Jan 18, 2020

Cory Diary : Will the Music Stops ?

Generally most people would agree that every lowering yield drives yield stocks. What happen if when the music stops ? In the year 2008 Global Financial Crisis, CMT my most often used example, price crashes from the high of $2.18 in Year 2007 to $0.875 in early part of Year 2009. That Year 2008, CMT distributed $0.13. In Year 2009, CMT yield hits 11.5% ! 

How hard is the crash ? 60% drops ! If we include $0.13 dividends, that's about 54% drops. That's why is called Global Financial Crisis.The scale could be a single lifetime event. As mentioned earlier, if one could not walk out of this scenario, they probably have waited outside the market for 10 years already. That's another GFC to oneself and it won't be a single lifetime event.

At today CMT price of $2.60 , the optimistic yield is 4.7%. This is way surpass Year 2007 before GFC prices of yield 6.6%. If we are to judge CMT as too expensive because of Year 2007 low valuation, then we could get our logic totally wrong.

The number one reason is inflation. The other is lowering yield. Look at chart below. Is CMT price today expensive based on simplified inflation consideration on Year 2020?

Still not convince the power of Stable Reits  ? CMT is capable of distributing 12 cents this year. Look at the above table again. What the price you would think it should be. Let says a stock market correction resulted CMT price drops to $2.2. That's more than 5 years ago price. That's will be about 3 years of dividends. That's timing if you try to save this dividends. The good news is we don't have to if we ignore timing. Treat it as a time deposits that gives you cash-flow of roughly 12 cents annually. 

If we believe in the quality of CMT properties holds and the long term prospect, that Singapore way of life centers around Malls for the next decade, it will be quite difficult NOT for CMT price to return comfortably and more unless we see something seriously happen to Singapore that we would want to hedge and in which case if not, most of SG Stocks could likely be affected and probably our currency in the saving too.

See Chart below of estimated CMT price trend.




Over the long term, the trend is quite obvious. Cory is just doing calculated risk decision making. As in all investment there are risk and the price could drop and we could lose everything. If we look above chart again, near term it could fall towards "Median line".

Or the price could accelerate upwards and form a new gradient line. And which case the new "Median line" could be as below.




Too many people falls for current perceptions and forget about looking into the possible futures could be. And which case the price could be on acceleration path.

And that the 'trick" of the charts. You see what you want to see. 


Cory
2020-0118

Jan 15, 2020

Cory Diary : Resetting Performance Tracker 2020

The year 2020 starts with robust gain though not like the burst we see in start of 2019. Cory portfolio is also not well position to benefit significantly from it. Nevertheless relatively to STI, Cory Portfolio still edge a little bit higher.



The purpose of this post today is not about the gains but the reset feature of recognizing past realised and unreleased gains in 2019 as one's Year 2020 asset. This is done by resetting the Cory portfolio tracker to zero as above along with STI.

This is important concept in Cory Portfolio Strategy management that is not to subject oneself to have a mindset of plenty and that what profited in prior years are not dispensable money.



Cory
2020-0115

Jan 13, 2020

Cory Diary : Investment Income

Start with saying the obvious. Main source of living expenses for most people comes from salary income . Even for those who are so called FIRE or Financially Independence, the seeds has to large enough, comes from salary income. Even then they may not completely retire. This statements are generally acceptable with the exceptions few.

As one grow older, various income source comes into play. What best to represent it is to show the Net Worth chart and the allocation within. Financially few things Cory did or don't.

1. Move most OA funds to CPF SA
2. Continue to leave some amount of CPF in Property Loan for another year
3. Continue to have SSB Max Out
4. Have at least 3 years buffers to support housing loan in FD
5. Transferred Allowances to parents. Happy New Year !
6. Annual Bonus to Nanny. Very Professional Nanny.



Cory long term goal is to have salaried income replaced by equity income that is more passive. This seems quite illusive with annual adjustment !  LOL ! Like many people who come from humble background, and has no business acumen, we just have to learn to save or we have to learn through business failures of which most of us could not afford without safety net. How long it takes to save and build up do depends on how much delay gratification we want. This amount becomes very handy once a door open. 

One main door open is Stocks Market. While Cory cannot run business, he can find good managers who can do this for him. So this is rather passive income. The trick is how to stay profitable in this business. This is especially make possible when the information gap is narrowed between institutions and retailers. And technology allows cheaper trading and more sophisticated products. Of-course experience in the market matters a lot. And then the saving slowly move in.

The next door opened when he starts to invest in property. This hurdle is harder to cross due to property curbs and needs for cash-flow to sustain. This is different from buying a property for one stay. The mindset is for investment gains and rental components. So why explore this ?
Like to mentioned Cory is not an expert and needs more buffers but the logic seems clear as below.

Cory is no longer young. Getting a loan will be harder. And it will be tough when one is without work one day. So if one want to invest in property, time is an essence too.

20% down for single property is like 5x leverage of a big sum of money. The mindset is quite different from stock investment where Cory do not leverage at all. 

Loan is relatively cheap with low rates. Even after all the misc costs, and even so rental unable to cover all the loans, as long the interests part (not the principal) of the loan is well covered into good portion of the principal payment, theoretically one is making good money.

The rates may go up but by then the loan would have been serviced for some period of time and there will be more options. Ideally we like it to be in as long as possible, and as much as possible with comfortable buffer as property loan is one of cheapest to tap on.

Capital appreciation factor for those with good location. Is more pricey logically. With land limited Singapore, unless we are seeing something like no future for Singapore, with inflation the price general trend is upwards with fluctuation in-between that can be quite volatile.

As long one is able to service, after rental, is quite hard to lose money after all the costs. The main risk is cash-flow which is why Cory put this as top priority to mitigate and not to assume Rental Income is sufficient. 


What will be the next door ?


Cory
2020-0113