*Official* BBCWatcher club

[celtosaxon]

Thanks BBC... you are like a fountain of information, and then some! I don’t know how you do it.

Let’s say she doesn’t agree to Raffles (she does tend to prefer Mount Elizabeth), what is the next best option? Or would it be better to look for critical illness cover for anything big?

 

[BBCWatcher]

Hey BBC, if I own some stocks/etf and using IBKR, is there any way I can loan them out for short selling or put them out as call options?

You can certainly do the latter, but that can be quite perilous. Many types of options trades come with the possibility of mathematically unlimited losses.

Interactive Brokers offers a security lending program, and you can sign up for it if you wish, but I think it's only available for U.S. exchanges.

Let’s say she doesn’t agree to Raffles (she does tend to prefer Mount Elizabeth), what is the next best option? Or would it be better to look for critical illness cover for anything big?

To be clear, with Raffles Shield A plus the company coverage she could still go to Mount Elizabeth Hospital. She's allowed to file claims with both (company coverage first, Raffles Shield second) as long as the carriers know about the respective claims. Let's assume the whole medical bill is claimable -- no lobster or other fluff appearing as line items. OK, the company coverage provides whatever coverage it provides, up to its limits. Then, if there's still anything left to pay, she'd file a claim with Raffles Shield. Raffles Shield would look at the total Mount Elizabeth Hospital bill and immediately whack off 40% from consideration since the carrier applies a proration factor of 60%. Then it would run the rest of the bill through the rest of its claim calculations and pay a final amount.

In practice, this combination works well for "small" and "medium" bills at Mount Elizabeth Hospital. The company-provided coverage handles the initial amount, up to its limits, and then Raffles Shield A takes over. For "large" bills that exceed what the combination of policies covers, Raffles Shield A would then provide a hefty discount of very roughly 50%, but not a 90% discount. In other words, "dabbling" in Mount Elizabeth works for "routine" stuff, but for really expensive stuff, or for the next hospital visit within the same policy year, it'd be Raffles Hospital or a public hospital for better coverage. That's a pretty good way to think of it, actually: one "freebie" stay per policy year at Mount Elizabeth, preferably in a multi-bed ward to keep the costs under a bit more control.

If that's not good enough, the next step up in Integrated Shield plans is the top tier plan type, a full private hospital Integrated Shield plan. In alphabetical order the following carriers sell these plans: AIA, Aviva, AXA, Great Eastern, NTUC Income, Prudential, and Raffles Shield. I don't have a strong favorite among them, but I would note that these plan premiums can get pretty expensive (by Singapore standards) pretty quickly, so I think it's worth thinking about the possible "downgrade" options, specifically which carriers also have solid public hospital A ward plans. Raffles Shield has that quirky (in a good way) Raffles Shield A+Raffles Hospital Option step between a full private hospital plan and a public hospital A ward plan.

I'm a big supporter of Disability Income Insurance (DII), as you probably know. I'm less enthusiastic about Critical Illness (CI) insurance. I don't think CI makes much sense to plug possible medical insurance gaps because CI itself has lots of holes, and two sieves don't make a bucket. CI only pays anything when a specific, named risk event occurs -- and usually a one-time (not "multi-pay") payout. ("Multi-pay" is even more expensive.) I would much prefer just plugging the medical insurance gap ("one bucket"), and yes I do agree with her that she probably ought to have more than MediShield Life and the company-provided coverage.

She could consider getting a full private Integrated Shield plan, plus lowest cost rider, then completely drop the company-provided coverage. One advantage with the company-provided coverage is that it's group-based and doesn't exclude preexisting conditions, or at least such plans usually don't. It's not a whole lot of coverage, but "more than MediShield Life for a PR" is most helpful when it comes to preexisting conditions. But if she doesn't have preexisting conditions, then it could be best to push everything onto the private hospital Integrated Shield plan plus rider (plus MediSave, plus cash) and save the S$600/year premium.

