Lessons Learnt in this bear market

Sleep has been getting better. Surprisingly, i managed to not buy anything for the last 3 days. Is this the sign of investor fatigue which i need to be contrarian about against my own behaviour? As of today, total unrealized capital loss is 7.7 %. I am actually getting pretty ok about the further capitulation of the stock market as it just means there is less risk if i were to buy further but lets see how long i can be on cold turkey.

Lessons learnt
1) The role of bonds.
I have come to appreciate the presence of  retail bonds in my portfolio. Nearly all asset classes available to the common retail investor will fall in a bear market ( except US treasury bills, USD,JPY e.t.c) but unleveraged non-junk retail bonds will fall less. My bonds act as a stabiliser, it dampens returns in bull times and dampens losses in bear times. As of now, my bonds could be sold to add to my cash warchest, having helped me earn a higher rate of return as compared to fixed deposits in the past 5 years of ultra low interest rates . Now, the US Federal Reserve increasing rates is something i need to watch out for as it will affect my bonds.

2) The role of sentiment.
As much as fundamental analysis is important, the role of sentiment  is equally or even much more so. I really like the article written by Howard Marks of Oak Tree Capital recommended by investmentmoats and there is a sentence that says" a common behaviorial trait among investors is their tendency to overlook negatives and understate their significance for a while, and then eventually to capitulate and overreact to them on the downside..". I am now waiting for the overreaction patiently.

3) My psychology
I know for a fact that making a return of $50,000 brings me less joy than the "xian-ness" of losing $50,000. A terrible mistake is the failure to apply this knowledge. I must now keep telling myself, it is never a wrong time to take profits. NEVER. Forget the shit of selling for a profit and later regretting when the price shoots much higher. A profit is a profit.

4)The importance of market cycle investing
Warren Buffet said " Never fall in love with your stocks". I read but didn't internalize. Shit man. He is darn right. but of course. Buy and hold is quite a buzzword but does one really know what it means? Market moves in cycles, it had, has been, will always forever move like that. This is just nature. I fell in love with my stocks and now i'm dumped! I have to thank the late Dennis Ng for his knowledge shared in his forum, Masteryourfinance.

Anyway, if my memory is right, i remembered 2008/ 2009 we saw asset managers like Franklin Templeton, Schroders selling en mass, daily or weekly as their unit trust holder panicked but i don't see it this time which may explain why i'm not as calm and collected this time as i was then. This might be a long drawn process, no hurry to buy, so lets go to sleep , life goes on....

Controlling my emotions in this bear market

I unleashed my greed in August, September, October of 2015 and now with the market sell down again ....honestly, i finally feel sick. My capital gains from my greed in 2008 and 2009 has been totally wiped out due to my greed in the 3 months of 2015 and i am truly 'sian'.  My total portfolio of stocks and bonds is now down 5.5% . I still have a warchest of half my value of stocks and bonds and the dividends i get monthly helps alleviate the pain. The other painkiller that i use to remind myself is that the accumulated dividends over the years has more than made up the unrealized capital loss of 5.5%.

Seriously, i thought i could handle this bear calmly having been through the Lehman crisis but i still can't. Truly, i'm having some sleepless nights and its affecting my work slightly as my eyes are frequently glued to my bloomberg app.

Everyday is an emotional fight within myself to "hold On" ...don't press the buy button...dont be greedy...pace yourself...while the other 'evil' side in me tells me to buy,buy,buy,buy,buy,buy ... Its the greed of losing out on the opportunity of buying at cheap prices versus the fear of prices further plummeting.

Anyway, let's see how it goes and the big question is ...Is this just purely sentiment driven or is there some deep problem going on? George Soros has said there is a looming crisis, and he is a $27 billion networth big fish...who am i to disagree with him but then again, he is a hedge fund person and may do the opposite to what he says.......argh mental struggle again!

My experience opening an Australian bank account as a Singaporean resident

With the AUD/SGD dropping to a multi-year low on the back of a commodities meltdown, what better way to take advantage of this then to go for a 16 days holiday in Australia. Besides, Australia is an amazingly baby-friendly nation ( much more than Singapore) in terms of places to bring the Baby to. Milk and baby food is also darn cheap, being about 40% cheaper than Singapore. And so i thought i would be "saving" some money. BUT, my wife just had to change darn lot of money just in case we ran out , especially when the currency is cheap now. Naturally, there was excess and bringing back to Singapore to change back to SGD or just to keep it in a milo tin was a "SIN" to me. Money should always work hard, not rest and slack!Money as the spread going to the money changer should always be minimized too!

So the last week of the holiday, i opened an Australian bank account. Here are some lessons learnt.

