Saturday, May 27, 2017

Thoughts on Bitcoin, Cryptocurrencies and the future of Finance

Hey guys, this is just a blog post of me taking a massive brain dump and just dropping whatever is in my head onto this page here. Ever since my recent post on Bitcoin hitting $2500 (subsequently went on to almost hit $2800 and it is now $2000), I've once again (I've done it before in the past, on 2 separate occasions) plunged back into cryptocurrencies to see what is going on at this front.

I'm afraid that this post is going to be full of technical jargon. Unfortunately, there is no easy way around this. If I explained all the jargon that will pop up, this is going to be a super long post. I'm sure 50% of readers know close to nothing about Bitcoin, 90% cannot name more than 5 crytocurrencies and 99% probably don't understand the mechanics behind it. So how can we proceed? I just talk and no one understands?

If you don't feel confident about cryptocurrencies, I strongly recommend that you watch this series of youtube videos. It was created by the DASH community (a cryptocurrency which actually allows real world spending through a top-up debit card), but the first 4 videos are relevant to all most cryptocurrencies (maybe I can explain why later).

The general public (99%) have the view that digital currencies are just like "digital funny money", that it doesn't have any value and it doesn't have any real world applications.

While I have to admit that after my first 2 dives into digital currencies, discovering the dark web and even looking at the type of sites that accept digital currencies, I think it would be rather safe to say that the association of digital currencies with unpleasant / questionable things is warranted.

What are the things that you could buy with digital currencies then? Well, excluding the dark web (drugs, weapons, assassination contracts, etc), most of the things on the clear web were like VPNs and gold bars. Very tin-foil hatty, if I may say so myself.

However, much progress have been made. I think the most impactful headway has been made by allowing digital currencies to transact over the current payment platforms, thereby allowing digital currencies to be accepted... sort of. These services almost always hedge for the merchant, meaning that the prices are set in fiat currency and the digital currency FX rate is just adjusted based on the market value. Although not revolutionary, you can't really fault almost any business for not wanting to accept digital currencies outright. However, these services finally bridge holders of digital currencies to transact in the real world through a 3rd party. Not only does it bridge the gap, it does so automatically, without the need to pull out wallets and transfer with QR codes, but also without needing to wait for tx confirmation.

Digital currency debit cards allow people to buy real goods and services without all the hassle of the other party not only knowing, but willing to accept their digital currency and also knowing how to receive it. I'm sure these services aren't cheap, but it's a great way to show that they can actually be used for buying things in the real world. If there was more adoption and direct payments without the fiat intermediary, things would take off a lot faster.

Other than those cards, many big companies have also started to accept bitcoins as payment online. They are making good headway through gift cards as well. Many small retail stores also accept direct payment at their physical locations.

However, this is where a problem occurs, especially for Bitcoin. Since blockchain requires several blocks to confirm a transaction, direct Bitcoin transactions can take a while to be confirmed into consensus. Basically, what is means is that you can spend your BTC at shop A, then you can go to shop B and spend the BTC that you already spent at shop A. And you can keep doing this as long as the merchant is willing to give you the benefit of doubt and trust you that you transaction will EVENTUALLY get through. Of course, it won't in such a situation.

In a layman's term, it's like walking into a shop, purchasing a product, but paying with an envelope that supposedly has the money for the purchase.... but the shop owner can only open up the envelope and check X number of minutes later. The usual waiting time was under 20 mins. The current 7-day average of the tx confirmation time (meaning that there are transactions much slower than this) is 4 hours.

This issue of the tx speed issue and is one of the main reasons why BTC cannot be adopted as a point of sales method. There is no discussion to fix this, but this is a huge problem for BTC being viable for day to day transactions. People can't be waiting around even for 5 minutes every time they buy something.

The distribution of power in BTC is also a cause of concern. Since it is a proof of work (POW) model, the power is held with the miners. Since mining is expensive, there is a shift towards centralization and pools of power, rather than it being more spread out.

I personally prefer the proof of stake (POS) model, or even the POI model by NEM. That means that the power isn't handed over by default to people with expensive hardware. The power is instead with the stakeholders, people who actually own the digital currency and are motivated for it to do well since they have a share. The POS model solves the issue of huge miners with no initial stake pushing their weight around.

