Reits, gold and 12% guaranteed returns per annum

Wow, so much for regular blogging..haven’t updated in a while.

Guess I’ve been busy with wedding prep.

Let me see, since I last blogged, gold prices are coming off their highs and REITs are being massacred  going through a healthy correction (hah!) I see this as an opportunity really to bag more REITs for long term income.

 On REITS

It’s good that the REIT fever is winding down somewhat. That highly leveraged, debt rolling REITs are seen as capital appreciation tools always baffled me. As I understand, REITs should be invested in for their yield. Period. REITs can only take on small bits of property development, so their potential to unlock value is much lesser than a property developer. REITS buy buildings which are already stable yielding and pass on those yields to unitholders. The only ways a REIT can unlock value is through Asset enhancement (although there are opp costs in terms of affecting current rentals) and by borrowing cheaply to fund yield accretive stuff. That’s my really layman understand of the REIT structure.

Despite knowing this, when REITs’ share prices soared week after week, you are eager to chase as well, thinking that you are missing out somewhat if you don’t. I knew interest rates rising, or any talk of it, will certainly start the decline of REIT prices (no way a REIT should trade at PTB 1.4 seriously!) but yet I keep thinking I will sell at the top, get out with my gains. I was caught up with the REIT fever too, wildly happy when my REITs’ share prices soared week after week. Just shows you how hard it is to stay rational in the market isn’t it?

Well from this all, I really learned something important. Which is never to be wildly ecstatic about paper gains. What goes up quickly comes down twice as fast. Within a few sessions, my recently bought REITs were trading back at my purchase levels. Life isn’t it? Another thing to rmb: trust your gut. When you feel it’s time to take profit, just do it. My initial plan was to divest my REITs slowly before my estimated interest rate rise in early 2014. Haha, the market always prices in stuff 6 mths early. REMEMBER.

Well no biggie. Im looking to collect more REITS to form the bedrock of my passive income in the future, so as REIT prices fall, I’m gonna be averaging down and adding more. I believe that REITs will be better prepared to meet any coming  financial crisis, unlike during the GFC. I read that some REITS had even prepared for this by taking on higher interest debt (cant rmb where I read from, but I think it’s one of the industrial ones). I really like retail REITS which are boring but steady during bad times, logistic REITS because I think warehouse spaces are also required in a transit hub like Singapore + the whole online shopping boom. Healthcare REITS are great esp with grey tsunami coming on – but right now I cannot reconcile the PTB of First REIT and Parkway..so yeah. I hope the prices continue staying low till after my wedding where I have a better sense of J and I’s combined NAV.

Really love him for trusting me enough to invest for both of us. Although sometimes it’s really stab in the dark for me…haha.

On Gold

I really like gold. Rationally, with all the cheap money flying about, gold should be soaring. Alas it is not and right now it’s in a severe bear market, coming off highs of 2011. My investments in gold is a little small wafer bar and some ETFs. Have some silver too. I suspect the recent gold decline was due to massive manipulation in the market through ETFs. I will probably be buying physical from now on. Well apparently it takes USD 1100 plus to make a troy ounce of gold, so there you have your price support.

 For my Gor Dai Lei, I’m getting gold jewellery from my mam and J’s mum. I think gold’s very timeless and look forward to adorning myself with it!!

On 12% GUARANTEED RETURNS

Speaking of gold, let me share an interesting phone chat I had. So apparently this guy got me number from a list of people who were swindled by gold firms, and contacted me. Firstly, I was like swindled wert? Did not buy from any of those gold firms dear. Yes I bought gold. Like just pure gold that’s not on lease or funny buyback stuff. Just normal, free gold that although has depreciated, is mine forever and I won’t have to go HL Park to campaign the gov to help me get it back. So anyway, he started recommending me these schemes that his company (I shall not name names) had which promised 12% guaranteed returns. I told him that no way this was possible and he said it very well was and just that no one had ever advised me on such schemes before. At this point, my eyebrows were raised to the point of almost disappearing into my hair, but I indulged him. Told me about a European country (shall not name names) listed building scheme that guarantees 12% returns a year. Apparently, some developer buys this type of rare conserved European building, refurbishes it and sells it back to Europeans. So we buy into this scheme by giving developer the money to buy the rare conserved European buildings in the first place, and we can slice up our stake to just SGD 10000, and for reasons unknown, even though the loan should be in Eur, there is declared, no currency risk. Then after 12 months, we get back our capital + 12% return.

