The Best Investments in Life

MANILA – The Atlantic has a good article out today on the struggles of a typical middle class American with his finances¬†http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/ . Good writing is supposed to make you feel, and as I was reading the article, the years that I spent in the US came back clear as yesterday, and I kept thinking if this was I, what would I have done differently. The writer is clearly smart and he works hard. He didn’t make too many choices that were blatantly wrong. So why is he still in this situation? Let’s park that question for a second. Another thing that gnawed at me inside, was the sense of gentle forlorn in the writing. Is America still great and is our generation still a great time to be alive? I am in Manila, Philippines this week and while Philippines has got its own more than fair share of problems, there is an energy in the air that is alive and pulsating. Throngs of call center workers walk around Makati, laughing, talking, going to late night “lunches” and drinking coffees. Around the Triangle park, people run in the summer night as the heat eases. In Manila people don’t make that much money, a typical call center agent makes around $1,000 per month. But they are young and full of life, and their expenses are low. So the money seems enough and they keep themselves busy climbing up the ranks and keeping themselves fit and healthy. I greatly admire that. It’s easier to be optimistic when you are young and things are on the up and up, and it’s only natural that people start to feel down in the middle ages. So let’s build a solid foundation so that we don’t have to work so much and so hard when we get older.

I have a lot of friends like the writer of the Atlantic essay. They work hard all their lives but they find themselves lagging behind. I am in my forties now so let I not think this is someone else’s problem – but I do find a couple of themes in these friends. What they do as a profession often is a 1 to 1 relationship, and there is not much leveraging going on. By leveraging I am specifically calling out leveraging oneself, leveraging the network, and leveraging your own investments. When I was younger I was often excited by saving 20 dollars or making another 100 dollars. At some point my income got high enough and my investments got large enough that I started to lose the enthusiasm, because if you look at the numbers cold-heartedly, I started to need at least $100 – 200 of income to justify spending an hour of my time, and these types of work is again a linear relationship, you have to keep doing it to keep getting the money. To truly get ahead, you have to keep investing in yourself by getting more knowledge and experience. This is what I mean by leveraging self. We are all getting older, but how do we get better results in life with our declining faculties? It’s clear it’s got to be the wisdom and experience, instead of the raw talent and speed. So these days, if it’s a choice of making $100 vs. working out or spending an hour with my daughter, I’ll pick the latter every time. Because when you work out and spend time with family and friends, you are aging backwards a la Benjamin Button. The more youthful you with a clearer head, will come up with better ideas in life and make more money as a result.

Leveraging your connections is the same thing. I never ask money from family and friends and I never borrow money from them. But I freely admit I tap into my network for advice and ideas all the time, never paying any consulting fees to them. Is that fair to them? Well, I never try to take advantage of people and I always try to do it in a gracious way, perhaps buying them a nice lunch and have a couple of glasses of wine with them, so that they remember it as a fun occasion. But I have gotten ideas worth easily thousands of dollars, for free, and willingly given by my friends. I also take care to pay that forward, by mentoring younger friends and relatives. So far it’s been working out really well. I don’t need to spend a ton of effort, and my network is getting larger and with more interesting expertise on tap. And the best part is, my network is mine. My employer doesn’t own it, and I will own and maintain the network until the day I die. So it’s something that will continue to give value to me for as long as I care about my family and friends, let’s hope that won’t ever change!

The essay writer from the Atlantic happens to have quite a combination of character traits that probably has disadvantaged him in terms of money. He is a writer by trade, which is a lonely bunch. A writer is also paid based on the work produced, so it’s a harder profession to scale. You can write better but it’s hard to write a lot, and it’s REALLY hard to write a lot of good stuff. This is different than writing software whereas you write one piece of software and it can be installed everywhere. But I feel the last point with his plight (which happens to be a lot of Americans’), is that he’s not sophisticated with leveraging his money and investment. It used to be that if you don’t really know finance or investment, you could still get by. Hey, a hamburger used to be 25 cents so who cares, you could always live on a meager retirement income. Unfortunately the World is different now. With the financialization of everything and the money printing, today if you don’t learn some fundamentals of finance, you’ll be in a world of hurt by 35, if not earlier. The biggest and the most important ideas in personal finance and investment, is not to lose principal, and whatever you invest in, make sure it’ll continue to appreciate in most likely scenarios.

That’s a lot to ask. But on the flip side, when you invest into things that you don’t understand, you lose everything. Losing everything is so painful that I took it to heart. But not everyone does the same. People will always invest in Ponzi schemes, MLMs, chase return, buy at the high and sell on the low. Instead of doing something creative which may hurt their pride, they pay. A friend of mine didn’t want to negotiate with the bank on his mortgage rates because he felt small doing it. I say it’s your money and to bargain is glorious. Just do it in a way that’s dignified and fair. It’s possible. So from an investment perspective what does that mean? It means that even though Real Estate is one of my great loves, I don’t buy a house unless the numbers make sense. If I can’t rent it out and have a decent return, I’d rather keep renting it myself. My track record as a live in property owner is not great – in my 40 something years of life I have lived in at least 11 houses, so now I know I am being delusional if I think I will live in a property for the rest of my life. It also means that if there is no better investment vehicles out there, I put money into S&P500 index funds and CDs. A safe investment is a wonderful investment!

