Official Shiny Things thread—Part III

[tangent314]

Interesting. Either Luxembourg's 15% is different from Ireland's 15%, or perhaps it was only recently changed to 15%?

 

[SpeedingBullet]

OK, let’s talk markets, because wow things got exciting overnight and you’re probably going to hear a lot about it:



It’s bananas! B-A-N-A-N-A-S! Gwen Stefani should be doing banks’ market wraps today!

This is why I keep banging the drum for bonds, even though they aren’t glamorous like stocks. There has been an absolute wall of money into bonds over the last few weeks, from people selling stocks and buying bonds; my suspicion is that the rip higher in price (and lower in yields) overnight was driven by technical factors (convexity hedging of US mortgages, this stuff is weird, I can go deep on this if you want), but that doesn’t make it any less real.

This has flowed across into SGD bonds and corporate bonds as well. My old fave MBH is up 1.5% in the last month. When there’s a flight to safety, people buy bonds.

These are your dry powder; these are your war-chest.

I tend to think that these big moves in interest rates are a bit over-extended. If a corporate client came to me asking how they should take advantage of the moves in rates, I’d be telling them to lock in fixed-rate loans right now for as long as they possibly can. (If you have a mortgage, this is probably a good idea too! Fix your rate now!)

F*ck yes. Nerd out on on mortgage hedging please.

P.S., 10YT is now below 0.5% and oil just died.

 

[BBCWatcher]

P.S., 10YT is now below 0.5% and oil just died.

I think the negative TIPS yields out to and including 30 years is the biggest sovereign debt story right now. Lower oil prices aren’t so unusual. The oil and gas sector has been highly cyclical since it was born.

 

[Listopad]

It hasn’t changed. I had a few lump sums come in from my tax refund and a contracting project that I just finished, and I plowed those into my usual allocation (I was short of international stocks, so that was most of what I bought). I last rebalanced in November (sold some stocks, bought some corporate bonds) and I’ll look again in April.

these few lump sums, do you vest into the markets per ur usual allocation at one go? or do you split the amounts to vest over a few weeks period ?

 

[SpeedingBullet]

I think the negative TIPS yields out to and including 30 years is the biggest sovereign debt story right now. Lower oil prices aren’t so unusual. The oil and gas sector has been highly cyclical since it was born.

Yes, the story is still fixed income. Lower oil actually helps various industries

 

[lingalong]

Hi Shiny, just a clarification,


Just set up my account, it says IBKR Pro, under the website ending with .com.au.

I did a fast transaction of 1.00SGD recently and was accepted in my account, but it shows up at 0.72USD, without me doing any conversion

Under account setting it says

Account type:Cash
Base currency: USD
Dividend reinvestment: disabled
BKR Pricing Plan: IBKR Pro; Stocks: Tiered

Am I on the right track? Thanks

 

[w1rbelw1nd]

Hi Shiny, just a clarification,


Just set up my account, it says IBKR Pro, under the website ending with .com.au.

I did a fast transaction of 1.00SGD recently and was accepted in my account, but it shows up at 0.72USD, without me doing any conversion

Under account setting it says

Account type:Cash
Base currency: USD
Dividend reinvestment: disabled
BKR Pricing Plan: IBKR Pro; Stocks: Tiered

Am I on the right track? Thanks

Change your base currency to SGD. Good that you are on tiered pricing, if you intend to invest in LSE ETFs.

 

[cassowary18]

Can IB automatically reinvest dividends? Thinking about when IB allows SGX trades, whether they can help me reinvest my ES3 and MBH dividends.

 

[BBCWatcher]

Change your base currency to SGD.

That's not necessary. If you look into the details of the holdings within the account it'll show the one Singapore dollar as 1.00 SGD.

 

[shallow]

With the market at this condition, is it the time for DCA folks to massively improve their average price after the selloff? Ie rebalancing from bonds/pump cash

 

[Shiny Things]

So it's an interesting morning out there in equity and bond markets. Here's some theme music for you:

This is the time when the planning pays off. People who are all-in in stocks—or buying TSLA calls, or punting oil futures, or whatever the cool kids' trade-of-the-day is—are getting phone calls from the margin clerks at their brokers. Even regular investors who are blindly buying unit trusts are having a rough time and wondering "why is my unit trust going down? My fund managers are supposed to be smarter than this! They're supposed to give me all the gains and none of the losses!".

