Official Shiny Things thread—Part III

[Cryophoenix]

Can we expect federal bond interest rates (e.g. SSB) to increase if the Government incurs a budget deficit?

 

[BBCWatcher]

Can we expect federal bond interest rates (e.g. SSB) to increase if the Government incurs a budget deficit?

No, that's not a given. I refer you to Japan for reference.

 

[little pupsky]

I find BBCW and w1r1belwind’s arguments for capping STI’s allocation (to, say, not more than 20%) a lot more persuasive than Shiny’s.

To me, Shiny’s argument is an argument for simplicity, especially targeted at new investors, but it seems to trivialize or inadequately address the very valid complexities and scenarios BBCW and w1r brought up.

I actually agree with and learnt a lot from >90% of the advice he has shared in this forum (thanks, Shiny!) but whenever it comes to the topic of why such a high allocation to the STI for Singaporeans, his arguments are always puzzlingly weak compared to his other straight-shooting, insightful perspectives.

I suppose it doesn’t help that Shiny has written a chargeable book advocating his recommendation of 50:50 global:local split. He is therefore obliged in some ways to stand by his recommendation publicly. To address individual needs and investment complexities faced by non-newbies, he then offers chargeable consulting. I think this puts him in a rather awkward spot.

Full disclosure: I’m 90:10 global:local stock allocation.

 

[5408854088]

I know little about investing, so I defer to videos I watch on youtube:
https://www.youtube.com/watch?v=fy73eIBcKJE
Personally, looks good to me to hold a bit for a long term, and they don't give dividends so it's all capital gains. Still I'll put the bulk of my money in VWRA.

thanks for sharing. interesting perspectives.

 

[kennycancan]

Hi ST and all,

I have finished reading "Rich by Retirement" and the subsequent recommendation by ST "Random Walk down Wall Street". I have really learnt alot (Although much of the concept, technical vs fundamental analysis in Random walk down wall street has been covered in university)

Does anyone have any further book recommendations?

Background info:
I am an accountancy undergraduate who's passionate in the asset management industry. I would love to take on front office roles in the future!!

Sent from Google PIXEL 3 XL using GAGT

 

[5408854088]

If you want an annual vacation in Omaha, Nebraska (post-COVID) and discounts on candy then you could buy one Class B share. Otherwise, no, I wouldn’t.

Look, I love The Chuck and Wozza Show as much as anyone, but their salad days were back in the 60s and 70s, when there were more value-stock gems around and the fund was smaller, so it could invest in smaller things and still deliver a meaningful return.

BRK has been a victim of its own success: it's become too big, and everyone piled into the value-stock factor and ruined it. Over the last 25 years, all in (including dividends), Berky has actually underperformed the S&P 500.

BBCW's right. Only buy Berky if you want to justify a yearly trip to exciting, vibrant, cosmopolitan Omaha.

so putting aside the value or growth perspective, how is the idea of having Berkshire Hathaway as an asset management company, similar to that when we buy ETFs from BlackRock and Vanguard? would you still prefer to put your money with BlackRock and Vanguard?

do you think that fundamentally, Berkshire Hathaway has a different investment strategy as compared to BlackRock and Vanguard, and if their strategy of value investing is outdated? or do you think that strategy doesn't matter in today's world, just show me the money instead?

of the US$137 billion cash position that they are having now, do you think that this would give them an edge as compared to many others, amidst the covid-19 situation? to maybe invest and emerge stronger in time to come?

 

[BBCWatcher]

of the US$137 billion cash position that they are having now, do you think that this would give them an edge as compared to many others, amidst the covid-19 situation? to maybe invest and emerge stronger in time to come?

I'll take this last bit. The current largest holding in global stock index funds is Apple (AAPL). At last report Apple alone is holding over US$200 billion in cash and cash equivalents.

I don't think global MNCs are particularly short of cash right now, broadly speaking/overall.

 

[hellvolhardzelinsky]

When I click online trading in my SC account, it's still showing the application page. Does anyone know how long it will take before I get access to the SC Online Trading platform?

I already have different currencies' security accounts and already waited for few weeks.

And do I need to submit the customer account review?

