One of the more interesting programmes I’ve watched on my iPad recently is National Geographic’s “Doomsday Preppers”. The term “preppers” refers to people with survivalist beliefs, that the end of the world as we know it (TEOTWAWKI) is near due to risks of nuclear war, over-population, collapse of US and global economy, massive earthquake (California), shifts in magnetic poles bringing earthquakes and massive weather changes, flu pandemic, terrorism etc.

These people prepare for the contingency that things fall apart in the societies where we live, with the social fabric torn beyond recognition and where breakdown of society leads to anarchy, chaos and violence.

It is not unthinkable for us in Singapore as we have lived through SARS in 2003, H1N1 pandemic in recent years as well as seen 9-11 terrorism attack in 2001 as well as potential terrorism threats from Jemaah Islamiyah internally. Partly because of these threats, some of my reservist duties in the Singapore Armed Forces involved protecting installations from these risks.

Doomsday Prepper or Survivor Insurance

Watching the NatGeo series on “Doomsday Preppers” set me thinking about my own emergency preparedness. Some of the families featured in the NatGeo programme spent in the range of USD 6,000 upwards to USD 300,000 on their preparations. These typically involved:

1. Water and Food stores (dehydrated, canned, MREs)
2. Medical and personal hygiene supplies
3. Camping and outdoor gear
4. Weapons for self-defence (sticks, knives, handguns to assault rifles and ammunition)
5. Emergency shelter (underground bunker or fortified home)
6. Bug-out (escape strategy)
7. Survivor skills to live off the land

It was interesting to see how those families prepared themselves for a potential apocalyptic scenario in the future.

I had earlier thought about emergency preparedness and even our Singapore Civil Defence Force encourages citizens to be ready for emergencies. If you recall, Singapore has encountered almost island wide black-outs before and even in my own apartment, there has been localised blackouts lasting several hours that occurred in the past year.

Financial Freedom is Useless If You Cannot Survive

It struck me that even if you are a millionnaire with $$$ in the bank or in equities, bonds or property, you can’t get access to them if the world around us collapses. What is the use of money in an era of hyperinflation caused by collapse of an economy? What use is your investment property if your tenant refuses to pay you when modern society collapses?

I started to think how I should set aside some part of my investible net worth into purchasing tangible survivor supplies. The starting point is to follow SCDF’s Guidebook on emergency preparedness to have a “Ready” bag or FEMA’s recommendation is a “72 hour” bag or “bug-out” bag. Such a bag should contain food, water, medical kit, personal hygiene to sustain life for 72 hours following a disaster or emergency before one can get to a shelter or be rescued.

After having the “Ready” bag, I should considering stockpiling some food and water to last my family 2 weeks. These would require a more extensive planning as it could include means for sanitation, fuel for cooking and washing. We sometimes take our water and electricity supplies for granted. In the case of an emergency, water and electricity could be cut off and one would have to cater for these using backup supplies.

Do you think you will consider investing in a little “survivor insurance” for yourself? Hopefully it can be sold along with to the usual health insurance quotes. Have you already gotten a “Ready” or “72 hour” bag ready for emergencies?

Share with Panzer your thoughts in the comments section.

Be well and prosper.

It is a timely lesson in my journey towards financial freedom that unforeseen circumstances can occur but the key thing is that all family members in the car are safe and sound.

Looking back, I was distracted but for a moment but the consequences were painful. Reinforces the lesson to be “present” at whatever one is doing at the moment, to be fully immersed and not be distracted by other inconsequential things.

Our journey towards financial freedom also requires us to be present. To be aware of our net asset positions as well as our cash positions. To know how much investible savings we have and what is our returns on investments. It also requires us to know a lot about ourselves, our personalities, investment risk appetite and ultimate objectives in financial freedom.

How do you maintain your focus on the task at hand without being distracted in your journey towards financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

(Photo Source: Flickr by Stuart Mudie)

I remember parts of this Shakespearean quotation during my “A”-Levels studying literature from the play, “Measure for Measure” and it struck me the more I read about how the two casinos Integrated Resorts have resulted in seemingly educated professionals falling prey to the addictive nature of gambling. A local brokerage firm UOB Kay Hian has also urged its staff to voluntarily sign up for self-exclusion through the National Council on Problem Gambling.

The Siren Song

Ever since I read that story and also about how people succumbed to the lure of the roulette wheel or at games of chance, I decided to voluntarily sign up for self-exclusion from the two IRs. Not because I have a gambling problem but to recognise that I am human and I can fall just like anyone else. It is true that it is one thing to be tempted, and another to fall.