If you've planned smartly, though, here's what you'll see:

• Your stocks are a lot lower, and that’s OK—it’s an opportunity to buy more at a lower price. You don’t need the cash right now, so there’s no need to panic; and definitely no need to sell. You sell before the panic, not after it.
• Your international stocks are down as well, but the weaker SGD has reduced your losses there by a bit over half a percent;
• Your bonds are in great shape. I see MBH up nearly 1% on the day.

All in all, you’re probably down 2-3% today, counting your stocks and your bonds, depending how conservative your allocation is. And that’s not the end of the world. It’s rough, but you’ll get through it.

If you have a war chest, now’s the time to deploy it, too. Stuff is on sale, and buying when other people are panic selling is good strategy.

So what actually happened?

You'll all have seen the huge plunge in oil prices triggered by Saudi Arabia flooding the market; that's flowed through to bond yields (because lower oil prices -> lower inflation -> lower government bond yields); corporate debt (because oil producers make up a big chunk of the "junk" debt market, and lower oil prices -> tougher for those companies to service debt -> riskier companies -> higher junk bond yields, which is why you don't own junk bonds as a hedge for equities!).

On top of that, the Lebanese default over the weekend, and more COVID-19 cases popping up in the USA, have sent people scrambling to sell anything they can, just to reduce risk and get into cash.

I think the negative TIPS yields out to and including 30 years is the biggest sovereign debt story right now. Lower oil prices aren’t so unusual. The oil and gas sector has been highly cyclical since it was born.

Hmm - counterpoint, I think the hilariously negative TIPS spreads (and commensurately low forward inflation) are mostly a side-effect of the oil price falling out of bed. (Happy to be proven wrong here though.) The really amazing thing to me is the entire UST curve trading richer than Fed Funds, which is just… wow.

(And ze 10-year Bund trading at like -0.71%! I don't have any philosophical problem with negative interest rates, but who's paying that much? How on earth are they expecting to make money at that yield?)

I am looking to buy some oil ETF to make a punt on the low oil price.

Boy oh boy I hope you didn’t do this already.

Anyway, don’t trade oil (or any other commodities except gold and silver) through ETFs. If you must trade oil, open up an Interactive Brokers account and trade futures.

(Why not? Because with the exception of gold and silver ETFs, most commodity ETFs don’t own the commodity: they own futures on the commodity. And the difference shows up in a consistent, painful underperformance.)

1) Hmm is there a similar one in ireland that tracks TLT instead?

Imagine me as Clippy right now:

I see you’re trying to buy something that’s already skyrocketed. Are you sure you want to do this?

Anyway, no. If you specifically want exposure to the long end, you’ll have to get it through bond futures. Don’t do this, though, especially given your second question:

2) Secondly, may I ask what is maintenance margin?
I switched to a margin account from cash in order to be able to play short.
However, I noticed a maintanance margin and did some googling.

When you’re using a margin account, there are two “margin” numbers associated with a trade:

• Initial Margin is the cash you have to have in your account to open a particular trade;
• Maintenance Margin (which is usually less than IM) is the cash you have to have in your account to keep that trade open.

ST, just China A shares. What etf would you recommend?

Ooogggg, are you sure? You know those trade at like a 15-20% premium to the H-shares, right?

Anyway, if you must, 2822 HK is the go.

Does it make it a difference if I choose to buy more of the stock with lower ratio instead of selling and buying to re balance?

When you sell-and-buy, you get to your target allocations faster.

CPF can be consider bonds component or not?

if IWDA's current pe is 18.64, does it mean that we will get 5.36% return annually in the long run for any investment make today?

1. Yes, it can.
2. Lol no, absolutely not.

Hey ST, this is a absolute n00b question but how do you invest in bonds?

Are there some tickers that track bonds? I'm guessing Ireland domiciled is better than US since WHT still applies?

I searched MBH and it's listed on both SGX (SGD?) and MBH (US?)

Sure. The easiest way to buy bonds is to buy an ETF (like MBH) that owns those bonds. You want to own the SGX-listed one; the only other MBH I can see is Michelmersh Brick Holdings, listed in London.