Of course, the elephant is the room is the pseudo-anonymous nature of bitcoin. Since all coins are on the blockchain and everyone can watch where everything is going, coins can be followed around and that creates a privacy issue, especially with banks and government controlling the entry and exits by matching addresses to people / businesses when they cash out.

Let's say a business is robbed and the robbers used the stolen cash to pay for goods. The money changes hands a couple of times, then it's your change after you bought some stuff. Yes, the stolen "cash" is with you now, but obviously you would not be faulted over it. The BTC blockchain is different, and it can be traced. So, how far back must a transaction be for you to not be held accountable? There is no answer to this.

This essentially is a fungibility problem. With cash, my $2 note and your $2 is the same. With BTC, it is a problem. Stolen coins or coins used for black market transactions can be followed around, except if it is thrown into a tumbler (virtual money laundering) and is obfuscated.

Many people actually see this as a problem as well, which are why the newer coin technologies have implemented ways to tackle this problem. Some solve it quite well (DASH with private payment), while others are implementing complete solutions (the zerocoin protocol).

However, this creates a new problem. The problem that governments AND businesses will not adopt or support a coin technology which is based on privacy, since they would not be able to check on transactions. This of course opens the pandora's box for tax evasion, money laundering... just generally bad stuff.

The counter-arguement would be that criminals wouldn't use a transparent standard that gets adopted anyway. Right now with BTC tumblers, it is still cheap and easy for anyone to hide what is going on with their money trail. With the first mover advantage, name recognition and a huge community to support it, BTC can still act as "digital gold". And just like how you don't see people paying for things at shops with gold coins or bars, it would be hard for BTC to be used in such a way as well. BTC seems to me more like a store, but then again there are newer technologies that could win over supporters.

Now that we're done talking about BTC, let's talk about the reasons for digital currencies and why it might be adopted.

For some of the coins with a very fast transaction confirmation (less than 1 min, some as fast as a few seconds), they are actually viable to be used as a point of sales method. Why would anyone want to do that?

Counterparty risk
Settlement risk

That's why.

If you get paid instantly and you see that money in your bank account, you've removed your settlement risk and can happily and confidently release your goods, knowing that you've been paid.

And since the money goes straight to your wallet, and not your bank or any other 3rd party, you don't need to have "trust 3rd parties" who basically add a middle man in between your initially direct transaction.

Digital currencies that can transact quickly immediately removes both counterparty and settlement risk. And the removal of risk also reduces costs that were previously associated with managing those risks.

Sending the digital equivalent of TTs would be almost instantaneous (instead of several days) with a cost more like 0.01% (instead of the industry standard of 1/8% + FX fees).

So that's for businesses. How about people?

I think for people, the cost becomes less of an issue, while the convenience, privacy and trust of the network becomes more important. Why? Think of the last time YOU transferred money to another PERSON. Now think of all the times that you transact with businesses. You've probably transferred money to people a couple of times the last month, while in a given day you could already have made several transactions by the afternoon!

Right now, I think the simplification of coin technology to laymen have advanced a lot. Some simple intro to block chain, followed by the important understanding of public + private keys and you're good to go. Certain currencies are trying to make it even easier for people by associating those long address strings with something like usernames, which helps for sure. I hope I can snag a good name if that really happens!

Privacy and trust is an issue too. If anyone had a choice, most people would say that they would prefer that NO ONE knew what they were buying or up to lately, especially businesses (customers can be subject to price discrimination) and governments. While many people believe that any currency that is private will fail due to the lack of support from businesses and governments, I actually think that it could be a winning point, especially if your government is failing ie. doing a really bad job in developing the country, the economy, stable exchange rate. In such a situation, you SHOULD be able to try and preserve your wealth by moving it somewhere else, and the government shouldn't be able to stop you. If there is yet another banking crisis in the near future (which I'm quite certain there would be one), the faith in the banks and of the currency of their country will be shattered by many.

I might even go so far as to say that a collapse in areas of the modern banking and finance system would encourage adoption of digital currencies.

Of course, that is very unlikely. In fact, I would say that it would be nigh impossible. If anything, a financial crisis would weaken the unquestioned faith of fiat currencies, the misplaced trust in banks, governments and offer people a parrellel and alternative way to do things that they already do (save, spend) with digital currencies.

So, don't get me wrong. I don't think that the world is going to digital currencies. But I see it that it is going to really pose a very serious and proper alternative to the traditional way of "it's always been done like that" thinking.

