Friday, September 30, 2011

Net worth update(September 2011)

Net worth for September decreased by $449.52. This is mainly due to the fall in NAV of the commodity fund. Physical cash increased as a result of prudent saving and side income such as paid surveys. Net worth for next month should increase by at least $3000 after the bursary money is credited. Also, stocks will be included under assets in October due to the purchase of 2 lots of STI ETF.

2 lots of STI ETF @ $2.72

Bought 2 lots of STI ETF at $2.72 today.

Rationale behind purchase:
1) Just got awarded bursary valued at $3000
2) Dropped 20% from its $3.39 high(in line with strategy*)
3) VIX is at 42.96 today (>40)
4) Dividend yield(ttm) is near to 3%.
5) STI is in a downtrend and stocks are generally undervalued
6) A bet on Europe's recovery
7) Time horizon of at least 5 years
8) Still have more than $10,000 in cash after purchase.  Able to buy more when prices plunge further.

*My strategy for STI ETF is to start buying when price drops 20%. Subsequently, I will buy one lot of STI ETF for every 15% it drops. Next target price will thus be $2.31(0.85 x $2.72)

Wednesday, September 28, 2011

Awarded Bursary

My school notified me today that I will be awarded a bursary valued at $3,000. So far, the total value of the bursaries I received is about $9000 and I did not spend a single cent of it. The bursary presentation ceremony will be held next month and they will be presenting me a cheque. There will be a huge jump in my net worth in October due to this bursary. Estimated net worth by year end should be at least $40,000.

I will also be applying for another bursary valued at $2900. However, I have to declare that I am in receipt of this $3k bursary and my application will be considered on a case by case basis. Therefore, I will have to apply with an appeal letter to unveil my family's dire financial situation. In the best case scenario, my net worth will hit $50k by mid of 2012.

Thursday, September 15, 2011

CIMB StarSaver account

After a thorough research on savings deposits in Singapore, I concluded that the CIMB StarSaver account has the highest interest rate of 0.8% pa. After confirming that CIMB deposit accounts are insured by the Singapore Deposit Insurance Corporation, transferred the funds from 'savings account 3' to a CIMB StarSaver account.

The minimum deposit is $1000 and the base interest rate is 0.5%. I will have to maintain an increasing balance equivalent to increments of $100 each month and the interest rate will increase to 0.8% pa automatically on my entire savings balance. Given that my balance is about $3000, I will be able to enjoy the 0.8% interest for 20 months.

The only downside of this account is the inconvenience involved. This is due to the limited number of branches and ATM machines in Singapore which makes withdrawing and depositing hard cash inconvenient. Currently, there are only 2 branches in Singapore and ATM machines are located only at the branch itself.

Also, I am thinking of setting up another StarSaver account(not top up existing one due to personal reasons) and transfer $10,000 from savings account 1 & 2 to it.  The monthly interest earned on the $10,000 will be approximately $6.70.

Sunday, September 11, 2011

Unemployment vs. Inflation: Why Do We Worry Too Much About One, Not Enough About the Other?

Something that's been kicking around my brain for a few months now:

Why do we get so bent out of shape about the threat of inflation? And why don't we get more bent out of shape about the reality of high unemployment?

I find this really, really puzzling. Inflation, it seems to me, is a bookkeeping problem. Unemployment (beyond the minimal frictional level) is a tragedy.

Thought experiment: Prices of all goods and services inflate exactly 10 percent a year, again and again, steady as clockwork. Manufacturers adjust by raising their prices 10 percent annually. Labor demands 10 percent higher wages. Savers and investors build this 10 percent inflation into their "risk-free return" expectations. Social Security checks increase 10 percent a year.

So who gets hurt? Nobody. Psychologically, you may feel dismayed that last year's $2 loaf of bread now costs $2.20, but your wages of $55,000 are $5,000 higher too.

Now try to create a similar thought experiment for 10 percent unemployment. Millions of workers in the labor force are idle. They're frustrated, angry. For every minute they lack jobs, we as a country lose part of our productive capacity. Their power to consume is weakened. They siphon resources through the social safety net, through food stamp and Medicare programs.

This is unquestionably terrible: for our economy, for our country's self-image, for social and political stability. You can't spin high unemployment in a neutral light. It's impossible.

Now, granted, I know inflation can be harmful. Runaway inflation (Zimbabwe) does have real costs. Also high inflation can inject uncertainty into economic forecasting and planning. And it often does produce classes of winners and losers.

But still: it's not net destructive, not like high unemployment. After all (from an illustrated encyclopedia of economics),
Ignoring menu and distortion costs for a moment, inflation is roughly what mathematicians call a zero sum game. For every loser during inflation (someone who must pay more for a given good), there is a winner (someone who receives a greater price for the things sold).
I dare you to find a respectable economist who maintains that high unemployment is a "zero sum game."

So one more time: Why do we care so much about inflation and so little about unemployment?

One (rather depressing) possibility -- look who's affected.

Unemployment tends to hit the more marginal members of the workforce. If they were any good, some of us think, they'd have jobs, wouldn't they? Inflation though tends to be more of a concern among savers, among those on a fixed income, among businesses (who might even like unemployment to be a bit high to keep their labor costs down). All these groups are politically strong and speak with a louder voice (and fling around more campaign cash) than those bitter, disenfranchised unemployed people.

So what do you think? How to explain our lopsided concern, especially with unemployment at 9.1 percent?