Wednesday, October 29, 2008

What to See / Do in Melbourne

Money Saving Tips

  • Make full use of free Melbourne City Tourist Tram.
  • Sunday train tickets are extremely affordable.

  • Self-drive on Great Ocean Road. Recommended rest stops: Geelong, Lorne, Twelve Apostles, Port Fairy.
  • Halls Gap.
  • Take free City Tram.
  • Stroll along Portland.


  • Queen Victoria Market. Most busy on weekends.
  • Toorak area for shopping and eating. Take train from ...
  • St Kilda's weekend market. Only on weekends.
  • sfdfdsds


  • Skin medication products are extremely effective (not necessarily cheap). They are not available in Singapore.
  • Great country to shop for outdoor equipment, gear, hiking shoes, jackets. Range and selection of products are just amazing. These shops are mostly located on Little Collins Street.

KM Workshop with David Gurteen

Attended a knowledge management workshop conducted by David Gurteen.

His website provides a rich source of information on the subject.

These are my estimates of the effort needed to put in place a KM system in a corporation:

a. Technology (10%)
b. Process (20%)
c. People (70%)

Monday, October 20, 2008

SG's Workers Quarter

Would a similar workers' quarter ever be located in the heart of Bukit Timah? In the first place, would this even be considered at all?

It was reported that a maid's training school would be located in Admiralty. Isn't this more suitable to be located in SG? Wouldn't a swap be better?

Saturday, October 18, 2008

Warren Buffet: Buy American. I Am.

Source: New York Times, 16 Oct 2008.
THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.


A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

Friday, October 17, 2008

MAS guarantees all bank deposits

I am surprised this declaration did not come earlier. It is only a matter of time. No matter how strong we say our banks are, there will still be lingering doubts in the minds of depositors given the current fear in the market (and in banks).

The declaration may be a bit late, but it is still better to be late than never. I suppose there were signs of funds outflow in a flight for safety, as other governments in the region pledge their commitment to defend their banks. It is only common sense and logical. Meanwhile, we can take comfort and solace in this safety shield till it expires on 31 Dec 2010.

But why 2010? Reading between the lines, we can infer that that would be the estimated amount of time needed to repair the global financial system.

Story of the Eagle

This story was shared by one of my colleagues. The eagles' self renewal process is truely amazing.

When an eagle reaches 40 years old, their claws start to age, losing their effectiveness and making it hard for them to catch preys. Its beak is also too long, thickened feathers too heavy for easy flying. The lifespan of an eagle is up to 70 years old. But in order to live this long, it must make the toughest decision at 40.

There are 2 choices, to do nothing and await death or go through a painful period of renewal. For 150 days, it first trains itself to fly beyond the high mountains, build and live in its nest and cease all flying activities. It then begins to knock its beak against the rock till the beak is completely removed. When a new beak is grown, the eagle will use it to remove all its old claws and wait quietly for new ones to be fully grown.

When the new claws are fully-grown, the eagle will use them to remove all its feathers. 5 months later, when its new feathers are fully grown, it will soar again in the sky with renewed strength and live for the next 30 years.

How the Interbank Market works

Source: BT 15 Oct 2008
Liqudity in the financial system is like the lubricant in engines. Without it, the engine will seize and fail to function.

European bank rescue

Source: BT 15 Oct 2008

US Govt's bank rescue

Source: BT 16 Oct 2008
This bailout move is distasteful, but it is a necessary step to ensure financial stability and recovery.

Thursday, October 16, 2008

Beginning of the End?

The day is darkest before dawn. LIBOR is still staying stubbornly high despite the huge liquidity injection. Clearly, the day will only become brighter when confidence and trust returns to the financial and credit markets. We are now entering into a period of unknown unknowns, and it is during such times that only the paranoid will survive.

Oil's slippery slide

Source: BT, 15 Oct 2008.
Just barely 3 months ago, crude was breaking record after record, and peaked at US$147.27 per barrel on July 11. Today, prices have corrected a whopping 52% and crude is now trading at less than US$70 per barrel.

Insights from Paul Volcker

Source: BT, 15 Oct 2008

Paul Volcker, nicknamed the Inflation Slayer (for defeating double-digit inflation in the US during his Fed tenure from 1979 to 1987), was the former US Fed Chief. He made these comments recently.

He warned of "disturbing trends: huge imbalances, disequiliberia, risks."

"Altogether, the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot."

"I have been around for a while, I have seen a lot of crises but I have never seen anything quite like this one."

"I believe we are entering a recession of unknown duration."

Tuesday, October 14, 2008

Inflation is gravity defying

The official CPI for Singapore for last few months was hovering between 6.5% to 7%. But we all know this is certainly not reflective of real inflation. Just take a look at the price hikes of some common food items.

For example, a bowl of noodles at a hawker centre or food court is up from $2.50 to $3.00, a whopping 20% increase attributed to higher commodity (grain) prices. Similar, the price of bread has also gone up.

But do you know, wheat and corn prices have come off some 40% since then? Do you really think what has gone up will come down? I guess you and I know what the answer is.

Therefore my friends, inflation can only go one way - up. Only our salaries can possibly come down.

Monday, October 13, 2008

SIA - Still A Great Way To Fly

Why I like this stock.