There are "expat-style" medical insurance policies sold in Singapore. Pacific Prime specializes in such plans and makes them easy to compare online, so she could look at those, probably "just for fun." They tend to be very expensive, and they don't attempt to integrate with MediShield Life. I think PRs (and citizens) are generally better off with an Integrated Shield plan. That said, I've had such a plan in the past, and it was lovely, especially since I wasn't the one paying the premium. Some of these international plans are comprehensive, directly handling certain expenses such as prescription drugs that Integrated Shield plans don't handle as such. Integrated Shield plans often cover prescription drugs, but they don't cover them as a separate, standalone matter. Integrated Shield plans are hospitalization insurance plans, really, with "hospitalization" fairly broadly defined. They're not really designed to cover years or decades of chronic disease management requiring an expensive prescription drug, although fortunately prescription drugs are broadly much less expensive in Singapore than in, for example, the United States.

 

[celtosaxon]

Let’s say she has a hospital bill of $100k. Presumably 100% the first $17,250 would be paid by group insurance, and then 80% ($25,000) of the next $31,250 would be paid by the rider.

Without any other insurance, for each dollar after $48,500 she could claim ‘something’ on MediShield Life, for simplicity, let’s say we can expect around $50,000 out of pocket.

But with Raffles Shield A, it would cover 60% ($31,500) of the $52,500 remaining balance, and our total out of pocket would be $26,250 on the $100,000 bill.

Is my understanding roughly correct?

 

[BBCWatcher]

Let’s say she has a hospital bill of $100k. Presumably 100% the first $17,250 would be paid by group insurance, and then 80% ($25,000) of the next $31,250 would be paid by the rider.

I assume you understand your company-provided insurance better than I possibly could, so let's just assume that's all correct. It probably is.

Without any other insurance, for each dollar after $48,500 she could claim ‘something’ on MediShield Life, for simplicity, let’s say we can expect around $50,000 out of pocket.

Something like $40K, I'd guess. This is highly variable and depends on the surgical procedures. MediShield Life isn't nothing, but it doesn't go a long way for PRs in private hospitals, that's for sure.

But with Raffles Shield A, it would cover 60% ($31,500) of the $52,500 remaining balance, and our total out of pocket would be $26,250 on the $100,000 bill.

Not exactly. Without the Key Rider there's still a co-pay. So I think it'd be more like 50%, approximately. With the Key Rider, yes, 60% coverage is a good approximation.

Now, if she has Raffles Shield A+Raffles Hospital Option+Key Rider, then the company-provided insurance covers what it covers and there'd be 100% coverage for the remainder from Raffles Shield...but only at Raffles Hospital specifically, not at Mount Elizabeth Hospital.

Any unreimbursed hospitalization expense is generally MediSave payable, or at least a substantial part would be. Occasionally there are some interesting decisions to make about whether paying with MediSave is a good idea.

 

[BBCWatcher]

Interest Rate Developments

Today CIMB has reduced their fixed deposit interest rates. If you're interested in a fixed deposit, you better hurry. Other banks are likely to drop their rates at any moment. Last I checked, Etiqa's ELASTIQ is offering 1.80% for 3 years, ICBC Singapore is offering 1.70% for a 12 month "Step Up" fixed deposit, and Maybank is offering 2.05% for a 36 month fixed deposit. The Singapore Savings Bond will still be available per normal this month, however -- but if interest rates are really low this month's SSB may be oversubscribed. The SSB is getting more and more interesting since it's a 10 year instrument.

Yes, we live in a weird interest rate environment at least right now. My sympathies to those of you sitting on too big cash piles, including many of our grandparents.

U.S. mortgage interest rates have touched record lows. According to Freddie Mac, the 30 year fixed nominal rate hit 3.29% APR, and the 15 year fixed is all the way down to 2.79%. Yes, in the United States you can get a mortgage with a fixed interest rate for 30 years, not the mere 3 years fixed available in Singapore. Isn't that wonderful? It's especially wonderful now, with record low rates. Also, sometimes you can get a bit of a U.S. tax reduction since mortgage interest is tax deductible, although that's harder to pull off with rates this low and recent tax law changes.

