Official Shiny Things thread—Part III

[highsulphur]

Thanks for the reply ST and BBC

I had a plan to deploy my cash reserve when covid hit in Mar which was to buy iwda and es3 in a 3:1 ratio over 10 months (till end 2020). My thinking was that this health crisis would be long drawn till 2021 at least.

I have since deployed more than 1/3 but global equities have already rallied close to pre covid while es3 has lagged behind still. At the same time, Singapore interest rates have plunged to below 1%.

Now I'm struggling to decide whether to (1) shorten my deployment period by half and doubling up my investment (till end sep) and (2) start buying mbh in the meantime. MBH wasn't on my radar given how cheap equities was in March but clearly the gap has narrowed

 

[BBCWatcher]

I would stick to your plan, assuming your bond/bond-like allocation is converging on your previously desired state (i.e. you were/are too bond heavy for your age and risk profile). Your dollar cost averaging over these 10 months means you’re getting fewer shares of the global stock index fund at this instant. If there’s a double dip, great, you’ll buy more shares. If not, oh well, at least you got more shares back in March and April. And you seem to be getting more ES3 shares at fairly depressed levels. (It seems. The 10 months of dollar cost averaging will sort it out as best it can.)

Ten months seems fine, too. It’s not so long that it’ll make much difference in long-term results, and it’s not a lump sum that’d make you feel depressed if you caught a near-term high. Except now you seem to be upset that you didn’t shove everything in back in March or April. Don’t be. You picked 10 months, a reasonable pick, so stick with it.

 

[highsulphur]

Appreciate the reply BBC

 

[Listopad]

IHYU LN, if you just want USD bonds. You don’t need this until you get bigger, though… having a few hundred dollars (or even a few thousand) in a high-yield ETF isn’t going to make any meaningful difference to your returns, it’s just going to run up transaction costs.

my portfolio is relatively large. what additional tweaks could i incorporate to better the yield, give rates are so low now.

if one has access to cheap borrowings, say 0.9%, is there any "safe" place to vest to earn some monies out of this?

 

[Shiny Things]

my portfolio is relatively large. what additional tweaks could i incorporate to better the yield, give rates are so low now.

This is usually the point where I encourage people to talk to me about tailored consulting. The answer to this question depends on a lot of things: do you mean yield in particular or cap gains in general; what’s your risk appetite; what’s your tax situation; what currencies do you need access to... there is no one answer to this question.

if one has access to cheap borrowings, say 0.9%, is there any "safe" place to vest to earn some monies out of this?

You’re asking “can I do the carry trade?”.

“Carry trades” are a generic term for borrowing cheap and investing it in higher-yielding products to capture the interest margin. Problem is, there’s always a risk of some sort hidden in carry trades.

The classic FX carry trade used to be long AUDJPY or AUDCHF, which yielded a few percent (quite nice once you leverage it!) but required you to take FX risk, which blew you up when AUDJPY dropped 20% or 30%, as it would do every so often. Late-2000s “conduit” vehicles borrowed one-week or one-month in commercial paper markets to fund investments that lasted for ten years... which worked great, until 2008 when people started refusing to roll that commercial paper, and the banks that sponsored the conduits (Including my own!) had to dig into their own pockets for tens of billions of dollars to bail out the conduits.

So... if you’re borrowing SGD, you could invest in long-dated govvy bonds, but that will lose money as soon as interest rates start to go up. You could invest in MBH, but if we have another March your loan’s going to get called in and you’ll eat the loss. You could buy high-yield, but again, another March (or a big drop in USDSGD!) and you’ll be eating a huge loss.

Carry trades are inherently risky. The only question is how much risk you want to take.

