Interest rate rise and interest coverage

Since Sabana Reit has already fallen so hard, why not buy it as there should be enough of a margin of safety ( P/B 0.66) and all bad news have already been priced in. Yeah why not, good idea!

Except that the Federal Reserve has indicated a few rate rises next year and here is the picture.

By compiling the interest coverage ratios of the REITs, it can be seen that Sabana Reit has the lowest interest coverage ratio of 2.63 and any increase in finance cost would hit it hardest.

Anyway,  I do think that concerns about gearing is over-rated  as looking at Ireit, it has a whopping high gearing of 42.5%, one of the highest among the REITs, and yet its interest coverage is also one of its highest and its dividend yield too. Besides, some REITs engage in issuing perpertual bonds which are not reflected in their debt.

Nothing interesting to buy so far!

Should i buy Sabana Reit at a Price to Book of 0.66 and dividend yield of about 10%?

My friend recommended me Sabana Reit as it was trading at a dividend yield of about 10% and  at a P/B of 0.66. Sounds good right!

I made a 'big picture' comparison with its peers and it loses in many metrics. I think i will give it a miss.

What will i be doing since the STI has surged

As of writing, the STI has hit a high of 2960.67. Don't know whether to be happy or sad. I'm happy because my concentration of purchases in banks since September 2015 and throughout 2016 paid off. I am quite happy because my Super Group shares are very highly likely to be privatized. I made a loss as i went in at the wrong entry price and its a lesson RE-learnt to not fall in love with a stock. I'm happy because ARA which i acquired this year got privatized and this is a gain in profits. I am sad as with this surge in the market, i haven't the opportunity anymore to increase my income from buying high dividend paying cheap stocks. There were considerations on whether i should take some profits on my banks since the RSI ( relative strength index) has hit a very extreme overbought level but i think i won't as i do not know where to put the cash and i am not a trader by nature ( i realised again!).

There has been many wrong forecast in the media about where the market will go, like people thought the Brexit or Trump event will cause some upheaval in the market but look at where we are now. I have re-learnt that there is no point in forecasting, just look at the current situation and see whats best( with some gunpowder of course).So, as i really don't know what to do, i have finally surrendered to investing in the NIKKO STI ETF. This is because other than the benefits of diversification to reduce risk( yawnzz) i get 2% commission to purchase the ETF. Yes, i get 2% commission not pay 2% commission which means i make an immediate guaranteed 2% gain everytime i buy. Without being paid 2% commission, i would not be buying an ETF as it's only giving me between 2-3% yield pa which doesn't fit into my style of investing. Furthermore, I do not think the STI is in overvalued territory ( or bargain price) and so will just continue with this until it hits 3100 then i will stop.

Been reading a book by Bobby Jeyaratnam and reading up on the financial presentations by the different REITS in Singapore and I am beginning to change my opinion on them after many years of observing and reflecting. I will be looking into finding any good opportunities to load them.

Renew COE for 10 years versus 5 years versus brand new similar car

As i like to quantify things, i just needed to do up the following table to see how much savings i make if i were to renew my COE car. Note that the depreciation which i calculate is much more stringent than the depreciation that is thrown around frequently in forums or sgcarmart and the likes because i also took into account the increase in annual road tax, the increase in the mandatory vehicle inspections and the overhaul i did for my old ride.

Just to say:

Annual road tax increases by 10% every year till the 5th year. 5th year onwards, it will remain at 1.5 times times the original road tax.

Mandatory vehicle inspections is required yearly for old cars while brand new cars only need to do inspections on the 3rd,5th,7th and 9th year.

As i am able to use full cash for all three options, interest payments on car loans will not be included. Insurance will also not be included. In my opinion, old cars only need third party insurance as if one encounters a major accident, just scrap the car and get back the prorated COE. If interest payments and insurance is included in the calculation, buying a brand new car will be much more expensive as comprehensive insurance and loans are normally required for brand new.

Renew 10 year VS Brand new car , i save $2270 per year.

New 10 year VS renew 5 year, i save $586 per year.

Some may say that the higher upfront cost ( $26,670) i fork out for renewing for 10 year vs renewing for 5 years would have lost me interest if i were to put in fixed deposit for 5 years or the likes of a risk-free investment and negate the $586 in yearly savings. But i see the option to renew anytime for 5 more years as valuable since COE can swing from $1000 to $90,000 and 5 years from now has a very high probability of a much much higher COE, looking at the COE cycle.

Just writing to straighten out my thoughts.

Tips for renewing car

Alas, my trusty Japanese car is turning 10 years old and i have decided to renew its COE as it still runs smoothly and a check with my trusted mechanic says that it is in perfect condition for 10 extra years. Base on the COE chart below, i was hoping that the cost of COE would go down since 2006 had the highest COE quota given out and that more people would deregister in 2016. It didn't go down much to my utter dismay.