I mean isn’t it like just wow? -.-

There are a thousand potshots I could take at this, but let me just highlight 2. 1) Borrowing costs in Europe must be like what, 0% now? So the developer feels obliged to borrow from muppets in Singapore at 12% interest to buy a European building? Hmmm… 2) at 12% guaranteed returns, you should see even WARREN BUFFET himself investing and pouring billions into this scheme. But no, they have magnanimously brought the scheme to Singapore to benefit said muppets. 

My gosh, where do I sign?

Another scheme explained to me. A 3% return every 3 months for investing in crude.  Okay, sure cos crude appreciates 3% every 3 months you know. -.-

The reason why I detailed this experience is because I feel such unsolicited schemes are quite insidious.

Firstly, I am pissed off that the company I bought gold from (I shall not name names) actually released my info to third party investment guys

Secondly, it is particularly insidious that this guy is targeting people who he feels are gold purchase victims. With the recent fall in gold price, coupled with the whole GG buy back fiasco, one can imagine how desperate the victims must be to try and recoup some of their losses. They are more likely to throw caution to the wind and punt on this one winning trade that they believe can get them 12% returns per annum.

Thirdly, the fact that it is unsolicited. Here I was coming about my ways and some dubious investment guy calls me about this scheme. Sure I could just block the call. But still I don’t like that they can contact you out of the blue and sell shit like this to you. Im defo putting me number down on the DNC registry next year.

I don’t like when people tell me this or that high return is guaranteed. Guaranteed by who? By you? And how good’s your word anyway? But I feel for people who may be lured by this high 12% return. I know many would say these people are greedy but I think we should take a kinder view here. I think many of us lay persons out there may not genuinely know the standard risk to reward percentages. For instance, a fixed deposit which is low risk yield 1%, bonds which are a bit higher risk yields 2%, and equities which are high risk are higher yielding (depending on whether they are blue chippers or volatile pennys). I guess many would just go WOW! at the 12% return and not realise that the risk must be insanely high. And no one gives you a guaranteed 12%. Ever.

Just a word of caution to people reading this (which is probably no one)… never buy shit that cant be sold easily in a sub market…never buy shit you don’t understand…never buy shit from people who invite you to free buffet lunches.

Oh wells. I probs wont be blogging till after my wed. But I guess no one will care haha.

Cheerios.

Forex

Haha this blog just started and I am already behind in my blog posts – been busy at work and all.

I have been experimenting with Forex trading of late. For the uninitiated, forex trading is the short term trading of currencies, betting that one currency will appreciate against the other in the short term. Many factors influence why one currency appreciates against the other. These range from interest rate policy, announcement of trade figures, general doom and gloom stories from said country.

I have researched quite extensively into forex trading recently. I recall in March 2012 when I first started stock trading, I did look a little into forex trading. But honestly, the forex quote itself scared the hell out of me – add to the fact that forex trades were so highly leveraged (up to 98% omg!) – I simply swore I won’t touch forex and will start responsibly with good old stocks and blue chips. I decided to take a closer look at forex trading a year into my trading journey because I discovered a few things about myself during my first year of trading.

1)      I have a severe distrust of the market. I am trying to move to a buy and hold passive dividend income strategy, but usually my trades are short, never more than a year. I believe limiting exposure to the market is the best bet of all

2)      I am not very greedy. You know the saying “lets your profits run”? For me, as long as profits start to jog, I take them off the table.