 

[cassowary18]

so putting aside the value or growth perspective, how is the idea of having Berkshire Hathaway as an asset management company, similar to that when we buy ETFs from BlackRock and Vanguard? would you still prefer to put your money with BlackRock and Vanguard?

do you think that fundamentally, Berkshire Hathaway has a different investment strategy as compared to BlackRock and Vanguard, and if their strategy of value investing is outdated? or do you think that strategy doesn't matter in today's world, just show me the money instead?

of the US$137 billion cash position that they are having now, do you think that this would give them an edge as compared to many others, amidst the covid-19 situation? to maybe invest and emerge stronger in time to come?

You're confused with what ETFs do. They don't evaluate if a stock is a value stock, or a growth stock, or a momentum stock, etc. They just buy all the constituents in an index.

 

[Chuu89]

Hi Shiny things,

i have bought your book and read it. as im totally new to investment i will like to asked:

Based on 110 minus age in my case will be 80 therefore 80% goes into stocks.

40% to goes to local stock / 40% to global stock and balance to bond.

you have been suggesting ETFs Straits times index ( ETF) which i have look into it and am looking to do that.

40% of global stocks. However instead of global stock , i am instead looking at buying a stock alone like OCBCs or UOB, or stocks that i can be given dividend or invited to their quarterly report conference to listen to their announcement. Or just stock that i can take dividend, how do i this? Can i buy from FSMone?

For bond what will you suggest?

Also is there any difference if i buy from OCBC securities and FSMOne other then the brokerage fee?

Thanks.

 

[cassowary18]

Hi Shiny things,

i have bought your book and read it. as im totally new to investment i will like to asked:

Based on 110 minus age in my case will be 80 therefore 80% goes into stocks.

40% to goes to local stock / 40% to global stock and balance to bond.

you have been suggesting ETFs Straits times index ( ETF) which i have look into it and am looking to do that.

40% of global stocks. However instead of global stock , i am instead looking at buying a stock alone like OCBCs or UOB, or stocks that i can be given dividend or invited to their quarterly report conference to listen to their announcement. Or just stock that i can take dividend, how do i this? Can i buy from FSMone?

For bond what will you suggest?

Also is there any difference if i buy from OCBC securities and FSMOne other then the brokerage fee?

Thanks.

So you want to buy STI ETF, which is already quite concentrated in Singapore, and then you want to buy another Singaporean blue chip stock? And zero global allocation? Probably not the best idea.

For bond, ST suggests MBH.

 

[5408854088]

I'll take this last bit. The current largest holding in global stock index funds is Apple (AAPL). At last report Apple alone is holding over US$200 billion in cash and cash equivalents.

I don't think global MNCs are particularly short of cash right now, broadly speaking/overall.

Ah yes, that's much more than BRK

 

[5408854088]

You're confused with what ETFs do. They don't evaluate if a stock is a value stock, or a growth stock, or a momentum stock, etc. They just buy all the constituents in an index.

Perhaps buying of ETF was not a good example. Maybe more from a fund house comparison perspective.

 

[psyfy]

My statement is based on real economics of US and US debts trends.

If you understand economics and current US situation, you will know why US is so afraid of China over-taking US in terms of GDP and economic status and world-standing that they need to resort to outright lies to smear China and pressuring many other countries from being friendly with China and threatening them from working with China, and also resorting to hacking and stealing to get ahead of China, including hacking into Huawei servers and blacklisting many successful Chinese companies and trying to kill them.

Remember the lies propagated by US and the Western Ang Mo Media about China Gov and states and China banks huge debts and they will burst sooner or later? Well, it has been >20 years and China banks are still going strong (despite the Ang Mo repeating their lies almost every year), while US banks need to be bailed out by the US Gov in 2008/2009!
And remember that US keep stressing that no country should interfere in open market and shouldn't bail out their country's banks?! Well, you can see the double-standard practiced by US and how a hypocrite US is!

So I take it that it's your personal views of supposed US's inadequacies which you are entitled to. Suggest you qualifying your statements as such and not as the empirical truth you made it out to be.

There are many people that are not very knowledageable in this forum and may think that what you said is a fact.