The act of applying for the self-exclusion basically closes the door physically and metaphorically on the casino part of the IRs. I can still go to the theme parks, food and beverage and retail shops at will. I have just put in place mechanisms to physically stop myself from even entering the casinos so that all temptation is removed. My job doesn’t require me to bring guests to the casino and even if it did, I could just wait outside for them and also save the $100 entrance fee

Ideas are Things

To be cognizant of one’s weaknesses is to be self-aware. I have been harbouring thoughts of going to the casino given that the March bonus promises to be good given 2010′s GDP figures in the public sector. I realise that those thoughts are dangerous because if you read enough Napolean Hill, you will see that everything that we do first started out as a thought or an idea in our minds. Ideas can be dangerous if they bring you to the dark side of your nature

Some people say that speculating investing in the stock market is also akin to gambling if you intention is to make a quick buck. I think it’s true, I’ve examined my own motivations and seen the naked greed and fear rearing themselves when I was in the speculating phase. It isn’t a pretty sight and messes up your emotional state.

What tempts you to go off the path towards financial freedom and how do you overcome it?

Share with Panzer in the comments section.

Be well and prosper.

What is staggering is the amount; but underlying this story is what can potentially happen to any of us when we take a gambling approach towards financial freedom.

I have been to the Resorts World Casino in Sentosa. It was an educational and interesting experience to see groups of people who come together with a common purpose to gamble with their money on the various games provided by the casino. While individual motivations differ, the activity is the same. Taking a bet on a random outcome and potentially gaining or losing money in the toss of a dice or roll of the roulette wheel.

Some feel that gambling is a vice. Others feel that it can be a harmless hobby if one plays within one’s limits and sees it as a leisure activity and not a money making opportunity.

I too have gambled on SGX. Punting on short-term movements in share prices of companies which I had little interest to understand and research. How different is that from gambling in a casino? I am also wagering my capital on the outcome of share prices in the future. The time horizon may be longer than the time it takes for the roulette wheel to finish spinning but the concept is similar especially if my mindset is that I don’t really understand the company and business much and am just watching for the volatility in share prices to buy lower and sell higher.

Ultimately, if one doesn’t really understand what we are getting into in terms of investments, then we are moving closer to a gambling mentality to investing rather than true investing.

The lesson from the $26million loss by the businessman is clear. Play within your means be it investment or gambling. Do not invest (gamble) on credit. And most important of all, know your limits and when to cut loss and walk away without destroying yourself and your own life savings recklessly.

Be well and prosper.

"Black Swan" by Nita W

I am constantly reminded about the unpredictability of life. Yesterday one of my colleagues injured herself getting down from the bus and was on a week’s medical leave due to a fracture in one of her bones. Another colleague informed me that she was tendering her resignation because she wanted to pursue full-time studies to get her qualification.

What does these seemingly unrelated and yet coincidental occurrences have to do with the picture above?

A World of Mini-Black Swans

After reading Nicholas Nassim Taleb’s books on “Fooled by Randomness” and “The Black Swan”, I realised that the human understanding of the predictability of life is grossly over-stated. We think we know more about the world than we actually do. In Taleb’s language, a black swan event is characterised by rarity, extreme impact and retrospective predictability.

It’s quite rare in my case for both my colleagues (and there are only three of us including myself in the team) – one having a serious fall through an innocuous activity of getting down the bus and the other resigning around the same time. The impact on the office could be big because if my injured colleague is on long-leave, by the time my other colleague is clearing her leave, I will have to man the fort alone until the new staff comes in which from experience lags a few weeks to a month after the staff has left the organisation.

This occurrence only serves to strengthen my belief that life is totally unpredictable and huge shocks can happen. My own life is filled with that as less than a month ago, I was facing a crisis in my own life, that of separation from my spouse. While we are for the time being reconciled, I cannot but feel that my own mini black swan is also lurking behind the corridors of time, and thus it is important that my life be measured by the experiences I have gone through rather than about the x or y dollars I have amassed while I live.

Being Prepared for A Totally Unpredictable World

The more I think about survivalism or TEOWAWKI scenarios, the more I realise we take for granted most things in life. Running water, a functioning state, security and health, career etc. Only when truly black swan events occur right in front of us and impacts us through the value of our homes, our equity (stocks and shares) portfolio or our own lives that we take stock about what we already enjoy and prepare ourselves for possible challenges ahead.

Being prepared means to have a scout’s mindset of always being ready. We cannot predict 100% of what happens in life and in the world but we can control ourselves in acquiring the useful skills and abilities that can see us through whatever comes.

I start to realise keeping healthy and fit is one way to make my body resilient and stronger to withstand the challenges of life. I start to realise cherishing the existing family relationships allow one to savour the sweetness of being in a family when it can be taken away. I also start to realise that I don’t want to live a life of regret and to start enjoying small luxuries within my means NOW before I reach a point when I am too old to enjoy them.

