Simple Chart Fortune Telling For STI (Nov 2014)

Haven't been doing fortune telling for STI for some time. This is a simple charting of STI, diagram taken from Yahoo Finance and edited.

Taking the 2007 peaks as reference, it seems like that will be a peak in 3rd quarter 2015 or 4th quarter 2017.

Adopting a long term view, I think 2017 would be a nice date to fit a 10 year cycle for markets to reach the peak.

Even if so, it meant a maximum upside gain of 15% over 3 years, or 5% a year. Risks probably not that worth taking anymore.

Personally continue adopting wait and see approach while learning how to deploy and move cash to build business systems.

Retirement -- Think of building business systems

This post is inspired by a friend's blog post, which you can find at http://bullythebear.blogspot.sg/2014/09/retirement-thoughts.html#.VAyDrFahgds

I guess it is easy for us to calculate. Let's say we manage to save $4k a month for the next 30 years, that would net us $1.44 mil.

Sounds good.

But that's 30 years later.


Then we read about news like Zopim being acquired for $37mil SGD, leaving their founders as multi-millionaires while below 30 years old.

What's the difference?

I have come to realise that starting our own businesses is among the best way to propel our wealth. But... the caveat is that lots of hard work is needed, much more than being just self-employed. Worst is, the hard work may not even pay off in the end. Of course, such probabilities could be improved with more knowledge and learning. And that is what I have been doing/studying the past 2 months.

The greatest realisation came after I chanced upon this quote which I like to share:

"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant" -- Michael Gerber

The busy past few months... and some lessons I learned

Past few months were crazy. First up was the HDB renovation. For a 5-room flat, I managed to finish the complete the renovation within a budget of $40k inclusive of furnishings. Guess I was pretty lucky to chance upon IKEA's sale and save a few hundred dollars on furniture. A 55" TV, LED lighting, built-in wardrobe, big dining table. My $40k isn't used up yet I guess, didn't really count, but there are still some portions of the house which need building, but it's pretty much done. :) And typing this blog post as I sit in my study room, of which furnishings come entirely from IKEA.

Next was my wedding in the early part of June. Photoshoots, actual day videos and bridal packages set me back nearly $27k. Ouch. But overall, it was pretty manageable in terms of finances. This excludes all the misc, i.e. lunch buffet at church, wedding banquet, etc. But if I include everything in, $60k was probably the costs. Still less than the $100k incurred by the couple on newspaper who went into debt just to get married.

While the government is encouraging couples to marry younger, I realised that at 30, with our combined finances, house renovations and wedding was pretty comfortable on the financial side. No stress and no need for any sacrifice for things we wanted. Certainly no need for any debt. The next big expenditure would probably be kids.


Next up for the month of July, I conducted olympiad trainings for 4 different schools. That was pretty crazy for the month because this is on top of my usual tuition workload. I also involved myself in a startup on indoor positioning systems. Basically, in the near future, you might probably see the fruits of our labour involving you somehow in some parts of your daily life :)

Finally, I have been studying more about businesses past few months, watching shows like Millionaire Intern on BBC Knowledge. What I see is that many businesses struggle because there was minimal sales. Even though their products or services may be very very good, as long as the sales are dismal, the business will not grow or may eventually go obsolete. The goal of marketing is to generate leads, and eventually conversion of leads to purchasers.

And in show Millionaire Intern, it seems that everything boils down to knowing marketing well. Personally, I have been studying more on copywriting, as well as experimenting different forms of marketing, on FB, Google, etc. I now have an idea of why some of the previous experiments failed, and probably will be adding my fix to it. Many many things learned, which boils down to even more application. Till then...

Investing Lessons to be gleamed from Eratat -- Avoiding a potential value trap

*This is a blog post written with hindsight, but I'm pretty sure it would have been dissed off and thrown aside had it been written earlier.*

Recently, just before Chinese New Year holidays, Eratat requested for a trading halt and subsequently suspension. It was a company I have been suspicious about since March 2011. Much of my analysis (with some calculations probably off) can be found here.
China Eratat

Note that this isn't an exercise or pure blog post done specially to ride on a S-chip suspension bandwagon, but to consolidate the lessons and what has been posted before since 2011.

The question is, is it possible to detect such fraud before it happens? Apparently, there were lots of clues to this, and this was posted in a few forums. Apart from that, from my recent read ups of marketing materials, I realise there are more things to investing in a business from a fundamental analysis viewpoint that is not often discussed about.

I might well be wrong, and everything turns out fine eventually. But I highly doubt so.