Also, take a look at the Singapore Government Securities daily quotations, particularly the shorter term interest rates over in the T-bills. We're seeing a collapse in short-term Singapore dollar interest rates right now, which, if sustained, will slash bank interest rates in Singapore.

 

[BBCWatcher]

Here's an interesting idea if you're looking to park a few U.S. dollars as U.S. dollar interest rates seem to be collapsing. Unfortunately what I'm about to suggest is only available to those with U.S. TreasuryDirect accounts, but if you happen to have a U.S. Social Security Number (SSN) and U.S. mailing address you may be able to open a TreasuryDirect account. You will also need a U.S. bank or U.S. credit union account with U.S. dollars in the account.

The U.S. Series I Savings Bond ("I Bond") is looking more and more interesting at the moment. The current issue is available now and next month (April, 2020). You can buy up to US$10,000 per calendar year per SSN. (There's an awkward, exotic way to purchase another US$5,000 involving U.S. tax refunds, but that's very hard to pull off.) This is a real return bond. The current I Bond guarantees an interest rate that's 20 basis points above the U.S. Consumer Price Index (CPI-U) inflation rate. The interest rate is adjusted every 6 months to track inflation. These are 30 year bonds, but you can redeem them any time after a minimum 1 year hold. If you redeem an I Bond within 5 years of purchase then there's a 3 month interest penalty. If there is ever any deflation the I Bond will never deflate -- the worst it'll ever do is 0.0% for some period.

For comparison, the 30 year U.S. TIPS is reporting a yield of -0.22%. That's insane, of course. The I Bond is now 38 basis points better (+0.20% real yield).

I Bonds are general obligation debt instruments, issued by the U.S. Treasury. They are backed by the full faith and credit of the United States federal government, and consequently they are the world's safest vehicle for parking U.S. dollars. And they're particularly safe since the U.S. Treasury is guaranteeing a particular real purchasing power outcome with I Bonds, not a nominal one. For U.S. persons the interest is taxable (only upon redemption or maturity) unless the Savings Bond is used toward qualified educational expenses. For non-U.S. persons there's no tax on the interest, and there's no U.S. estate tax on them.

The deadline for buying this current I Bond is a couple business days before April 30, 2020. Placing a buy order on April 28, 2020, should be safe. It takes at least one overnight cycle for the U.S. Treasury to pull funds from your bank/credit union account and book the sale. As I recall the end of the month is the best time to buy since interest is computed back to the first day of the month of purchase.

 

[BBCWatcher]

Pondering a Decision Now

It looks like I might have the happy problem again of "too much" cash piling up. I'm considering another increase in the monthly amount I push into long-term investments.

I review this particular decision periodically, and whenever I think I can sustain a new, higher plateau of monthly savings, I increase the flow. Fortunately I've been able to maintain a steady monthly savings flow for (...checks calendar...) about a quarter century. (I started early.) No interruptions, no reductions.

 

[lemniscate]

Hey, sorry I completely forgot to mention the US in my question, yes you are correct.

I think you're talking about the United States.

Wire transfer fees aren't particularly relevant at all, not domestically anyway. First of all, if you expect you might wire funds, try to find a U.S. bank or U.S. credit union account that doesn't charge an incoming wire transfer fee. There are some. Also, some U.S. brokers (and thus U.S. brokerage accounts), notably Interactive Brokers but also to some extent Charles Schwab, provide several inbound fund transfer accounts. With Schwab, for example, you can make a FAST or GIRO domestic transfer in Singapore of Singapore dollars to their custodial account in Singapore, and Schwab then automatically converts those funds to U.S. dollars and deposits the funds in your Schwab brokerage account. The conversion rate is decent -- not as good as Interactive Brokers, but decent -- and there's no additional fee. Some U.S. brokers provide free wire transfers outbound, too, at least for certain clients.