Even though my work staffing situation appears to be dire, it was fortunate that I have made some preparations. For instance, I got my staff to document her work and processes in electronic form to facilitate handover. I also am familiar with most of the things she is doing so can take over while she is away and before her replacement comes in. This is not because I had foresight or could predict this possibility but some months back my staff’s family member was very sick and she contemplated resigning to help take care of her family member. Fortunately, I managed to get her to rethink her decision and her family member’s condition improved enough that she managed to last another 9 months since that episode and she is leaving for other reasons.

In relation to my journey towards financial freedom, I am now still having 33% of my net worth in equities. I think the volatility in the market will continue with a tendency for a correction given that the economic fundamentals of our key markets, US, Europe and China not looking too rosy. The risk of deflation and double-dip recession in the US is very real and I cannot see how Singapore can be unaffected given our export oriented economy.

I have kept my cash and cash equivalents high as ammunition to fight the upcoming challenges that the global economy throws at me.  I sleep better knowing my cash position and am comfortable even if my equities go south as I am in a net asset position.

What mini black swans do you think about and how do you think you are managing it?

Share with Panzer.

Be well and prosper.

October brings back images of stock market crashes, the falling of the sky and other doomsday scenarios on the scale of apocalypses. It is not surprising that weak employment data last Friday in the US has made equity markets jumpy.

Currently, I’m adopting a nimble strategy of being overweight in cash and eyeing the bluest of blue chips for medium to long term growth and not over-committing to having up to 80-90% of my investible capital in equities (as I used to in the past) as I’ve learnt the value of having some portion of your investible capital in cash and cash equivalents because the world changes too fast. Even quick punts can net one returns exceeding 2 x fixed deposits.

What is your current strategy in the light of October volatility?

Share with Panzer in the comments page.

Be well and prosper.

These two countries are often compared because of similar geopolitical situations, racial compositions, approaches to economic growth and competitors to be the regional (if not world) class financial markets.

However, the recent Lehman mini-bonds fiasco has shown very different regulatory approaches in resolving the losses suffered by investors.

Hong Kong Monetary Authority: 1

Hong Kong’s recent actions by the Hong Kong Monetary Authorities as well as their Securities and Futures Commissioned has resulted in Lehman mini-bond holders who would be compensated as much as 70% of their principal amounts invested with the banks. About USD 1.6 b (SGD 2.4 b) was invested by Hong Kong investors in Lehman mini-bonds and around USD 800m or (SGD 1.2 b) or roughly 50% would be compensated.

Monetary Authority of Singapore: 0

Singapore’s banks on the other hand are compensating around SGD 107m (USD 71m) out of around SGD 508m (USD 352) or roughly 21% would be compensated. This is half the proportion that the Hong Kong authorities have managed to help broker for their own investors.  Interestingly enough, if the percentage paid by each financial institution in Hong Kong is similar, I suspect DBS in Hong Kong would likely be paying out a higher proportion than DBS Singapore for selling virtually the same product.

The Monetary Authority of Singapore on the other hand, had its Deputy Chairman and Minister for Trade and Industry, Mr. Lim Hng Kiang defending its actions in its supervision and not accepting that it had been lax in supervision.

Different Jurisdictions – Different Outcomes

The compensation obtained by Hong Kong investors is double that of Singapore for the same product and very similar circumstances. Why are Singapore investors suffering more than those in Hong Kong. Based on the news reports about the Lehman mini-bonds fiasco in these two countries, it appears that the Hong Kong authorities was more proactive in being an advocate for the retail investor compared to MAS’s more hands-off approach urging retail investors to avail themselves to first lodge their complaints to the banks and financial institutions before going to FIDReC.

While investors in the ill-fated Lehman related minibonds and other derivative products have suffered, the way their suffering unfolded has been quite different.

On one hand, banks in Hong Kong have to put up a US 200m fund “to help pay legal costs of trying to recover collateral that was backing many of the investments, possibly increasing the payout for investors“.

There were no such reports of similar initiatives in Singapore.

It seems ironic that Hong Kong, better known for its free-market type of approach to financial markets, has emerged to be seen as a stronger proponent for the retail investor.

Singapore, with its reputation of being tops in Corporate Governance in the region and in laws and regulations appear to be letting the Financial Institutions get away with a ban (ranging from six months to two years) on selling these structured notes that no-one aged 9 to 90 with a breath would touch with a ten-foot bamboo pole.

I guess the morale of this story is that perhaps one is better off investing in Hong Kong financial market because you seem to have more protection than as a retail investor in Singapore.

Be well and prosper.

The article by the Straits Times “CPFLife payouts for Life” is very misleading as the content of the article focuses on the questions raised by Mdm Halimah Yacob. Her concern is expressed here:

The remark was directed at Madam Halimah, chairman of the Government Parliamentary Committee for Manpower, who noted that the law allows the CPF Board to stop CPFLife payments unless the Lifelong Income Fund is solvent. ‘While I can understand the legal basis for this provision, I find it quite disturbing to have it reflected in the Bill,’ she said.