Who would have thought that Grab and Uber would buy so many cars in such a lackluster economic climate!

Anyway, from what i gathered, here are some findings i would like to share. In sharing, i hope to receive constructive feedback in case my thinking is not optimal or plain wrong.

1) The best times to renew COE

The best time to renew is after the third wednesday of the prior month to your deregistration date, depending on the 2 scenarios below.

Take for example my scenario.

My car is to be deregistered on 5 October 2016. The September PQP is $53339.

If i see that the COE bidding for the 1st and 3rd wednesday of September is lower than $53339, i can be absolutely certain that the October PQP will be lower than $53339. I will then renew my car in October before 5 October.

If i see that the COE bidding for the 1st and 3rd wednesday of September is higher than $53339, i will renew it  before 1 October.

In considering the above, take note that if you renew your COE on the deregistration month, your new COE starts the day after your deregistration date. If you renew your COE anytime before your deregistration month, your new COE starts from the 1st of the next month. 

2) Renewing in CASH ( No loan) for a 10 year period is generally better than a 5 year period at this point in time

The disadvantage of renewing for a 10 year period is the high upfront cash you have to fork out. It gets stuck with the government until you choose to deregister your car and get back the prorated unused portion of the COE. 

However, renewing for a 10 year period gives you an option to deregister your car anytime while awaiting for the COE to drop drastically. You can renew for another 10 years, in blocks of 10, indefinitely. If you renew only for 5 years, you can still deregister anytime, BUT you are compelled to deregister on the 5th year and can no longer renew .What if the COE within the 5 years is still super high?

Furthermore, looking at the COE quota cycle currently, by renewing COE for 5 years now, one is caught at the wrong part of the COE quota cycle as 2011 had very few COE quotas.

Other advantages include amortising your foregone PARF over a period of 10 years instead of 5 years. Take note that when renewing COE, road tax increases 10% every year till the 5th year before remaining at 150% of the road tax for the remaining years.

3) Japanese cars is generally more worth it to renew than Continental car, unless you are driving a classic continental car which appreciates in value

Japanese cars generally have lower PARF forgone. Also, Japanese cars generally have chock full of available parts, not to mention being more reliable. 

For my case, my car depreciation per year if i were to renew for 10 years is about $6000 per year, compared with the minimum depreciation of $9000 per year if i were to buy a brand new car.

Sorry.I can't help it. There is a saying that the more we mention about something, it comes true. I'm hoping for the stock market to fall.

The car i cant' afford nor want nor desire

Private hospitalization experience for my toddler

My toddler had a persistent high fever of above 40 degrees for a few days and a loss of appetite. Being a first time parent, naturally we were worried and we wanted the best for our child. We therefore sent him to a private hospital as it was only 3 minutes drive to our house and we didn't want to waste time queuing at Kedang Kerbau Hospital (KKH), based on feedback from others.

Anyway, the feeling during the whole stay was just money, money, money, money. The nurses were good at their job but i was sorely disappointed at the lack of transparency and lack of communication in terms of administrative matters. Professional care giving was up to standard. For a 1 night stay for an uncomplicated stay, total bill including A/E fee, pediatrician bills, medicine, ancilliary et.c is $1584.80.  

Even though I have bought for my son the highest hospitalisation plan possible with a rider so its fully covered for by my insurance and medisave, i still feel its not right. The following is the interim bill ( estimated). 

Red box:
Biogaia Probiotic 5 ml drops cost $91.17. Buying from Guardian cost only $45 based on the screenshot below. This is more than 100% more expensive.

Green box:
Do you notice something wrong with the billing in the green box?
2 sachets cost $8.74 while 8 sachets cost $15.74. Am i overcharged or undercharged? Anyway, the fact that such thing occurs does infer that something is way off about billing issues.

During the admissions procedure, the executive clearly told me that a full night stay was from 6 July 12.01am to 7 July 11am ( about 23 hours). We admitted at 12.30 am 6 July. Another admissiions executive told me that if i was warded on 5 july 11.30 pm ( 31 minutes more to 6 July 12.01am), i would be charged a full days rate if i discharged on 6 July 11 am ( spending only 11 hours 30 minutes). As i love to read fine prints, i pored through the contract and it stated official discharge time is 11 am so there is not reason to doubt the 2 executives words. Being a paranoid, i further looked at the help file given beside the bed, and it stated that 11 am is the discharge time and if discharged after 11am , before 8 pm, an additional half day is charged.