 

[Han Shot First]

A quick comment about MBH: it’s certainly not perfect. The fund is literally called an “Investment Grade” bond fund, but may I point out it’s holding several Singapore Airlines bonds, as an example. Singapore Airlines is an entity that just issued bonds with promised 6+% yields, right? Even Hyflux wasn’t that edgy. On no planet are Singapore Airlines bonds investment grade! They’re really quite junky, actually. Nikko AM is not managing this fund per its stated objectives. It should have dumped the Singapore Airlines bonds already. ...

If Nikko AM MBH fund manager dumped Singapore Airlines bonds when the index still holds such bonds, would that be active management? The MBH ETF is supposed to be passively managed - the fund manager does not have mandate to do bond picking, right?

That said, I agree that MBH is the best available, general purpose, long-term Singapore dollar bond fund.

So where would you park cash? Because MBH is for (long-term) investment and not for parking cash, right?

 

[swan02]

If Nikko AM MBH fund manager dumped Singapore Airlines bonds when the index still holds such bonds, would that be active management? The MBH ETF is supposed to be passively managed - the fund manager does not have mandate to do bond picking, right
So where would you park cash? Because MBH is for (long-term) investment and not for parking cash, right?

1. If only they bond pick and get rid of junk. Junk does not and should not fit in the definition of investment grade which I reckon bbc is saying, it’s almost perfect but now tainted.

2. is MBH really meant for long term ? To some, mbh and cash combo is there to meet retirement obligations in case of SORR. cash has to be cash like with almost zero risk for this matter hence can’t be altered. And it’s sad I can’t find a good alternative except MBH but yet it’s still not perfect because it still entails equity like risk plus interest rate risk.

Considering mbh has moderately low duration, I reckon 2 years worth of cash like and rest in mbh allows enough time for mbh to recover from an equity and interest rate risk debacle due to the 2 years worth of cash. Overall as seen as a whole gives a nice synergy. Of cuz this is seen in the eyes of a retiree with zero salary.

 

[swan02]

my portfolio is relatively large. what additional tweaks could i incorporate to better the yield, give rates are so low now.

if one has access to cheap borrowings, say 0.9%, is there any "safe" place to vest to earn some monies out of this?

you know there is a table in the web in how to set up an almost full bond portfolio that incorporates emerging market sovereign bonds in USD which is actually the king of risk adjusted returns , together with high yield and also investment grade right through to high quality govt bonds.

The tables gives u an idea as to how to synergies them to derive very good risk adjusted returns for any type of risk appetite.

For eg you will get some idea as to how much mbh and cash to have to get the most return for the lowest risk u r willing to accept.

 

[chrisloh65]

And this is a totally valid question. Chinese banks are trading at a P/E ratio around five, and a p/b ratio around 0.7. Those numbers are more depressed than German banks, and as someone who used to work for a German bank boy howdy that is saying something.

Interest rates are low, the curve’s flat, earnings growth has been anemic for half a decade… buying Chinese banks amounts to betting on a sudden, sharp turnaround in the Chinese economy, and asset quality getting better (which it isn’t, even the Chinese regulators are saying NPLs are getting worse right across the sector), and the government stepping back from its current policy of “asking” banks to cap their profit growth.

These things might all happen, and if they do, that’d light a rocket under Chinese banks’ earnings and their multiples. But it’s a long shot.

Again, the so-called "totally valid question" on why Chinese banks so cheap is the type of propaganda perpetuated by the Western media ang mo all out to smear China and Chinese companies. This is the real reason why Chinese banks are so cheap - because there is not enough people buying and investing these Chinese banks! (other than because of scared by all these lies spread by Western media and ang mo, the rest of the majority of the Chinese are also more interested in investing in properties than stocks when they have the money - Which means it is opportunity for us!).

That is why I say, stock prices are always about "Supply and Demand"! When you have so many people all around the world piling into IWDA because you listen to passive investing "gurus" (like Shiny Things etc), IWDA price goes through the roof and you end up getting diminishing returns as years goes by because people are just over-paying to own these same group of stocks (of which >65% are just terribly over-valued US stocks)! These indiscriminate buying blindly without considering the fundamentals of underlying stocks held by IWDA will ultimately burst. But early adopters (like Shiny Things) will cash out first when the time comes (without telling you) because they know very well that the price increase is artificial due to increasing buyers (without selling) and this cannot be sustained based on fundamentals.