 

[chrisloh65]

What I mentioned are based on economics and facts, such as:

(1) US is in huge budget deficit now (a FACT)!

(2) US has been running the printing machine to print money and borrow lots and lots of money over may years now (a FACT)!
- If US is not the world number 1 GDP country and USD is not the main world reserve currency, USD would have depreciated to become banana money now!

(3) US keep running budget deficit and keep printing money cannot last forever (a FACT)!
- There will come a time when US become World Number 2 in GDP and USD is no longer world reserve currency and USD will crash!

Beware!

So I take it that it's your personal views of supposed US's inadequacies which you are entitled to. Suggest you qualifying your statements as such and not as the empirical truth you made it out to be.

There are many people that are not very knowledageable in this forum and may think that what you said is a fact.

 

[psyfy]

What I mentioned are based on economics and facts, such as:

(1) US is in huge budget deficit now (a FACT)!

Very few countries are not in budget deficit, what has this to do with anything? And they can keep the money printing machines runing non stop longer than you can say supercallousfragilisticexpealidocious non stop for 30 times in a row without fail.

(2) US has been running the printing machine to print money and borrow lots and lots of money over may years now (a FACT)!
- If US is not the world number 1 GDP country and USD is not the main world reserve currency, USD would have depreciated to become banana money now!

And?

(3) US keep running budget deficit and keep printing money cannot last forever (a FACT)!
- There will come a time when US become World Number 2 in GDP and USD is no longer world reserve currency and USD will crash!

Beware!

I get that this is your opinion and you are entitiled to it no matter how outlandish I may think it is. But surely you are not saying that because of the above, your crystal ball predicts the US will fail anytime soon? If so, when do you think the US will fail and based on what? How does your crystal ball predict the end of 'Murica as we know it? The farms will run dry first? Mortgages will fail, oil reserves depleted first? How?

Want to put money where your mouth is if you are so confident of your crystal ball?

 

[ftpofmpo]

y can't new digital startup banks simply borrow money from the central bank and loan out to businesses, and with the collateral that the business pledge, use that same collateral as the basis for borrowing from the central bank?

in this way, no capital is required to start a bank

Also what is the limit that a small bank can loan out? in theory they can loan out a few trillions and at the end of the day gather all the deposits required to balance the books

 

[Shiny Things]

I find BBCW and w1r1belwind’s arguments for capping STI’s allocation (to, say, not more than 20%) a lot more persuasive than Shiny’s.

To me, Shiny’s argument is an argument for simplicity, especially targeted at new investors, but it seems to trivialize or inadequately address the very valid complexities and scenarios BBCW and w1r brought up.

The local/global equities split seems to be the point where most people disagree with my standard recommendation—and I'll be honest, I'm fine with that, though I appreciate people disagreeing with me: it makes me ask "is this actually the right answer, do I need to rethink this point". I'll take this away and have a think about it.

(Secretly, I'm quite glad that people are advocating for more global exposure. Home-country bias is one of the biggest, most consistent mistakes that new investors make, and I'm kinda glad I've done my bit to eliminate it.)

y can't new digital startup banks simply borrow money from the central bank and loan out to businesses, and with the collateral that the business pledge, use that same collateral as the basis for borrowing from the central bank?

Uh no. With a few exceptions (notably some of the emergency policies that the US Federal Reserve introduced), you can't pledge business loans to the central bank.

And with very rare exceptions, anything you can pledge to the central bank will require a haircut, so you can't just take on infinite leverage like that.

There are many people that are not very knowledageable in this forum and may think that what you said is a fact.

Chris is trying to start fights—I notice that he does this over in EDMW as well, and he seems to think the same behavior is acceptable here. Just report his posts and ignore him; don't respond.

Hi Shiny things,

i have bought your book and read it. as im totally new to investment i will like to asked:

Based on 110 minus age in my case will be 80 therefore 80% goes into stocks.

40% to goes to local stock / 40% to global stock and balance to bond.

you have been suggesting ETFs Straits times index ( ETF) which i have look into it and am looking to do that.

Yep this is good so far.