3)      I buy risky stuff. For a first year investor, I have bought into dubious declare-massive-profits-but-no-dividends S chips, Myanmar counters, pennies. Actually that is quite bad. But I digress

4)      I can take massive portfolio draw downs. Stock lost 20% of value? Shrugs, let me look into averaging down.

From all this, I was just thinking that actually forex trading could suit me really well. It’s short term get in get out, very risky (which I can take) and I’m not greedy (so it rises tens of pips and then I’m gonna go). So all this led to me to exploring forex a bit more.

Ok, let me impress upon the reader that I am honestly quite shit at exchanging money. Like, I even have problems reading the quote at a money changer. So imagine my horror seeing a forex quote like this:

EUR/USD = 1.3077/1.3081

Wert. I’m never gonna master this.

But I read on and I began to realise some basics. For example, putting money in SGD banks gives you quite a shit rate yeah? But imagine converting SGD to AUD where the Aussie banks give you a better rate. You earn just on interest alone! [So I asked my hubs, why on earth doesn’t everyone in Sg convert all their spare SGD to AUD and earn the higher interest rate? He  mumbled something about interest rate parity and said that was something I should have known in J1 econs. But anyone knowing me during J1 will know that I pay close to no attention in econs class so obviously how would I even know about interest rate parity.] Anyway, apparently one of the basics of forex trading is something called the currency carry which means that if you use SGD and buy AUD, and you have an overnight position, you get the difference of the higher interest rate credited to you. It’s like wow. But of course that is assuming ceteris paribus no movement between the SGD/aud pair, which in a 24 hrs totally liquid forex market is not possible. So really, the appreciating factor of one currency vis a vis the other is of paramount importance here.

Ok So lets say you think EUR is totally going to depreciate against USD cos of all the horsemeat thing and the Italian elections. What you should do is short the EUR/USD pair which means you sell EUR to hold USD. So that next time you can use the AUD to buy back a weakened SGD and get more SGD! Few things to consider:

1)      Spread

Ok rmb the quote I put up there? EUR/USD = 1.3077/1.3081. The 1.3077 is the bid price and the 1.3081 is the ask price. If you want to long (buy) the EUR/USD, you have to pay USD $1.3081 to get 1 Euro. If you want to sell this 1 euro immediately, you get paid only USD$1.3077. So the market earns the spread of USD$0.0004 (4 pips). This is the cost the forex broker charges for opening the position. Apparently there are no transaction costs unlike stock positions. Dunno why. 

2)      Currency Carry

Ok I mentioned this above. And if you buy a higher yielding currency by selling a lower yielding currency, then you get paid the difference in interest rate. The reverse means you pay the interest rate difference.

3)      Overnight closure of positions

Ok I read somewhere that some brokers close your positions overnight and reopen them in the morning which means each day you incur the spread fees (omg), I am not sure if CMCmarkets do this (I am experimenting with their demo account now), so I guess I will have to email them to us before I get a live account

4)      Holding fees

So I also read somewhere that if you hold a position overnight you have to pay holding fees to your broker. Again I think this varies amongst forex brokers so I gotta make sure that any brokerage I open with will not have holding fees like that.

So I have started a demo account with CMC and initially long-ed the EUR/USD pair until my hubs was like, dafuq are you doing, aint ppl fleeing from EUR now cos of the whole anti austerity vote in Italy. Then I was like oh yeah, so I closed that position.

I bought like 100 Euros, put up $3.25 sgd as margin and lost like $0.50. As you can see, not a great start.

So I started shorting the Eur/Usd, selling 1000 euros this time, putting up SGD 32 as margin. Omg, just as I did that, Euro started recovering, and my loss went up to SGD 12 before bouncing back to sgd 4 (at time of blogging). I wondered if it were real money and in much larger portions, would I have the mental strength to hold on or would I have cut losses pronto? All this is really hard to test with a demo account. It also showed me the great importance of stop loss.

