Lords Of Finance

I picked up this book from a bookstore in mid valley, Kuala Lumpur during one of our short getaways. Being an avid follower of financial history, I hope this book will be give me a better understanding of the causes for the Great Depression. The Lords that the book are referring to are mainly the central bankers of that era and they are Montagu Norman (U.K.), Benjamin Strong ( U.S.), Hjalmar Schacht (Germany) and Emile Moreau (France).

During those days, they are still on a gold standard and so it restrict the flexibility they will have in implementing policies during extreme scenarios. Moreover, all the european major economies were in debt to the US due to the war expenses. Some countries did break away from the gold standard and they fare better than those who stick on to it.

There are also quantitative easing of their kind during those turbulent period which I guess Bernanke might have learn a trick or two from his predecessors. The book also touched on famous personalities such as Winston Churchill, Maynard Keynes and Andrew Mellon.

Towards the end, the book touched on the eventual formulation of the Bretton Woods Treaty which is a modified and more flexible gold standard which lasted from the 1940s to early 1970s.

For financial history fans, this is a book that will be good for your collection.

Lee

My Take on Buy Term Insurance and Invest the Rest

The "Buy Term and Invest the Rest" concept has been around for many years and it is not something new. The main model behind this concept is to split the protection/insurance needs from your investment for retirement goals needs.

Insurance companies have try to bundle these two needs into investment linked plans whereby you will get protection and at the same time you are invested in unit trusts based on your risk profile. However, the charges such as sales charges and administrative fees could be quite huge relatively to if you do it on your own (Buying term insurance and investing in unit trust on your own). Therefore, it is not surprising that some insurance agents were pushing aggressively for Investment Linked Plans (ILP) to their less savvy clients as commissions are the greatest.

Insurance companies also offered other savings plans such as Endowment and Whole Life Plans whereby the insurance company will be in charge of investing the funds and generating decent returns for the policy holders. Majority of the funds will be usually invested in long term bonds. We will like to look at the track record and payout history of the separate insurance companies to have a gauge which company plans to choose (Thou historical record is not illustrative of future payout but at least it provide some sort of comparison and guidance).

Personally, we do not believe in an extreme buy term and invest the rest concept as we feel endowment and whole life plans adds a good dimension to your overall financial plans. It is a good way to force yourself to save and there is no temptation to dip into your investments for lifestyle needs.

For my own investment and protection needs, this is what we have planned. For protection needs, we have brought the SAF Aviva Group Insurance for both Death and Critical Illness as their premiums are really competitive. Also, we took up some SAF NTUC Group Insurance Plans. We have also taken up a mortgage declining insurance for our home loan with the bank. Not forgetting the usual health care insurance which we used our Medisave to pay for and using cash to pay for the excess waiver.These are basically term insurance.

For my kid's education needs, we have brought endowment plans that are due when they are about to go for their university education. So far Tokio Marine(Previously Asia Life) seems to have the best track record based on our comparison. However, we did diversify our plans and so we are holding policies with Tokio Marine, Manulife and NTUC Income for their education needs.

For my retirement funds goals, I am trying to segregate them into 3 sections.

1) My SRS is used mainly to build up a unit trust portfolio with some SGX listed Exchange Traded Funds as we are not able to invest in US based Exchange Traded Funds using SRS.

2) For my cash holdings, I am using it to build a portfolio of stocks. Also, if an opportunity presents itself, I will use it to pay for another property's down payment.

3) As for my CPF, I am using it mainly to pay off my mortgage and if there are excess, I will do some investments either through unit trust or exchange traded funds.

So hope my plans will work out fine and I will have a great retirement(Still a Long Way) with no worries about my finances.

Lee

PRIMARY ONE REGISTRATION

It is the time of the year again whereby parents start worrying about getting into the preferred primary schools of their choice for their kids. This is  a particular stressful phase especially if they are trying to get their kids into a popular school.