Yes, my IB should have me covered when it comes to transferring funds from Singapore to the US, as long as I open an account with zero incoming wire fee (such as Schwab which you recommended a few pages ago, though I haven't checked if I can open an account with them without SSN - which I'll get later on when I start an internship). It'll go like this: Singapore DBS/Citi > Singapore IB > convert to USD on IB > US-based bank.

You've also recommended a few credit cards to me, so I'll skip that part.

2. "BillPay," which is typically a free service that U.S. bank and U.S. credit union checking accounts provide. (Please avoid the few banks and credit unions that charge for this service.) This is pretty similar to what banks in Singapore offer and also analogous to AXS and SAM payment services, except online. However, BillPay takes it a big step farther: if the biller is not known to BillPay, no problem, BillPay can send a paper check with free postage. Of course that'll take a few days, but it works.

Please note that BillPay just sends the paper check (or electronic equivalent), not any notes or letters. So to let the recipient know what the payment is about, make sure you give BillPay the biller's/recipient's reference number and/or some other information. For example, when you want to pay a quarterly estimated U.S. federal income tax bill with BillPay, you can, but you need to make sure BillPay prints these two key pieces of information on the check:

a. Your Social Security Number (SSN) or ITIN.
b. "2020 Form 1040-ES"

The second line tells the IRS that it's a payment for the tax year 2020's estimated personal federal income tax, so they'll credit the payment toward 2020 taxes on the account referenced with the SSN or ITIN.

3. Your own paper checks are still fairly common if you want to pay somebody who doesn't accept a major credit or debit card. For example, you might be at a school charity event and want to donate some money, and so a paper check would still be a pretty typical way to do that, and it also maintains a paper trail in case it's a big donation and helpful for a tax deduction later on. Some banks and credit unions offer free paper checks, still. (I'm giving you some ideas how to comparison shop for bank/credit union accounts.) Many banks and credit unions now offer "mobile check deposit" service, which allows you to sign the back of the check you receive, take photos of the front and back using a mobile app, and deposit the funds. Some recipients don't accept personal checks but do accept more reliable checks, such as bank "cashier's checks" and "money orders," and some banks/credit unions offer free cashier's checks and/or free money orders. Walmart sells money orders for something like 70 cents.

Make sure you know how to fill out a paper check properly, per U.S. practices. There are plenty of online guides explaining the ins and outs. Don't rely on "postdating" a check.

Some U.S. banks, U.S. credit unions, and U.S. brokerages offer postage paid envelopes to mail in paper checks for deposit. Go ahead and request those envelopes (or at least ask) if you'd like some. The postage is free when you mail the envelope from anywhere the U.S. Postal Service serves, including overseas U.S. military postal stations.

I'll look into these things. I recall the university accepts checks/money orders and online checks (e-checks) apart from other tuition payment options that seem to come with fees (e.g. wire transfers, automated payment plans).

4. Cash now represents less than 20% of transactions last I checked and isn't accepted everywhere, but it's still used to some extent. You'll often see cups of pennies and tip jars at retail establishments. The cups of pennies are there both to donate pennies that you don't want to keep and to help out someone (and the cashier) if you're paying in cash and need a penny or three to avoid breaking a bill. Tip jars are invitations to get rid of coins (at least) you don't want to keep. (Tipping is a whole other subject, though.)

One problem with cash is getting it, since ATM operators can charge whatever fees they want. However, there are at least two solutions. One is to do business with a U.S. bank or U.S. credit union that offers a large network of "fee free ATMs." These aren't necessarily the big banks, by the way. Plenty of smaller banks and credit unions have banded together and leverage fee free ATM networks such as "MoneyPass." You can then check a mobile app or online to find one of the fee free ATMs in their network. The other approach is to get an account with a bank, credit union, or broker that offers an ATM card with ATM operator fee rebates. Schwab and Alliant Credit Union are two such examples.

Depositing cash is getting rather hard in the United States, just as in Singapore. Practically all ATMs used to accept cash deposits, but now very few of them do. Try not to accumulate too much cash.