Stop losses protect your profits and limit losses. But trading currency pairs with great volatility could mean you can stopped out of a trade prematurely. The one thing I do not understand is the trailing stop loss. You see when I sold Eur/Usd on my demo account for 1.3077, I set a trailing stop loss at 300 pips (half the margin). But when the Eur/Usd started recovering, I found that the trailing stop loss also moved! This baffles me and I still cannot explain it. Is not the trailing stop loss supposed to remain at the same level when price movement is not favourable? Only when price movement is favourable to the trade then the trailing stop loss follows it upwards? How can a trailing stop loss move down with a bad price movement – surely that defeats the point of a stop loss? I have no answers to why my trailing stop loss reacted this way but I guess I will have to experiment a lot more before I put real money to this.

蛇年行大运

Funny thing. The horoscope man on the Channel 8 CNY show cautioned Rabbits to be wary of the stock market and investing in this 蛇年。Now this is not too great shakes for someone like yours truly who has it amongst her 2013 goals to grow my yield stocks portfolio. And it got me thinking to how it all started….

                                  

Nevertheless, this constant zeal for yield (Z4Y) is necessitated by this low interest rate environs we are in (thank you QE), coupled with a rather high inflation rate of 4% (avg out over 2012). What started my whole Z4Y in Mar 2012 was a simple conversation over lunch which went something like this…

Friend: “Did you know banks’ interest rate per year is like 0.1%”

Me (busy eating): “Uh huh..”

Friend: “And like inflation is 5% this quarter”

Me (message sinking in): “wert…”

Friend: “yeah it means like money in the bank is just depleting and rotting by itself”.

Something like a fire alarm went off in my insides. Prior to this, I had never given much thought about my financial health. Money sort of appeared in my bank account every month, I would bid adios to about $700 (yeah I bought a car at 23 just before the crazy COE price spikes), $100+ off to insurance, odds and ends for credit card bills etc. I just left it to accumulate (very slowly though!), narry a care that while accumulating, it was also “depreciating” in real terms. Then came this epiphany over an ordinary lunch hour. I was shocked and scared into action.

Let’s illustrate the loss in real terms per year using $50 000 as an example.

Cash: $50 000

Bank Interest: 0.10% pa

Total Amt in bank after 1 year = $50 050

Cash (real terms after inflation of 5%) = $47 550

Net loss = $2450!

Well imagine that. So here I was, a year ago, in inflation crazy world, without an iota of financial knowledge at all but armed with that which is most precious: the realization that I had to do something. And Quick.

I started researching unit trusts and insurance products first – something I felt was more mass market and I didn’t have to take investing into my own noobish hands. It was a travesty. I have to admit, perhaps it is my less than desirable comprehension skills, but till today I have no idea what insurance products are selling (yes, even if you may have that Crystal Clear mark or whatever). I have no idea what I am entitled to and the factors that affect the payout. Seriously, no idea. Unit trusts, yeah I do understand how they work but the whole “you are totally diversified into a whole basket of thingys” didn’t really appeal to me. Nor did the manager’s fees still payable even when the fund is totally chui part. So it was then I decided I had to take a leapt of faith and take investing into my own hands.

So off I went to set up a UOB Kay Hian account – whole process of linking up with my CDP account and bank acct took a little over a month. It was really exciting times. In the meantime, I read up voraciously on REITs, dividend stocks and safe pillow stocks that I wanted to put my money in. I schooled myself from scratch in the basic stock analysis  - such as P/E ratios, P/Nav, payout ratios etc,  through helpful websites like www.investopedia.com. It was painstaking at first, for remember, I was going at it blind literally, with completely zilch financial knowledge – didn’t even know what last closing price was. But the more you read, the easier it got; the easier the understanding, the more you wanted to read to expose yourself to a whole range of analysis. I basically guided myself through the whole stock buying and selling process – reading the KH manual on how to put in order price, what’s a market order/limit order, what’s buy volume, sell volume. Ah, fun times. Navigating the Techanalyser on KH was what got me started in technical analysis. Stochastics, CMF, MACD divergence convergence, you name it – I have read it. And still learning so much more by the day.