The Government never giveth but the Government can taketh away

So it appears that the Government is able to legally STOP paying you out of YOUR savings accumulated from YOUR hardwork and locked by a portion of YOUR MINIMUM SUM CPF balances if the Lifelong Income Fund is insolvent.

However, given that the Lifelong Income Fund is mandatory for most CPF members and that you don’t really have much of a choice, if the fund is at risk of being insolvent, that would speak volumes about the quality of the people paid to run it. If you were given a monopoly and could control how much expense (payouts) to incur and can take other people’s money to invest (unlimited upside), some risk takers may use that money to make bets on the market. If the bets turn out well, 8 month (or more bonuses). If the bets turn sour, quit and find a new job while the members payouts get cut?!

Is the scenario I imagine realistic? Did we go through the last year or so since the sub-prime where we learnt nothing about putting people in such scenarios?

Minister Gan didn’t mention what happens if it is the CPF Board itself that makes investment mistakes that causes the Lifelong Income Fund to be insolvent in the first place or if the CPF Board is unable to generate sufficient income from its investments using YOUR portion of MINIMUM SUM locked away for CPF Life.

Those are very real possibilities for the Lifelong Income Fund to be insolvent and to be unable to fund future payouts. Even MAS can lose $9 billion in 1 year from investments and Temasek/GIC can lose BILLIONS in a year. What happens if CPF Board makes use of GIC to invest and they lose millions (not to say BILLIONS) in a “bad” year.

Would CPF members be screwed because of the mistakes made by the CPF Board?

Would CPF members be deprived of their right to their CPF Life income payouts that come from their OWN SAVINGS that they have NO CHOICE but to participate as opposed to private insurance/annuities?

And more importantly, Minister Gan’s promise as stated:

MANPOWER Minister Gan Kim Yong has assured Singaporeans they will receive a monthly payout from the CPFLife annuity scheme for the rest of their lives, despite a ‘disturbing’ provision in the new law.

But I am not sure if our esteemed Minister is aware that even if the payout is reduced to $1 a month (which the CPF Board is legally empowered to do so under these amendments to keep the Lifelong Income Fund solvent), he would still be honouring his promise while CPF Life members starve to death?

I cannot understand how we have a system where our forced savings from contributing to the Central Provident Fund is being managed with the risk borne by members. Not only do we lose the ability to decide what we want to do with our retirement monies, we’ve given the Government so much power that even if they make mistakes with our hard-earned savings, we will have to suffer for it.

If the CPF Board cannot generate sufficient income from CPF Life, we the CPF members are well and royally SCREWED.

If this doesn’t convince you to save for retirement OUTSIDE the CPF system, nothing else will.

Be well and prosper.

Flickr image "Bicycle" by Julien Hery

I’m quite close to starting my “cycle your way to work” project as my workplace is about 10km away from my home. This is a realistic distance for commuting to work by bicycle.

I’ve decided to embark on this project because I don’t drive to work daily as my spouse uses the car to run errands with my daughter so I decided to look for an alternate and healthy mode of transport. There is a direct bus from my home to the workplace but the bus can take up to 45minutes in the morning to get to my destination.

I’ll be posting more on this development as it is a way to save money and to get exercise at the same time. I value my life so I’ll avoid the roads for most of the journey and make use of park connectors for 60-70% of the journey.

More when I get my gear and start my cycling adventures.

Be well and prosper.

Flickr image "Greed" by Muffet

I recently had lunch to catch up with ex-colleagues from my very first job. It was a pleasant lunch as we caught up with the developments with the organisation and how each of us were doing.

Towards the end of the lunch, one of the colleagues started to talk about a business opportunity. It turned out to be an multi-level marketing opportunity.

Immediately, the red flags and hazard lights in my mind flashed repeatedly!

*Warning* *Warning* *Bullshit filters ACTIVATED*.

The reality behind MLM is that most people do not make money from it. The ones that do are those at the top of the MLM chain who started the entire business so that their downlines are the ones working hard for them. There are many references about MLM and you should make up your own mind. But my personal experience has been horrible.

My spouse was once recruited by an MLM outfit and for the week that she was with them, she was a totally transformed person. She was even “brain-washed” to expect objections from family members to her involvement with such a business.

Thus, I view MLM opportunities with skepticism and cynicism. Most of the evidence I’ve seen points to it being exploitative and driven more by profits rather than genuine regard for customers.

After this experience, I now view my ex-colleague with a degree of suspicion in that does he want to meet up because of our relationship as ex-colleagues or does he see me as another potential recruit for his downline?

Have you ever been approached to join a MLM program?

What did you do and how did you feel?

Share with Panzer in the comments section.