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.

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?