Special mention: TLT
Noticed this is trending higher on US markets. Any difference between this and the XYZ ETF that track bonds/treasuries?

TLT owns US government bonds (aka treasuries) with long maturities - longer than 20 years. Longer bonds are more sensitive to movements in interest rates, so long-maturity ETFs like TLT gain or lose value the fastest when interest rates move.

Can I ask our gurus and Shiny about hedging with warrants.. I.e to reduce downside on long DBS shares. How do I know the amount of warrants to purchase?

The number you care about is warrants-per-share. Let’s say you’re long 100 shares of DBS, and you want to hedge those 100 shares with a put warrant that has 15 warrants-per-share; you’ll need to buy 1500 warrants.

Is it generally ok to assume hedging with put warrant is a low cost insurance to downside? It appears that some upside is enough to cover the drop in put value over a short time when selling. Or is there a better way to reduce downside when I trade shares? Thankss

Not really, no. Options (and warrants, which are a subspecies of option) are like buying insurance. When you buy a put option, you buy insurance against the price of the stock dropping by a lot; you pay premium upfront; and if the price of the stock drops by a lot, you cash in the “insurance” (the option).

Now, insurance costs money. And trading options is a very poor idea for most investors; warrants are basically a glorified gambling tool.

Have to disagree with you regarding DBSV here. DBSV is good for buying local counters (insofar as it deposits your purchased shares in your CDP vs custodian account for SCB). However, it's absolutely horrible for overseas counters. They charge a $2 per month custodian fee and the commissions are higher.

Just stick with SCB or IB for overseas counters.

Oooh, thanks, fixed.

 

[Shiny Things]

these few lump sums, do you vest into the markets per ur usual allocation at one go? or do you split the amounts to vest over a few weeks period ?

I dumped them all in at once. On the one hand, I'm wishing I'd staggered them out over a few weeks - I'm not a robot! But also, I'm not too worried; I bought at some pretty great prices, and it's money that I don't need for years.

 

[Listopad]

I dumped them all in at once. On the one hand, I'm wishing I'd staggered them out over a few weeks - I'm not a robot! But also, I'm not too worried; I bought at some pretty great prices, and it's money that I don't need for years.

i am now at 45% eq/bond, trying to get to my 50%-52% allocation. spreading it over 6 months (going in every week, actually its tempting to go in every day!) to make myself feel psychologically better. Or to deploy it at a faster speed.... a million dollar question .

 

[lingalong]

That's not necessary. If you look into the details of the holdings within the account it'll show the one Singapore dollar as 1.00 SGD.

So I can just leave my base currency as USD? In that case, do I s need to do the currency conversion?

I recalled someone mentioning that one should be transferring SGD into the account via FAST and then convert it to USD, since this commission will fall under the monthly $10 charge.

 

[NubbyCat]

Hi guys, if I wanna buy in, let's say $1000, into STI ETF, what's the cheapest platform?

I saw FSMOne RSP the fee is only $1 minimum or 0.08%, but won't be able to start until next month's 8th..

 

[kram62]

So I can just leave my base currency as USD? In that case, do I s need to do the currency conversion?

I recalled someone mentioning that one should be transferring SGD into the account via FAST and then convert it to USD, since this commission will fall under the monthly $10 charge.

Base currency is the currency most of the reporting will be made with.

It doesn't matter which base currency you choose, you will have to convert your SGD to USD manually to buy USD quoted assets.

Base currency is just a preference for the user to see the reports and main balance value.

 

[hahaman111]

Enter now or stick to the monthly date?

 

[flowerpalms]

Just do monthly dca lah

Enter now or stick to the monthly date?

 

[flowerpalms]

1k use SCB for local

Hi guys, if I wanna buy in, let's say $1000, into STI ETF, what's the cheapest platform?

I saw FSMOne RSP the fee is only $1 minimum or 0.08%, but won't be able to start until next month's 8th..

 

[coralsg]

Buy ETF on margin

I found Shiny's no no advise on leveraged ETF in (Part 2 of this series). However, I am not sure what is the technical term to use to search for Shiny's view on :

a) Borrowing in SGD to invest in STI ETF
b) whether borrowing in any currency to invest in STI ETF, S&P500 or any of the global ETFs makes sense