  1. It is the only Singapore brand which has earned global recognition.
  2. Has a cash horde of more than S$5B.
  3. Able to sustain its S$1 annual dividends (Yield of 8.3% based on $12 stock price).
  4. Able to pass on fuel costs through fuel surcharges.
  5. Downward fuel price is positive on earnings (Fuel makes up 1/3 of total costs).
  6. Tiger Airlines, an associate company and budget carrier, turned in profits for the first time.


  1. Business and discretionary travel slowing (load factor).
  2. Challenges in securing toe hold of the China market via China Eastern Airlines stake.

Advise for Investors

  1. Consider time in the market (Not timing the market).
  2. Buy term and invest the rest.
  3. Rising tide lifts all ships (We all look like geniuses in an up market).
  4. Why pay fund managers when most can't beat the indexes over prolonged periods?
  5. Buy index funds.
  6. Educate yourself financially, trust nobody with your money.
  7. The most money is made in a down market.
  8. Luck is when opportunity and preparedness meets.
  9. Diversify your portfolio if you are not Warren Buffett.
  10. Understand the power of compounding and value cost averaging.

Impact of A$ fluctuations on earnings

For every 10% depreciation of the A$ against the S$:

a. SingTel's earnings reduce by 5%.

b. Capitaland's earnings reduce by 2%

c. Comfort Delgro's earnings reduce by 2%.

Thursday, October 9, 2008

Food for Thought

If your investment devalues by 50%, it would take a 100% gain (not 50%!!!) for this same investment to return to its original value.

David Bensimon's eye into the future

Source: BT, 8 Oct 2008

David Bensimon's predictions have been very accurate in the past. Here's a summary of his predictions. Let's review the accuracy of this forecast some time in the future.

  • The five-year outlook is for a huge growth in equities and commodities
  • Key equity indices will triple and commodities will more than triple' in five years from the bottom.
  • Crude would bottom at US$80 a barrel in early 2009.
  • Buy in as the S&P 500 Index hits 1,070 points.
  • First quarter of 2009 will present 'the best buying opportunities since October 2002'.
  • Gold will bottom at US$730 an ounce in April 2009.
  • Among commodities, the grains and livestock will probably outperform metals and energy.

My Stock Picks

  1. SIA
  2. SPH
  3. SPC
  4. Singapore Post
  5. F&N
  6. ST Engineering
  7. Noble Group
  8. Comfort Delgro
  9. Raffles Education
  10. Midas Holdings
  11. Food Empire

Wednesday, October 8, 2008

Fighting Inflation

One way to mitigate the impact of inflation is to purchase stocks of publicly listed companies which we have relationship with as consumers.

General rule of thumb works something like this. If public transport costs go up, buy companies like SMRT and Comfort Delgro. You will get back the delta expenses in terms of higher dividend payout. It's a simple logic.

Higher fixed line telephone costs, buy the Telcos.

Rising electricity costs, too bad. Our GENCOs are not publicly listed (yet).

So, stop whinning and complaining about cost increases. Nobody will listen nor care, if you belong to the sandwich layer (that makes most of us). You have to do something, and you can.

Assessing Leverage

Indicators for Debt Management.

1. Debt Ratio

  • Indicates extent to which Total Assets have been financed using borrowed funds.
  • Total Debt / Total Assets.

2. Debt to Equity Ratio

  • Total Debt / Total Stokholders' Equity.
  • Ratio > 1 indicates majority of assets financed through debt.
  • Ratio less than 1 indicates assets primarily financed through equity.

Assessing Liquidity

Key indicators of Liquidity.

1. Current Ratio
  • Indicates ability to meet short-term debt obligations.
  • Indicates ability to pay current debts.
  • Higher means more liquid.
  • Total Current Assets (TCA) / Total Current Liabilities (TCL).
  • If TCA > 2 x TCL, it shows good short-term financial strength.

2. Quick Ratio (also known as Acid Test Ratio)

  • Most stringent measure of how well a company can cover short-term obligations.
  • Indicates ability to convert current assets to cash for purpose of meeting current liabilities.
  • TCA - Inventory / TCL

Assessing Profitability

What are the key indicators of profitability?

1. Return On Equity (ROE)
  • Profits earned compared to total shareholder equity on Balance Sheet.
  • High ROE => ability to generate cash internally.
  • Higher, the better.

2. Return On Investment (ROI)

  • Net Profit / Total Assets.
  • Overall effectiveness to generate profits from total investment in assets.
  • Highter, the better.

3. Net Profit Margin

  • Net Profit / Net Sales
  • % of each sales dollar left after all expenses.
  • Highly industry dependent.
  • Higher, the better.

Inflation - The Silent Killer

Many still harness the illusion that placing one's hard earned money in the banks, earning a paltry interest of less than 1.5% p.a., is the safest and surest thing to do in the current climate. I beg to differ.

One of your greatest invisible enemies is inflation. If inflation hovers at just 3% p.a., which was more or less the scenario for the last decade, it can already make a significant dent to your retirement nest egg - halving your purchasing power in every 24 years. A simple sensitivity analysis reveals that, inflation at 5% p.a. would half your purchasing power in 15 years. And at 7% p.a., it would erode your purchasing power by half in every 10 years. Hence, inflation nibbles away at your nest egg 24 x 7 like a stinking rat, even while you sleep...

And before you know it, you have no cheese left. Do you sense that sinking feeling now? Of course, the next logical question would be, what can we do to fight inflation?