40% of global stocks. However instead of global stock , i am instead looking at buying a stock alone like OCBCs or UOB, or stocks that i can be given dividend or invited to their quarterly report conference to listen to their announcement. Or just stock that i can take dividend, how do i this? Can i buy from FSMone?

It's better to buy global stock ETFs like IWDA, than doubling up on local stocks. By buying ES3, you already own a stake in the big three banks, as well as other big Singaporean companies like Singtel, Capland, etc etc. So, because ES3 already owns those stocks, if you bought more Singaporean stocks, you'd be adding extra risk if one of them were to go bankrupt. (And ES3 already pays hefty dividends—somewhere around 3.5%!)

For bond what will you suggest?

MBH.

Also is there any difference if i buy from OCBC securities and FSMOne other then the brokerage fee?

Thanks.

No, there's no difference. Use whichever one is cheapest.

so putting aside the value or growth perspective, how is the idea of having Berkshire Hathaway as an asset management company, similar to that when we buy ETFs from BlackRock and Vanguard?

Edit: ah, I see you clarified this a little. Yeah, the issue is that Berky is basically like owning a "US large-cap value" equity ETF, because that's what it owns. You're effectively betting on Chuck and Wozza as fund managers—the problem is, they're betting on the value factor (which kind of relies on stocks being under-appreciated) in the single most heavily covered equity market sector in the world, large-cap US equities.

I think large-cap US value-factor is dead and buried. Other factors still "work" (notably momentum). Value doesn't any more; it just ends up with you owning a truckload of banks.

Hi ST and all,

I have finished reading "Rich by Retirement" and the subsequent recommendation by ST "Random Walk down Wall Street". I have really learnt alot (Although much of the concept, technical vs fundamental analysis in Random walk down wall street has been covered in university)

Does anyone have any further book recommendations?

Oooh. If you're looking at asset management and becoming a PM, the answer's going to depend on which asset class you're interested in. Are you thinking bonds; equities; vol...?

 

[BBCWatcher]

The local/global equities split seems to be the point where most people disagree with my standard recommendation—and I'll be honest, I'm fine with that, though I appreciate people disagreeing with me: it makes me ask "is this actually the right answer, do I need to rethink this point". I'll take this away and have a think about it.

(Secretly, I'm quite glad that people are advocating for more global exposure. Home-country bias is one of the biggest, most consistent mistakes that new investors make, and I'm kinda glad I've done my bit to eliminate it.)

Importantly, if you have a nonzero percentage target allocation for ES3 or G3B, if you happen to be rebalancing now (or approximately now) since that’s when you normally rebalance, you’ll tend to buy more ES3/G3B. In a “3 fund” portfolio that’s the one that has been COVID-whacked the most lately.

To be clear, I don’t take issue with a 50-50 local-global stock split...while in retirement (i.e. with a circa 70-30 bonds-stock split, so 15-15 for the local-global stocks). I’m just very uncomfortable with that sort of 50-50 split prior to, say, age 60.

I should also remind that I cannot really invest in ES3, G3B, or any other non-U.S. domiciled fund since such funds are “tax toxic” for U.S. persons. There’s a U.S. domiciled analog to ES3/G3B: EWS. However, it’s kind of expensive (highish management fee). As I’ve explained before I ended up taking a small long position in the bank stocks directly since that works a bit better overall for me. I’m also holding a pretty good chunk of Singapore dollar denominated bonds, although again I cannot do that via MBH, A35, or other “foreign” funds. I have to adapt generalized advice to unusual circumstances, and that’s fine.

 

[beefjerky]

The local/global equities split seems to be the point where most people disagree with my standard recommendation—and I'll be honest, I'm fine with that, though I appreciate people disagreeing with me: it makes me ask "is this actually the right answer, do I need to rethink this point". I'll take this away and have a think about it.

What about adjusting the formula such that there is a larger exposure to a World index when one is young? Perhaps something like

Bonds = Age - 10
World = [(110-Age)^2]/100
Local = [(Age-10)(110-Age)]/100

Age Bonds World Local
25 15 72.25 12.75

35 25 56.25 18.75

45 35 42.25 22.75

65 55 20.25 24.75

85 75 6.25 18.75