Let us first recap the pretty obvious red flags that were brought up over the course of time in different forums.

1) High percentage of receivables as part of assets.
2) The receivables would have been even higher had some of it not be written off as sales incentive and renovation subsidies.
3) Despite high cash levels, Eratat had "no choice" but to borrow at an effective interest rate of 32%.
4) As Greenrookie has pointed out in NextInsight forum, Eratat's subsidiary did not appear in the tax reports of top 100 corporate tax payers, which means it paid less than 3 mil RMB in taxes. The maths does not work out.
5) The director sold all his shares at a "deep discount" in Aug 2013 due to personal reasons that were never revealed. Now we know his "personal reasons".

I have also pointed out earlier that the NAV after netting off receivables looks constant after 2 years of being listed.

Business Lessons picked up (Part 3)

I think I am addicted to writing this, so shall add a part 3

It's never easy
No one ever says starting a business or running one is easy.

Which is why when I felt like giving up, I don't. I look for alternatives and look for better systems to achieve the targets and goals.

If needed, I will pay for external help. If there's anything I learned, there's no necessity to do everything myself.  Hire help. Outsource. As long as the costs are managed, spending to increase productivity is the way to go.

Which brings me to the next point....

Learn to delegate
Delegation is something that is easier said than done.

In the past, when I was still working as an engineer, I had to delegate some stuff to the engineering assistants to carry out. My first time doing it was a mess; the assistants were totally lost on what to do. Basically, I gave the final result I wanted, and not the steps to doing it.

So, I learned to list everything in steps, before sending my instructions on what to do.

I also once asked my sister to help me convert my handwritten physics notes into MS Word format.
The result was horrendous. Graphics weren't done well, nor was there proper formatting and font usage. I had to redo almost 90% of the stuff.

On hindsight, it was my fault. I learned over time that I should have done the following:
1) Provide a template
2) Include examples
3) Do up a metrics of performance
4) Detail out what needs to be done

Delegation is best done if the steps and systems are well laid out. Not many people know what you want, because most do not possess the unique skill of mind-reading.

More business lessons I picked up over 2013, first hand

As I plod on, I realised there are few more business lessons I have learned and personally experienced. Thought I should be writing on them to help consolidate my thoughts as well as share on the public domain, although these are pretty cliche.

A team of different skills is needed

While most of the time, there are many things I can do alone, I realised the time and effort that are spent may not be worth it. The the speed of execution is important.

In additional, I recognize that I lack a number of skills to make a business succeed.

This is where a team comes in. Not a team of people, but a team of skills. Lots of people I see form teams just for the sake of forming teams. Or from what they learned from schools, formed teams because the teacher says so and so will make a team.

I remember the time I was in NUS, where we had to do this project called EE2001 at the second year. Right from the first year as a uni student, I was already opening my eyes and judging fellow students as potential team mates for this project. Needless to say, I chose the best I know, and they know too I will contribute the best I can. Eventually our project clinched A. Sounds great! Until I know another team that clinched A+. That team was not as good as us individually I believe, but as a team they worked great! Each of them has different skillsets that were crucial to the success of the project, and together, they did it better than us!

The true meaning of teamwork lies in forming a team where people with different skillsets can come to work in synergy.

A great team helps to bring a project forward. While deep pockets can pay for teams, small pockets like mine could also go into partnerships with people who have these skills to bring things forward. But the ultimate goal is the same, to bring projects one step further ahead.

Think and live and breathe the business

A business cannot be handled as a "by the way" thing, even though it may be a sideline. No one ever starts a business by chance. No one wakes up one day and says "Hey I have a business!". No one.

By thinking about the business, living and breathing it, I mean to say that one must think as a business owner, to constant think and improve and innovate to first match, then reach above competition.

==> Sometimes, I really wonder about small retail investors who claimed that they buy the business are hence a business owner, when they aren't even involved in the process of thinking, improving and innovating for it.

There is no point having a business that is the exact duplicate of the one next door. What makes a bubble tea shop better than the other one down the road? What makes this tuition centre better than the other one just beside? 

In essence, one must be always thinking on how to improve the business, make it better, and more helpful, more value, to customers. This distinguishes the business in the long run.

Initially, the constant thinking portion may be tough, but persist in thinking and over time, human brains will adapt, and eventually be constantly thinking about the business. Right now as I'm typing out, I'm still thinking how to bring my projects forward and make my tuition more effective and be able to reach out and help more students. It has been conditioned this way for over a year, and it is now second nature.

Instead of investing in a business with a economic moat, why not create a business and create your own economic moat?