It seems to be the case that I'd occasionally need to pay with cash (at least that's what some alumni and friends say about certain places around the campus), but there's one "free" ATM that they say won't charge any fees regardless of your bank. I'm also looking out for banks that reimburse ATM fees.

Interesting observation on the availability of cash deposit machines (or lack of), I don't plan to bring a lot of cash with me (just a few $100 notes in my wallet would suffice I imagine, since I have Singapore credit cards as well) so that shouldn't be a big issue.

5. Barter. Not too common, but it happens once in a while.

6. "Instant" peer-to-peer (P2P) payment services such as Paypal, Zelle, Venmo, Apple Pay, and Google Wallet. Zelle is essentially like Singapore's PayNow. Stereotypically the cool/hip "Millennials" use these services, sometimes.

These would certainly be helpful, it wouldn't make sense to use wire transfers for splitting bills, for example. I know it sounds so "OK Boomer" but I still have friends who use bank transfers to pay me after splitting restaurant bills.

 

[BBCWatcher]

Interesting observation on the availability of cash deposit machines (or lack of), I don't plan to bring a lot of cash with me (just a few $100 notes in my wallet would suffice I imagine, since I have Singapore credit cards as well) so that shouldn't be a big issue.

Get a little variety of denominations, and it'd be OK to stick to $50 and below. The $50 and (especially) $100 notes aren't always welcome.

I should also mention that cash is subject to loss and theft, and they happen once in a while. One form of theft is called "civil asset forfeiture," and you might want to read up on it. The police commits that particular atrocity, and it's currently legal.

 

[lemniscate]

Get a little variety of denominations, and it'd be OK to stick to $50 and below. The $50 and (especially) $100 notes aren't always welcome.

Good point, I still have some notes left from my last trip, I'll see if I need to get smaller notes.

I should also mention that cash is subject to loss and theft, and they happen once in a while. One form of theft is called "civil asset forfeiture," and you might want to read up on it. The police commits that particular atrocity, and it's currently legal.

I probably won't carry too much cash with me as most shops at the airports would likely accept cards, and I can use uber once I arrive there (or even have a family/friend pick me up). Thanks for the warning though, that's another interesting stuff I learned today.

 

[revhappy]

Hi BBCWatcher, I needed advice from you. What are the chances of some of the bonds in MBH ETF getting into stress or default in the current environment? I understand sovereign bond yields are falling but the credit spread is increasing. Given the current yield of MBH, is the risk reward worth staying invested in it? I recently moved from SSB to MBH, so that I could gradually move it to ES3 ETF, in the last 1 month, there is some profit of 0.5%

 

[tangent314]

The highest one-year default rate for AAA, AA, A, and BBB-rated bonds (investment-grade bonds) were 0%, 0.38%, 0.39%, and 1.02%, respectively [1]. Recovery rate for defaulted corporate bonds is about 37% [1].

So assuming the result of the virus causes defaults to match the worst rate of default in history and all the bonds in MBH are BBB-, you're looking at a loss of about 0.64% per year from defaults.

[1] https://www.spglobal.com/en/research-insights/articles/sp-global-ratings-global-outlook-2019
[2] https://www.moodys.com/sites/products/defaultresearch/2006600000428092.pdf

 

[revhappy]

The highest one-year default rate for AAA, AA, A, and BBB-rated bonds (investment-grade bonds) were 0%, 0.38%, 0.39%, and 1.02%, respectively [1]. Recovery rate for defaulted corporate bonds is about 37% [1].

So assuming the result of the virus causes defaults to match the worst rate of default in history and all the bonds in MBH are BBB-, you're looking at a loss of about 0.64% per year from defaults.

[1] https://www.spglobal.com/en/research-insights/articles/sp-global-ratings-global-outlook-2019
[2] https://www.moodys.com/sites/products/defaultresearch/2006600000428092.pdf

Thanks, appreciate it!