1) As a Singapore Citizen who is just a tourist like me, DO NOT ever give an australian address to the banker to open an account for you. This is a major misconception! You do not need an australian address at all. If you give an australian address, you will automatically be deemed to be staying in Australia and your withholding tax rate will be  46.5% ( top marginal tax rate 45% + Medicare levy 1.5%)  on your savings account interest earned per year.  If you give a Singapore address, you will be deemed as a non-resident and withholding tax is only 10%. I reiterated many times to the banker that i was a non-resident just so he opened the account correctly. 

2) Go to the major banks like National Australia Bank (NAB), Commonwealth Bank of Australia(CBA), Westpac and ANZ. I was just passing by a community bank called Bendigo bank and thank GOD i didn't open with them as the banker asked me for an australian address and didn't even know the withholding tax rate. My suggestion is to go to an asian banker in one of the major banks as he or she has dealt with many asians opening bank accounts in Australia and so will be very experienced. 

3) Open the account at least 5 working days prior to your departure from Australia. The reason was because the atm card needs around 5 working days before they can be collected from the same branch you opened with. 

4) You have to have some activity in the account or else the account will be in dormant status and it will be swept to a government account. According to the asian banker i spoke to, he said it was HELL to get back that money with lots of paper work and time ( think months). He wasn't too sure about the span of time before dormancy starts but told me to open 2 accounts and transfer some funds between them once every 6 months just to be safe. As i can't have a peace of mind not knowing something for certain, here it goes:

Apparently it's 3 years ( i don't know if the 7 years one has be approved) and the Australian government takes about half a billion a year from these dormant accounts! That's free money!

So what's benefits

I opened the NAB reward saver account which currently has an interest of 2.85% pa, ( use to be 3.05% as can be seen in the pic below), After WHT of 10%, the net interest rate will be 2.565% pa (use to be 2.745%), which is better than any banks savings here and even better than our Central Provident Fund -Ordinary account of 2.5%. And this along with the belief that the AUD will appreciate in time to come.Going back to Australia is also certain and this will act as a holiday fund there. 

Doing business with car dealers - Protect yourself

Not only are cars blood sucking liabilities to get in Singapore, the process of getting one is also fraught with many dangers. 

Examples of car dealers who infamously made the news for various reasons:

Volks Auto, KS Automobile, Galaxy carz, Cars Today, Mich Automobile,.Go google them!

Common danger
The original car owner sells a car to the car dealer for $32,000 . The car has an outstanding loan of $30,000.The car dealer gives you $2000 first and takes the car, promising you to handle the paperwork of settling the remaining loan of $30,000.
The car dealer then finds a car buyer. Car buyer pays a deposit(or worse the full amount!) and takes over the physical car, believing mistakenly that having the physical car as 'collateral' gives one a peace of mind.
Car dealer then runs away.
Original car owner : Still owes the bank the loan of $30,000, is liable for any fines that is incurred and loses the use of the car.
Car buyer : Loses deposit, car will be towed away as it is owned by the bank due to outstanding loan.

Possible ways to reduce risk
For original car owner : Settle your loans by yourself before selling the car to the car dealer. Besides, some car dealers like to charge an admin fee for doing such work. I was asked for $500 before for the admin fee which i found ridiculous for such a trivial job and of course i dropped this dealer. Do not let him take the car after receiving the deposit. After settling the loan by yourself ( you can't transfer ownership until the loan is settled), make sure that there is a transfer of ownership to the car dealer at LTA or if the dealer is an electronic service agent, apply for a transaction pin using your Singpass and then do it at the dealer's premises. On the spot at LTA or at the dealer's  premises, receive the full amount then transfer the ownership.   Only after this, then pass the car to the car dealer.

For car buyer: Paying a deposit seems like a common industry practice which i kind of disagree with. Negotiate for a lower deposit to reduce risk or  a complete safer way is to request the car dealer to go down to LTA to do a transfer of ownership of the car and only then pay him in full the amount once transfer of ownership is done. If the car still has outstanding loan or is not owned by the car dealer, the car cannot be transferred. If he is a scam, he will surely not agree to this. If he is an electronic service agent (ESA), you can ask him to get a transaction pin  and transfer the vehicle ownership to you at his premises.Again if the car still has outstanding loan or is not owned by the car dealer, the car cannot be transferred.

There are actually a lot of permutations of how to get cheated in the car industry but the moral of the story is : The ownership status recorded with LTA and when you hand over or receive the money is very important and always get an invoice. This principle also applies when dealing with direct car owners or buyers.

Other car articles
Buying a brand new car- What i learnt
Buying a brand new car- The minimum considerations

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.