Talk of "Interest rates are low, the curve’s flat, earnings growth has been anemic for half a decade…", this is all worst for USA banks! US interest rates is so much lower than China! So US banks are more seriously in problem than China banks, not to mention US banks are now so horrendously over-valued and over-priced (compared to China's banks) especially when USA is so badly hit by corona-virus (which Shiny Things refused to tell you)!
And Shiny Things posted this URL webpage:
https://www.reuters.com/article/us-...-due-to-virus-credit-risks-grow-idUSKBN2320GI
which reads:
<China says banks' bad loans high due to virus, credit risks grow>

And I wonder how many people would be so stupid not to understand that since China's banks bad loans are "high due to corona-virus",
with China's corona-virus Total cases = 83,565, and Total death = 4,634, Total population = 1,439 Millions,
vs USA's corona-virus Total cases = 3,040,833, and Total death = 132,979, Total population = 331 Millions,

Any person with even minimum limited IQ would immediately be able to connect the dot and realize that US banks' bad loans would be at least 36.38 times "higher due to corona-virus" (than China) because US corona-virus total cases is 36.38 times higher than China!
Also, USA death rate (total deaths / total population) = 0.04% (vs China's death rate = 0.00032%) - Not to mention that USA death rate and total cases are totally "kelong" (or "cheating" number to make it looks much better than it really is)! Fact is, many of these Americans have not been tested (US cases too many and overwhelmed!), not diagnosed, quite some classified as "vaping deaths", "pneumonia" etc!

And Shiny Things conveniently refused to tell people the truth about the state of US economy, like these:
https://www.japantimes.co.jp/news/2...y-business/covid-19-bankruptcies-u-s-economy/
<Wave of COVID-19 bankruptcies poses next threat to U.S. economy>

https://www.nytimes.com/2020/06/18/business/corporate-bankruptcy-coronavirus.html
<A Tidal Wave of Bankruptcies Is Coming:
Experts foresee so many filings in the coming months that the courts could struggle to salvage the businesses that are worth saving.>

https://www.cbsnews.com/news/bankruptcy-coronavirus-recession-2020/
<Bracing for the next phase of the coronavirus recession: Bankruptcies>

https://www.cnbc.com/2020/05/15/the...ankruptcy-since-the-coronavirus-pandemic.html
<JC Penney could join a growing list of bankruptcies during the coronavirus pandemic>

https://www.forbes.com/sites/hanktu...ajor-companies-are-failing-amid-the-shutdown/
<Coronavirus Bankruptcy Tracker: These Major Companies Are Failing Amid The Shutdown>

And also US Gov has been printing tons of USD toilet papers:
https://medium.com/concoda/when-the...tes-will-try-to-steal-your-money-8e41a42f684c
<When the U.S Dollar Collapses, the Elites Will Try to Steal Your Money
This is how you could prepare for a monetary disaster>

At least, Chinese regulators are honest enough to sound the warning!
But US Gov? No, no way! They want you to continue to buy those horrendously over-priced US stocks (including those US bank stocks), and USA Gov has cut interest rate to almost 0% and printing tons of USD toilet papers to prop up their markets!

When people insinuate that Chinese banks priced so cheap means got problem, strangely, many of these people are stupid to not question and know that the American banks so expensive is the real problem (don't even need to say "valid question")! Furthermore, they may just go bankrupt and close shop when next crisis comes (just like in 2008 "Lehman Brothers", and more US banks would have closed if not for USA Gov's bailout (and some US Gov officials did not want to bailout USA banks because this is very serious free market interference (something USA keep accusing China of - So you see, many of these Americans and their Western media are greatest hypocrites that do not eat what they "cooked" for you!).