Still remember my first transaction ever, like it was just yesterday. CMT at $1.745, order put in at 4.58pm and order filled during market close matching. Ah… I remember my direct debit link to my account wasn’t even ready then and my ever obliging hubs issued a cheque for it!!! (He owns a majority stake in our combined portfolio currently haha) Many buys and sells later, I feel each transaction yielded more than just profits. Experience, these transactions gave, experience to tackle and brave the protean stock market years ahead.

So what’s ahead for this 蛇年, during which I, as a Rabbit, am advised not to speculate in shares and invest? I will certainly err on the side of caution and not let GREED overrule rational thinking. Go for smaller gains and not try to pick market tops. Life is not always about money and it is important not to let stock market trading be the be all end all. Take time off to smell the flowers, spend quality time with loved ones and trade cautiously.

祝大家蛇年行大运，身体健康，心想事成！

The Man without a Face

On the way to the Lama Temple, I saw from afar, a shadow of a man, perched on a low stool, shivering uncontrollably in the bitter winter cold. His furtive eyes darted from each passing person to the next, hands outstretched for a coin that would promise at least his next bare sustenance. As I drew near, I saw a horror which haunts me in dreams till very day, even when ensconced in my comfortable marshmallow existence a thousand miles away; a physical horror translated into a mental horror which I have no doubt will continue to plague me till the ends of my days.

His face had no semblance of a living human face; it was bright pink, as if the skin had been burned right off; a gaping hole when his nose should have been; and his eyes – o his eyes! – glazed over with a bottomless misery I can hardly begin to describe. I averted my eyes – surely as anyone would have – and numbed my soul. My thoughts struggled to find flat ground upon which to make camp. A great conundrum rose within me – do I reach into my pocket to give him a couple of ten yuans to alleviate his suffering or do I pass him by as I would any of the countless beggars along Wangfujing Street?

Perhaps he was a political prisoner, now free (if one could call it freedom). Perhaps he was a Tibetan who took to self immolation as a plea to the world for help. Perhaps he was a victim of the Cultural Revolution – a learned man caught in the wrong age. Perhaps he was one of the Falun Gong, tortured beyond belief, if one is to believe the stories. In the end, it didn’t matter. For I simply walked on. For to stop to help him only makes me aware of the millions more that I would have failed to help. The millions more shivering uncontrollably in the bitter winter cold. The millions more who would give everything to have one tenth of what I have been given in life. I would despair at the helplessness to help.  A lesser being such as myself cannot fathom such depths of anguish. I walked on, not because I was indifferent –quite the contrary I was moved beyond tears – nonetheless I walked on, because to stop is to discover the depths of your helplessness, not something I can handle at this point of my young life.

But “The Man without a Face”, as I name him, stays with me. He stares at me melancholic when the trivialities in life get me down. He dares me to despair at my own life. He gnaws at my guilt, my guilt of having food and drinks larger than my hunger and thirst. Because of him, I cannot but be happy. For him and those millions more, I cannot but be content. He gives my life meaning. He reminds me of how far I am from the abyss.

When I emerged from the Lama Temple, he was gone – vanished without a trace – faceless from the face of the earth. 

first light of day.

For reasons unknown to me, I have decided to start blogging again. Sure, I have had blogs a plenty since my adolescent teenage years to the sarcasm ridden college days; but interest in blogging had waned following the tides of the blogging trend. Think Facebook sunk the final nail. My mctivities blog lay forgotten in the annals of time.

So in my 26th year, I have decided – to once again put pen to paper – or should it be, to put fingers to keyboard; and chronicle life’s little idiosyncrasies.

It’ll be fun. Let’s see how long this one lasts.