Hi ST,
Currently I'm holding on to some LVGO shares. Since Teledoc is making a takeover offer and paying partial cash & Teledoc shares (1 lvgo = 0.592 tdoc), is the partial cash component subject to withholding tax? Even though its not dividends.
What about the partial shares if my broker dont allow partial shares transaction?
1) Not a dividend = no DWT.
2) For partial-share offers, there’s always a clause in the takeover docs that describes how partial-share holding should be dealt with; the most common way to deal with it is that you’ll get rounded down and receive cash equivalent to the fractional share amount.
Partial-share transactions have always been a thing, ever since before brokers figured out how to let people trade partial shares.
Thanks for your insights,
1. [...] can I say for certain that the financial crisis that rendered bonds useless/or lose money will never or VERY unlikely to occur at least in theory in the next few years ?
OK, for all of these questions I’m gonna speak very broadly, and generally focus on the US bond market (because, to be honest, that’s where the action is, and SGD bond markets will tend to follow the US). That out of the way... in the short end you’re basically right. Every central bank in the world is on the bid for short-dated bonds in various hilariously large amounts, in order to keep short-dated yields down.
In the longer end, not so much. Central banks aren’t as fixated on long-end rates, so you could potentially see a steepening in countries where the central bank’s not explicitly controlling the long end (that is, rates go up / prices drop in the long end, while the short end stays pegged at zero). That’s the US, maybe Europe, and Australia.
You’re sort of seeing this in Australian bonds right now. The RBA (who are not idiots, don’t fight the RBA) is explicitly engaging in yield curve control, keeping the cash rate and the 3-year bond yield below 0.25%. But because they’re not targeting the 10s, the longer-end yields bounce around a lot more (10-year ACGB yields blipped up to 1.1% a couple of months ago, which is nice carry if you can get it).
2. What are your opinions on approx 10 year duration Inflation linked bonds for diversification purposes ? My understanding of them have always been that they are sensitive to both nominal yields and inflation. i.e. it provides both deflationary and inflationary protection.
BUT the longer its duration such as one with Standard deviation of about 6-8% (10 year?), the more sensitive it is to nominal rates rather than inflation.
Uh, I think you’re getting snarled up in bond math? The standard deviation of the bond price doesn’t have much to do with its sensitivity to rates vs inflation...
Anyway, if you care about diversification, buy nominals (regular govvy bonds). If you care about inflation protection, buy linkers. (And pay attention to which country’s linkers you’re buying! You might care about exposure to Aussie or US inflation, but you won’t care about exposure to, I dunno, EU or Swedish inflation.)
I reckon you’ll find that linkers are surprisingly correlated to equities.
3. Why is it that inflation linked bonds perform much more terribly than quality bonds during a financial crisis ?
Two reasons:
1) Dumb market-structure reasons. When there’s a financial crisis, people want the simplest possible instrument, and that’s nominals, not linkers.
2) Sensible planning-for-the-future reasons. In a financial crisis, spending stops and inflation collapses, so inflation forecasts collapse, so inflation-linked bonds collapse.
4. Since assuming my assertions are right, that inflation linked bonds have dual benefits...
This is where I lost you. Is the argument you’re trying to make is that linkers will perform better than nominals (not a given, especially given that US breakevens are already back to where they were before the pandemic); that linkers provide a bigger diversification benefit (also not a given, US linkers got toasted in March); or something else?
I’ll go back to what I said earlier. If you want diversification and stability, buy nominals. If you want an inflation hedge, buy linkers. The two are not the same.
(Independently of anything else, for anyone else reading this post - this doesn’t matter to most of us on this thread. Swan has a very global portfolio, so they care about global inflation, and they have a very low risk tolerance. Most of us here have more middle-of-the-road risk tolerances; and there isn’t a Singaporean inflation-linked bond market anyway.)
5. Thinking of RMB sovereign bonds denominated in USD for diversification. What are good ETFs for such ?
Mate, not gonna lie, you’re going full Pokémon here. You don’t need to catch ‘em all. What on earth are you trying to diversify away
from that Chinese bonds are the hedge?
Also, this isn’t entirely clear. Are you asking for Chinese sovereign bonds denominated in CNY (in which case CNYB LN exists), or Chinese sovereign bonds denominated in USD (in which case that basically doesn’t exist)?
6. Whether you see China govt bonds as being more Risk on like or Risk off like ?.....the idea is that I'm looking at other quality govt NOMINAL bonds other than the typical USD and Euro govt bonds.
I get you, but I don’t think that’s going to work; the USDCNY FX risk is uuuuusually a RORO type of thing. If you want a negatively-correlated asset, just buy nominal govvies in whichever currency you need the money.
I mean, there are more esoteric things you could try (JPY and CHF govvies? Just straight-up buying SPY puts, since it seems like you’re really looking for a crash hedge?). But really, you’re going way too deep here; it seems like you’re trying to hedge every possible bad outcome, and that gets expensive, fast. If you’re just trying to save for a retirement split between Australia and Singapore (stop me if I’ve got that wrong), and you have a near-zero risk appetite... ACGBs are great! The Aussie government is a great credit. Just buy ACGBs.
I haven't thought of the information asymmetry angle before. Personally I think the value premium is more behavior-based, and can (and is being) arbitraged away.
Yeah, that’s a valid way of looking at the value factor; I think it gets you to the same point though. Value being arbitraged away happens regardless of the cause.
Also, I presume Uncle Wozza is Mr. Buffett? What do "momo" and 'MU" mean? I'm not familiar with those terms
Thanks!
Oh yeah, bring on the colloquialisms.
“Momo” = “momentum factor”. “Stocks that go up tend to keep going up, until acted on by an external force.” It’s basically Newton’s First Law but for financial markets. It’s definitely a thing, and it’s performed pretty well lately. Value has died and growth and momo factors have taken over (ahem, TSLA, ahem).
MU is Micron Technologies, the most notorious value-trap stock in the world. Back in the late 2010s, “do they own MU?” Was the easiest way to distinguish whether a value-stock manager knew what they were doing or were just blindly screening for low P/E or low P/BV stocks. MU looked GREAT on a naive stock screen at the time - it traded at a single-digit PE, and it’s a tech company! - so people would buy it thinking they’d found the newest hidden value stock.
But Micron had its own problems. Specifically, they made DRAM chips, which is an incredibly volatile market, but they weren’t big enough to be a price-setter in that market, so their revenue was also horrifically volatile. That “E” in the P/E ratio would swing by hundreds of percent plus or minus from year to year, which is why the P/E was so low - the company’s not worth much if the price of its main product can suddenly collapse and send the company under.
So MU’s sort of become shorthand for value-traps - stocks that look great on a value-stock screen, but are broken for more fundamental reasons.
If I do not get a CI coverage, what should I be doing in the event that I get hit with a CI? I understand that the hospitalisation policy will cover my treatment fees, but how can I handle the loss in income and the fees associated with potential longer-term care and rehabilitation?
Sure—that’s what your emergency fund is for. You save up an emergency fund so that you don’t have to pay for expensive critical-illness riders.
If you’re the only breadwinner in a household, it might make sense to have a disability income replacement policy, so that if you can’t work, your family has an extra layer of protection over and above the emergency fund. But disability income insurance is not the same as critical-illness insurance.
not singapore.