You can read the report here that even after Fed's "bending" (make it more lenient to pass their so-called "stress tests" (just so that they can fool you and encourage you to continue to buy these over-priced US banks' stocks)):
https://www.reuters.com/article/us-...-u-s-banks-in-2019-stress-tests-idUSKCN1QN2PX
<Federal Reserve scraps 'qualitative' test for U.S. banks in 2019 stress tests>

and despite of making it so much more lenient, USA banks are still failing Fed's stress tests! These include some of the biggest US banks like Citibank, Bank of America, Goldman Sachs, and JP Morgan!:
https://www.americanbanker.com/slideshow/nine-banks-that-have-fallen-short-on-the-feds-stress-tests
<Nine banks that have fallen short on the Fed's stress tests>

Strangely, many people here seems to be hypnotized by Shiny Things and didn't question why he don't tell you the truth about American banks! See? Biased, totally biased! Typical of those USA and Western media perpetuated by ang mos.

US banks' stock price crashing is just a matter of time, unless miracle happens (and people should stop dreaming and hoping unless you believe that only ang mo can create miracle and even resurrect you from death or only believing them then you can go to heaven)!

Shiny Things,
Since you are trying to put up arguments for Why Chinese banks are bad (but again just words of mouth of smearing without any facts and evidence to back up), why don't you do yourself a favor and back up all your below claims (that you made in your previous post)?

Given that you are still trying to avoid backing up your previous claims, I suppose I can safely assume that you can't provide facts to backup your previous claims, and that brings into question whether you Shiny Things are purposely spreading lies here and refusing to retract your false claims in your previous post?

Shiny Things,
Why don't you do yourself a favor and backup your below claims here?

Firstly, are you sure you want to do this? When you buy a China ETF instead of a global ETF, you're betting that the Chinese stock market will outperform the MSCI World. For that to happen, one of three things has to happen:

* Chinese banks manage to work themselves out from under their GARGANTUAN pile of bad loans; or,
* Chinese tech companies go from "trading at a titanically expensive multiple of earnings" to "trading at a truly monstrously expensive multiple of earnings"; or,
* Chinese property companies manage to keep the Ponzi going. I have a few acquaintances who look at this stuff and none of them can figure out how the Chinese property sector hasn't imploded yet.

................
"China is going to emerge!" has been trapping people in an underperforming market for decades.

Could you please provide facts to back up your claims that:

(1) You claimed that Chinese banks have GARGANTUAN pile of bad loans!
Where is the evidence? Please point to the Chinese bank financial statements, etc. ICBC, and show us where is the GARGANTUAN pile of bad loans?

(2) You claimed that Chinese tech companies are "trading at a titanically expensive multiple of earnings" that should be avoided!
But yet why you didn't warn all of us here that many of the USA tech companies are now "trading at a monstrously expensive multiple of earnings" (worst than those titanically expensive Chinese tech stocks) when you advocated others here to continue to buy IWDA, consisting of >65% US stocks (including those "mostrously expensive" US tech stocks)?

(3) You claimed that Chinese property companies are having Ponzi scheme!
What ponzi scheme and where are the facts and evidence?

(4) You claimed that "China is going to emerge!" has been trapping people in an underperforming market for decades!
Please back up your claim.
From what I can see, comparing VWRD etf (that you recommended) and 2822.HK China etf since 2012 (near their inception), 2822.HK has beaten VWRD handily since 2012! Wow! so much for underperforming market but beating VWRD (that you recommended) handily hands down!

And strangely, why you don't want to tell us that USD and US T-bills is the biggest ponzi scheme of all time in history?!
US Gov clearly has no ability to pay off all the T-bills without printing more USD like toilet papers!

And another ponzi scheme is to "DCA blindly into index ETFs regardless of market conditions" so that the earlier adopters will retire early very rich by persuading the latter comers to keep pushing up the price, very much like those MLM scheme!