Initially, I am of the view that a decent primary school will be good enough for my kids. However after considering our overall position, we feel that we can afford to give my daughter a good start to her educational journey. With that in mind, we decided to switch on our kiasu mentality and push forward our plan to get her into a relatively popular primary school.

In strategizing our game plan, we decided to explore the avenues and shortlisting the primary school of our choice. There are mainly 4 avenues available to us:

1) Using Clan association

2) Grassroots Leader Route

3) Staying Within 1km of the School

4) Parent Volunteer Route

We initially wanted to go through the clan association  through Phase 2B but the competition is very stiff and there is no "Sure Eat Scenario". Later we decided to zero in onto a popular primary school whereby if we are staying with 1km and is an active grassroots leader, the odds are 100 percent based on historical results for admission based on Phase 2B.This primary school don't really take in parent volunteers. Being an aspiring trader and loving high probability situations, the latter seems to be a no brainer
.

Next up will be the implementation stage. We sold our house and move to within 1km of our preferred school. Also, I started my grassroots work which I find it pretty meaningful and am able to make friends from outside your normal social circle.

So everything is set and we are waiting for July 22nd to register our daughter for the admission into the primary school of our choice. Wish us Luck.

Lee

Alwaleed

Recently, I got to borrow this book from the National Library while i was glancing through the investment section. With lots of literature on Warren Buffet, a biography on Prince Alwaleed known as the "Warren Buffet of Middle East" and the largest individual shareholder of Citigroup seems to be an interesting read.

From just a US$30000 dollars start up capital given by his dad and a US$300000 dollars bank loan from Citibank, he was able to amass a fortune of around 24 billion as of 2004. He started off using his status as a prince to embark on the construction and infrastructure boom of Saudi Arabia by being the middleman and earning commissions. He then made strategic investments in the equity markets to grow his wealth. The book goes about explaining his investment strategy of buying good brand names at depressed level and sitting on them. His biggest bet was on Citibank which he put in about half of his wealth at that point of investment. It also goes through his gruelling schedule whereby he will usually just sleep for around 4 to 5 hours a day. On business trips, his lifestyle seems to come out of a James Bond movie with private jets, booking of the whole cinema and a big entourage moving along with him wherever he goes.

The book do get kind of repetitive and dull in the later chapters but it was quite a page turner for the earlier chapters. Worth a read especially if you can loan it from the library for free.

Lee

Exposure to Gold and Silver

With Gold prices plummeting in the recent weeks whereby it breached the 1200 dollars level, it certainly doesn’t seem like a good idea to be holding gold at the moment. It has corrected close to 40 % from their peak of 1900 level. For those whom believe “To buy when everyone is fearful” theory, it is perhaps time to consider accumulating a position on gold especially if you have more of a medium to long term time frame. 

Some reasons advocated by gold bulls had been that it could be looked as an alternative currency. It seems like a good angle to look at especially with the current limitless money printing and quantitative easing by the major nations such as US and Japan. Also, it tends to serve as a good inflation hedge. Currently, it has not been favourable for gold as inflation seems to be under control.

There are several methods to gain exposure to gold or silver (Have a more volatile nature). These are some of the avenues you can look into.

1)     Exchange  Traded Funds (There is a Gold ETF listed in SGX)

2)     Gold and Silver Exploration Companies Equities (eg: Barrick Gold)

3)     Futures and Leverage Spot Products (Not for those faint hearted)

4)     Physical Gold and Silver

Personally I have a small allocation to gold for my portfolio. I have exposure using two avenues.  Firstly I have invested in the exchange traded fund utilising my CPF gold limit. I am also vested in Barrick Gold which is listed in NYSE.

I will be looking into buying physical gold soon through UOB bank which I will touch on in another entry.  I am looking at a long term time frame for the physical gold (Hopefully I can resist the temptation to cash in when gold prices start shooting up) as I am intending to pass it on to my two kids.

If you have the notion that I am extremely bullish on gold, then let me just clarify, I am not. Gold is likely to remain range bound in the near to medium term time frame after looking at their price action. Any upside should be cap at the 1500 levels.

Lee