 

[celtosaxon]

Get a little variety of denominations, and it'd be OK to stick to $50 and below. The $50 and (especially) $100 notes aren't always welcome.

I haven’t seen a US$50 note in years! There have been quite a few times on my trips to the US where I handed them a $100. It almost always gets a reaction, but it is legal tender and so they will grudgingly accept it. They typically fumble around with a pen or flashlight to verify it’s authenticity. If they don’t have that, they will usually ask if you have anything smaller. If you say no, then they will just try and take a good look at it, shrug their shoulders and shove it under the cash tray. I’ve yet to encounter an outright refusal to accept a $100, but I wouldn’t rule out that possibility.

One fact that would probably surprise people from outside the US, you can generally pass off a Singapore 10¢ coin for a US dime (same goes for Canadian coins 25¢ and below). It would be rare to encounter anyone who would bother or care, applies to both for cashiers and customers. I believe this is unique to the US and speaks to the culture, people generally don’t sweat the small stuff.

 

[BBCWatcher]

I haven’t seen a US$50 note in years!

The $50 note is rather common. Much more common than the $2 note, which is not uncommon. However, the $50 has a somewhat lower velocity (rate of circulation) than the $100 note. You can probably guess why.

There have been quite a few times on my trips to the US where I handed them a $100. It almost always gets a reaction, but it is legal tender and so they will grudgingly accept it.

"Legal tender" doesn't mean a merchant has to accept it. That's something of a mythology.

 

[arcaninx]

Hi bbcw, which platform offer the lowest fee For regular saving plan?

Also, is there a website that shows the historical PE and PB ratio of MCSI World index?

Thanks in advance

 

[BBCWatcher]

Hi bbcw, which platform offer the lowest fee For regular saving plan?

Savings into what?

Also, is there a website that shows the historical PE and PB ratio of MCSI World index?

This site has such data.

 

[GloryKnight]

Hi BBC, would you recommend any use of the roboadvisor service in sg? In particular DBS's global portfolio?

Should i diversify with buying other ETFs in LSE?

Thanks!

 

[celtosaxon]

The $50 note is rather common. Much more common than the $2 note, which is not uncommon. However, the $50 has a somewhat lower velocity (rate of circulation) than the $100 note. You can probably guess why.

I would say the main reason the $50 is not popular is because the ATMs only dispense $20 notes. I worked as a cashier in the US while in high school, and at least 99% of cash sales involved $20 notes and below.

The $2 note has become a collectors item. I’ve got a few myself. Similar to the status of the $20 note in Singapore. I used to see a few of those yellow notes in circulation here back in the late 1990’s. I never understood why the $20 couldn’t be more popular here.

"Legal tender" doesn't mean a merchant has to accept it. That's something of a mythology.

True, my understanding of legal tender is it just means it “legally has value” per the U.S. government. A merchant is a liberty to stipulate anything, they could even say they only accept bitcoin for payment.

 

[BBCWatcher]

Hi BBC, would you recommend any use of the roboadvisor service in sg? In particular DBS's global portfolio?

No. I keep an open mind, but I haven't seen any compelling offers yet.

Should i diversify with buying other ETFs in LSE?

Other than what fund? Most people are well served with a single London-listed fund.

I would say the main reason the $50 is not popular is because the ATMs only dispense $20 notes. I worked as a cashier in the US while in high school, and at least 99% of cash sales involved $20 notes and below.

Exactly. But there are at lot of $50 notes in circulation, at least according to the Federal Reserve's statistics.

The $2 note has become a collectors item. I’ve got a few myself.

Yes, people collect them. I think I have a $2 note sitting in a folder somewhere. However, they're still printed, circulate, and aren't worth anything more than face value, even for the $2 notes printed a few decades ago.

True, my understanding of legal tender is it just means it “legally has value” per the U.S. government. A merchant is a liberty to stipulate anything, they could even say they only accept bitcoin for payment.

Yes. It's getting rather common now for merchants to accept credit/debit cards only (Visa and Mastercard at least). A lot of airlines eschew cash, as an example.