Now, if you can't provide facts to backup your above claims, that brings into question whether you Shiny Things are purposely spreading lies here or you are really so ignorant and making those false claims in your post?

 

[mozzozo]

Sorry but have not read through the WOT, but chrisloh65, what would you recommend and whats your strategy?

 

[invisible.hippo]

Hi shiny things,
What to note when using cpf oa to buy shares?

Like the stock you buy is losing the value you need to top up cpf etc?
Or when you hold on to a stock for a year, you need to pay back The sum + interest to cpf etc?

 

[Han Shot First]

I've extracted from Endowus' website the factsheet for UOB AM United SGD Fund that makes up 50% of the Enhanced Cash Smart product, and noted that the credit risks embedded in the fund is higher than what I had expected:
- Weighted average YTM of 4.16%, implying quite a large credit spread to compensate you for bearing credit risks. A quick google search of the fund's top 5 holdings (15% of NAV) would reveal some attributes: emerging market corporates, mostly BBB-rated, most of them have mature 2-3 years later

Please could you elaborate on your analysis.

According to United SGD Fund factsheet of June 2020, Weighted Average Yield to Maturity is 3.52%.

Of the top 5 holdings, only 2 are BBB- rated. The others have higher credit rating.

Also you mentioned that the credit risks are higher than you expected. Could you elaborate what you expected?

 

[aYu82]

Hi BBC and ST, with the low interest environment right now, will it make sense to put the 'dry powder' fund into corporate bond eg, ASTREA, Temasek etc.... instead of those bank account/MM-link account?

 

[Shiny Things]

Separately to everything else, it's sort of fun to watch Chris's head explode every time I make fun of Chinese equities.

Hey Chris, what do you think about the mainland property developers and their habit of funding opex from the cashflow from pre-selling properties that they'll eventually have to build and deliver? Is that a sustainable model? Are people just going to keep buying apartments off into infinity?

No, wait, don't answer that, I have better things to do than reading another spittle-flecked wall of text where every third word is underlined and boldfaced and in red.

And switch to decaf.

Now don't get me wrong, I do love making fun of other countries' stonks too. The first Tesla run-up, back when r/wallstreetbets was screwing with it by buying All The Calls, was full of absolute comedy gold. Seeing options market-makers getting toasted by a bunch of Robinhodlers because they literally couldn't hedge their delta fast enough was a) hilariously funny, and b) gave me a stomach-churning moment of recognition, because I've been there in eight-figure size before.

And Wirecard! It blows my mind that there were actual fund managers who get paid actual money to not blow up their customers' money, who nevertheless went balls-deep on Wirecard equity after the FT ran multiple articles with insiders swapping emails saying "ok let's do The Fraud, how do we do The Fraudening this quarter, make sure nobody sees these emails where we do Fraudy Fraud Fraud Fraud with a side of Fraud".

Hi BBC and ST, with the low interest environment right now, will it make sense to put the 'dry powder' fund into corporate bond eg, ASTREA, Temasek etc.... instead of those bank account/MM-link account?

Nooooo no no no. A "dry powder fund", if you're doing such a thing (hint; you don't need to! you probably can't time the market!), needs to be somewhere you can get at it quickly, and be sure that the money is there when you'll need it. Single-name corporate bonds, which take time to sell and tend to be volatile just when you need them to not be volatile (like, March) are not a good place for that.

Aside from anything else, the Astrea bonds are a really poor investment structure for the people who buy the bonds. When you buy an Astrea bond, you're lending money to Temasek to invest in private equity funds; they get all the upside if the PE funds do well, but if they do badly, the bondholders lose the money. Temasek gets the upside, and the poor suckers who buy the Astrea bonds get all the downside.

---

As a side note on "you probably can't time the market": there's mountains of empirical evidence that the vast majority of active traders don't beat the index.