Money is not life. Money is but an indication of how you have managed your life thus far as a general manager. Money gives you the freedom to do what you want to do instead of toiling all day. So now I am going to sign off and have some wine with a few friends who also happened to be in Manila today, and hope you all do the same and please enjoy this picture of metro Manila.

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Banks and the Financialization of Everything

SINGAPORE – As I sit here I can look out my window and see bank branches, more banks in the distance, and service providers for the financial industry. Singapore has been called the Switzerland of Asia, and it well deserves that moniker. In the last 10 year that I have been based in Asia, I am seeing visibly how Singapore has gained slowly but surely on its nearest rival – Hong Kong. Now Singapore is ranking third in the World as a global financial center https://en.wikipedia.org/wiki/Global_Financial_Centres_Index . But this post is not about the ranking and relative merits of the various global financial centers, but rather about the way to make a good living around in an industry ever increasing in power and influence, where money and political influence flow to like water flowing to the sea. Financial industry, yes my friend, is indeed that industry.

Just as the Internet has taking power and influence from the brick and mortar industries, in some cases completely destroying the older institutions, so banks have been on a tear creating and drawing more power and influence to itself. Mortgage has been completely financialized – witness the utter inability of lower income Americans to get mortgages after the Great Financial Crisis. The same can be said with technology start ups, gold, and many more types of physical goods and investments. In this low rate, stagflating world, money is flowing like water chasing return, and the Banks and other investment industry titans benefit from it. It’s far beyond me to fully understand what is really happening and to predict the long term impact, but I can see the writing on the wall and I made an important decision a long time ago. This decision, is to work as a supplier to the banks and make money off of them.

You see, I sell software to banks. As the banks around the globe all embracing the Internet, mobile lifestyle, cloud etc, there is a lot of money to be made in the transitions. The World is changing perhaps faster than it’s ever been, but there is no use complaining about it, it’s better to meet the changes head on and benefit from them. As the banks turn into a technology platform on which data and money flow through, there is ever increasing need for my skills and experience. Singapore in particular, is a great place for me to be based out of. How many cities can you think of in the World with a comparable size and density of financial institutions? Singapore is one of those world class places with local banks (Singaporean), International banks (US, UK, European), Chinese banks and other Asian players. I can go to Changi and throw a rock and hit the operations centers of 4 big banks. From a practical perspective, it means that I am never in want for a client and I don’t even have to commute to get to them. In Asia now I see only two places where this is possible: Singapore and Hong Kong. As for the other banking hubs, namely Shanghai, Tokyo and in some measures Australia, as an expat you have to deal with the languages in Shanghai and Tokyo, and Australia is just too far from the rest of Asia.

This blog is mainly about investment and personal finance, so I’ll share that while I make money in technology and banks, I never invest into these two fields directly (investing indirectly due to index funds is inevitable). I’ll write about why in a future post.

As usual, your thoughts and thoughts are welcome.

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(View of Singapore from downtown)

The Asian Century

SINGAPORE – I’ve been living in Asia for close to ten years now and have seen first hand how fast the World is changing. You don’t realize how fast moving and energetic Asia is, until you go somewhere else. In my case this somewhere else is often when I go back to the US visiting my parents, or when I go to Europe for vacation and the occasional work related trips. This is usually when I think to myself, wait, these places haven’t changed in the last ten years! In Asia, things are moving so fast that often you are seeing a new trend before you even got comfortable with the last one. Singapore is a fighter with heart, and it punches way above its weight class. I was in Nanning, China, a few months ago, and noticed that the biggest taxi company is now operated by Comfort Delgro. Similar things are happening everywhere. I see CP animal feed granaries in Manila port, large international companies setting up Asia headquarters in Singapore, and the relentless investment of mainland Chinese businesses in Hong Kong. This truly feels like the Asian century. The media hype we see in the news, I must say, doesn’t even capture half of what’s really happening on the ground. The energy is manic!

With an emerging (ascending) region with its 3 Billion+ people, there will be incredible opportunities. We all have limited time and energy, and the best way to invest those limited resources, is where the greatest macro opportunities manifest themselves. It’s only maybe 5 years ago when I was hiring some people in Kuala Lumpur, Malaysia, and thinking to myself, there is such a skill gap here, it’d be great to get some real professional expats to do the jobs. Lo and behold, 5 years later Standard Chartered bank set up one of their largest back office centers in KL. This is in addition to all the large centers set up by HP, IBM, DHL, etc.

I have friends who are living elsewhere and really want to ride the Asian wave. I always tell them, the hardest person to convince is yourself – we all have such deep rooted fears and insecurities. But once you make that leap, Asia offers tremendous opportunities. You have to be driven and adaptable. I personally think these are the most valuable attributes that can help you make it in Asia. Asia is not a country, but a huge array of different countries, peoples, languages, customs, and political sensitivities. But for the wanderers and the dreamers, the entrepreneurs and the doers, there is rarely such widespread opportunity laid out in front of you. I can see the growth lasting for decades to come. When I get old, I hope I’ll be able to say with pride, “something happened here in the last 30 years, something wonderful and profound, something that changed the World, and I was a part of it.”

Readers, are you an expat or thinking about becoming an expat? Leave your thoughts and comments below please.

(Night view of Singapore downtown from a rooftop bar)