me down medela swing ( this only pumps one breast at a time) took more than one freaking hour to use, which makes Wifey very frustrated which results in a not that great time for the Hubby. Buy a double pump one(pumps two breasts concurrently) instead as it takes half the time. 

The Stock Market Bugger and Portfolio

The recent correction revived my interest in the stock market with some deployment of my hard-earned war chest. Since my last post in December 2014 about the US interest rates, i am getting ready for it by first repricing my home loan to the DBS FHR (1.1%+FHR, no lock-in) and boy was i in the nick of time as they increased it the next day to (1.5% +FHR, 3 years lock) which is no longer attractive in the market currently(UOB 1.68% is better now,imo). My home loan has effectively decreased from about 2.1%(1 month +1 month sibor) to 1.5% currently.

The second thing i did was to sell half of my capmalltrustbonds3.05% at a price of $1.05 (acquired during IPO) immediately after the interest was given. The original intention was to sell all of it but given the current sub-IPO price of about $0.993 with some interest having accrued, heck it, as there is still some uncertainty about when interest rate will rise since US inflation is still pretty low. Selling this was to bolster my warchest to whack the sunken stock market bugger real hard if it ever becomes a 2009 crisis but i doubt it.

The third thing i did was to buy shares, namely, UOB,OCBC, Stamford land, Ireit, Accordia, ST Engineering, Jardine C&C, Keppel and M1. Having experienced the 2009 crisis, learning and profiting from it, i bought the shares 1 lot ( yes 100 shares each time) as it tanks...the more it tanks i increased it to 2,3,4,5 lots, capping my purchase to a max of 5-7K each day to pace my warchest. Having to pay only 0.18% commission with no minimum allowed me to do that. The cold comfort of Wee Cho Yaw buying UOB at about $22 and $18.76 per piece and OCBC's discounted DCA price of $8.71 gave me a benchmark to work with and heck, these bank shares price/book has been the lowest in 5 years with the former giving 4.6% dividend yield and the latter 4% dividend yield. Having ST Engineering director buy STE at about $2.75 with its dividend yield of 5.6% makes me shake off any losses i get hit with as i average down. I try not to average up, only average down, so the purchases came to an end with the recent bullish state of the stock market, leaving me with 2/3 of my warchest still languishing in high-yield bank accounts, namely, ocbc360 and CIMB. 

$14580 per annum of passive income from bonds and equity ( non-CPF). The journey of a trillion miles continues.

Direct From the Federal Open Market Committee

Forget about CNBC, Bloomberg, Reuters, Analysts Reports, Newspapers e.t.c. It's best to be informed from the source. 

"......When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run......"- Federal Open Market Committee, 17 Dec 2014

Seems like those who are heavily leveraged in loans, especially floating rate home / mortgage loans can heave a great sigh of relief. 

Current US inflation rate: 1.3% as reported by the Bureau if Labor Statistics (BLS) on December 17, 2014.