This paper, from the Brazilian equity futures market, is kinda the canonical reference, and the abstract says it all: "97% of all individuals who persisted for more than 300 days lost money. Only 1.1% earned more than the Brazilian minimum wage and only 0.5% earned more than the initial salary of a bank teller — all with great risk."

This other paper found that the net return (after costs) of Schwab investors was strongly inversely correlated to turnover—basically the traders who traded the least, made the most money.

Now, this is not to say that there aren't some individual traders who do better than the market. But the vast, vast majority of active traders, more than ninety percent of active traders—whether you're a deep-value stock-picker who worships at the temple of Uncle Wozza, a Robinhodler buying calls on meme stonks for the tendies, a frantic point-and-click screen-jockey, or a quant building your own super-sophisticated stat-arb algo in Python—would be better off just buying the index and going to the pub.

 

[beefjerky]

I need some help closing out of an option position. I bought a bear call spread on GSX, sold the 25 Call and bought the 30 Call and had a credit of 3.26

However when I am trying to close out the position now, by selling the bear call spread, they are showing me a credit of -7.00 to -3.9 on IB. I tried inputting a price in the middle but it doesn't get filled.

My two questions are, why is it a credit? Is this just the way it is reflected but actually a debit? Second is, if I am unable to close out the position, should I exercise the option then sell the stock?

 

[highsulphur]

What's tech etf do you guys buy into?

 

[BBCWatcher]

If Nikko AM MBH fund manager dumped Singapore Airlines bonds when the index still holds such bonds, would that be active management? The MBH ETF is supposed to be passively managed - the fund manager does not have mandate to do bond picking, right?

If the index is still including Singapore Airlines bonds, then the fund should not be literally called “Investment Grade.” That’s just nonsense, the sort of thing a regulator should have stopped long ago. Something is very, very wrong here with MBH. Nikko AM needs to fix this.

Look, I sympathize with the fund manager. The Singapore dollar bond market is thin, and too many issuers are skipping the bond ratings (even when the MAS is subsidizing the agency fees). I think Nikko AM needs to either put its foot down and insist on ratings (then only invest in investment grade bonds) or rename the fund, one of the two. The status quo is untenable.

So where would you park cash? Because MBH is for (long-term) investment and not for parking cash, right?

I would not/do not park excessive amounts of cash. There’s a whole other thread discussing where to park hopefully non-excessive Singapore dollar cash.

And Wirecard!

It now appears that BaFin, the German regulator, had a grand total of one employee spending time watching Wirecard AG. And BaFin invested far more time and effort investigating The Financial Times for reporting on the fraud, because evidently Germany’s gravest financial problem is that a newspaper might broadly agree with short sellers on a particular occasion.

BaFin deserves heaps of criticism and more. Let’s just stipulate that the German government should never be allowed anywhere near monetary or financial regulation. (Regulating beer, OK, that might work.)

I cannot say enough good things about The FT on this occasion. They started reporting on Wirecard’s frauds in 2015, and they kept coming back to it. From all indications it’s a terrific accomplishment in enterprise investigatory journalism. Congratulations to the reporters, researchers, forensic accountants, and others who brought these frauds to light, despite BaFin’s vigorous efforts to bury them.

 

[BBCWatcher]

What's tech etf do you guys buy into?

A global stock index fund! Here are the current top 5 holdings in VWRA, for example: Microsoft, Apple, Amazon, Alphabet, and Facebook. “Technology” is 20% of the fund! That’s plenty.

 

[highsulphur]

A global stock index fund! Here are the current top 5 holdings in VWRA, for example: Microsoft, Apple, Amazon, Alphabet, and Facebook. “Technology” is 20% of the fund! That’s plenty.

Is that similar for iwda?

 

[swan02]

I think it has slightly even more than VWRA.
It has to, tech was what drove the fortunes of the USA market for the last decade which constitutes a large chunk in iwda.

Is that similar for iwda?