But surprise, surprise, as the PD was good and her medicine effective, my toddler was told he could be discharged as he has stabilised. So we discharged at 10.30 am 6 July before 11am, thinking that it is considered half day, but alas we were charged full day.

Maybe im really stupid to not understand, after asking 2 different admissions executive, 2 different nurses and 1 accounts billing executive how it all works and after reading the contract and the help file.

My bill have been fully paid with no cash outflow so why should i bother? It bothers because the end result is us the consumers suffering when we end up paying more premiums if the insurers cant make their money with the private hospitals, doctors and dentists being the sole winners.

Why can't places for more doctors and dentists be offered locally? I understand the logic of having the best people for the job and we want only competent people to treat us BUT this logic is debunked when you see doctors or dentists who practice medicine here and can't get into local universities but get their degrees from recognised overseas universities just because their parents have the means to do so. Note: I have had my best experiences with overseas doctors, my main point is, is there room for opening up more spaces in local universities such that those without financial means but are able to get into overseas medical universities will still be accepted?

How to stop oneself from being greedy during bear markets

For some, allocating their warchest in tranches based on price level of an index helps them. For me, it helps slightly but not much. I am a sucker for sustainable dividends. So i need a reason to stop wasting money using up all my warchest too fast. I have been buying lately and i do feel very guilty.

The drop so far can be considered the 4th worst bear market since 1987 for the STI. 

The official definition of a bear market refers to a downturn of 20% or more.

The STI dropped 20% from its most recent peak and entered bear market territory in September 1997, May 2001 and February 2008. It reached the bottom roughly in the months of August 1998, March 2003 and February 2009 respectively.

Number of months to reach the bottom from the start of the bear market

Sept 1997 - Aug 1998 = 11 months

May 2001 - Mar 2003 = 22 months

Feb 2008 - Feb 2009 = 12 months

Average months to reach = 15 months

Sep 2015 - Don't know when = ??

So far, about 4 months have passed since STI reached bear market territory. I think i really have to make sure my warchest can last at least another 11 months and to hope for the market to fall very very steep as the steeper it drops, the faster the recovery process can take. The most 'sian' one will be if it turns out to be like May 2001- Mar 2003 where one will suffer many DEAD BIG CAT BOUNCES. 

Lessons Learnt in this bear market

Sleep has been getting better. Surprisingly, i managed to not buy anything for the last 3 days. Is this the sign of investor fatigue which i need to be contrarian about against my own behaviour? As of today, total unrealized capital loss is 7.7 %. I am actually getting pretty ok about the further capitulation of the stock market as it just means there is less risk if i were to buy further but lets see how long i can be on cold turkey.

Lessons learnt
1) The role of bonds.
I have come to appreciate the presence of  retail bonds in my portfolio. Nearly all asset classes available to the common retail investor will fall in a bear market ( except US treasury bills, USD,JPY e.t.c) but unleveraged non-junk retail bonds will fall less. My bonds act as a stabiliser, it dampens returns in bull times and dampens losses in bear times. As of now, my bonds could be sold to add to my cash warchest, having helped me earn a higher rate of return as compared to fixed deposits in the past 5 years of ultra low interest rates . Now, the US Federal Reserve increasing rates is something i need to watch out for as it will affect my bonds.

2) The role of sentiment.
As much as fundamental analysis is important, the role of sentiment  is equally or even much more so. I really like the article written by Howard Marks of Oak Tree Capital recommended by investmentmoats and there is a sentence that says" a common behaviorial trait among investors is their tendency to overlook negatives and understate their significance for a while, and then eventually to capitulate and overreact to them on the downside..". I am now waiting for the overreaction patiently.

3) My psychology
I know for a fact that making a return of $50,000 brings me less joy than the "xian-ness" of losing $50,000. A terrible mistake is the failure to apply this knowledge. I must now keep telling myself, it is never a wrong time to take profits. NEVER. Forget the shit of selling for a profit and later regretting when the price shoots much higher. A profit is a profit.

4)The importance of market cycle investing
Warren Buffet said " Never fall in love with your stocks". I read but didn't internalize. Shit man. He is darn right. but of course. Buy and hold is quite a buzzword but does one really know what it means? Market moves in cycles, it had, has been, will always forever move like that. This is just nature. I fell in love with my stocks and now i'm dumped! I have to thank the late Dennis Ng for his knowledge shared in his forum, Masteryourfinance.

Anyway, if my memory is right, i remembered 2008/ 2009 we saw asset managers like Franklin Templeton, Schroders selling en mass, daily or weekly as their unit trust holder panicked but i don't see it this time which may explain why i'm not as calm and collected this time as i was then. This might be a long drawn process, no hurry to buy, so lets go to sleep , life goes on....