Anyway, to end off my thoughts for now, I do still think that the recent coin mania was a bubble, but I can totally see how it becomes even more and more bubbly. That said, while you could make 10X your money over a few months, you could just as easily lose 30% in 24h.

Why do I think it's a bubble with even more potential? There plenty of 15-25 year olds with YouTube channels going on about crytocurrencies almost as if they were fund managers. Some are rather bright though, and their massive profits speak for themselves, but its just food for thought to know how many young people have already gotten into digital currencies. Here's a video of one of the guys that I stumbled upon.


Of course I'm biased because he has precious metals, and thinks that bonds, stocks and real estate are overvalued. What's wrong with my echo bubble? Go back to your stock / property bubble and yell at me from there! (Haha, just some humour)

Thursday, May 25, 2017


Bitcoin (BTC) is trading at freaking $2500 USD now.

That's just mind blowingly insane! (especially when previously I was considering buying in at $500, ehehe #notsalty)

I'd say that I understand cryptocurrencies quite well (better than your average Ah Huat). It takes a fair bit of brain power to understand how public and private keys work and how to move the money around. Interestingly, I even ventured into the dark web and discovered "tumblers", which are basically money laundering services. For the privacy-concerned, this is an essential step since all bitcoins can actually be traced moving around. Tumblers solve this problem, at least I think. Sure, it's more of obfuscating than actually washing, but I think it does the job pretty well.

Pair this up with direct P2P cash-BTC meetups and deals, throw in / hire a middle man with fake accounts to do the deal and drop offs, and you've pretty much got an almost anonymous way to deal with money.

Okay, sounds very criminal-ish, but that's the reality of bitcoin. It moves fast, it moves together with thousands of other transactions, the owners moving the coins around can be anonymous and finally cashing out requires no law, authority or permission. And to be honest, I think that is the appeal of BTC.

Personally, I believe that the future of money is the world is going to be local, sovereign currencies governed by each country, but co-exisiting with unregulated crytocurrencies.

I'm still waiting on a crytocurrency that has the potential to be go mainstream.

As it stands right now, BTC is used for allowing capital flight, black market transactions and money laundering. I question the amount of legitimate transactions going on with BTC.

Methinks that a future crytocurrency would be able to do all of the above as well, but the main difference would be that the volume of such "dirty" transactions would make up a fraction of the volume changing hands. I'm rather certain that most of the transactions and the bulk of the value of BTC movement are for sketchy purposes.

Definitely not a tech savvy hipster paying for his matcha-latte frap at a BTC-accepting hipster cafe.

If a crytocurrency can break into the mainstream for practical usage purposes, I believe we would have found our next "gold", or at least, an international medium of exchange.

Until there is adoption by at least a sizeable amount of people using it for actual day to day purchases, crytocurrencies are in a bubble to me.

That said, Japan legally accepts BTC as payment, so they do have that going for them. With the recent news that BTC has just enabled scaling (allowing more and faster transaction confirmation), BTC does seem like it could go mainstream.

If we see more countries accepting and legalizing BTC usage, I would say that it would be time go to into BTC. Even though its not intrinsically valuable, such "legitimization" would allow BTCs to at least be cashed out in those accepted countries and prevents it from being stuck or worthless.

Watching the meteoric rise of crytocurrencies lately and also hearing stories of a guy sitting on $2,000,000 worth of alt-coins from an $8000 investment also makes me feel like jumping in, but really, it's a lot of risk, but I guess for a lot of reward as well.

I await the rise of crytocurrencies and now I'm just on the sidelines watching the big boys slug it out (BTC, ETH, LTC). BTC is simplistic, but it works, it's improving and it's big. ETH is the new player, but it's still in development and seems highly speculative as of now. But looking at the volumes, it seems quite safe to assume that quite a lot of BTC holders are moving their profits and diversifying into this. LTC, while promising, looks completely overrun by the Chinese. This could lead it to have a bigger run up, but it could also leave it high and dry (no volume).

Of course, while all this is happening, we are also watching governments de-value their currencies.

I happily sit atop my pile and count my stash of precious metals.

Wednesday, May 24, 2017

10 Tips for "Adulting" for Graduates of 2017

Hello graduates of 2017! Congratulations and welcome to real life, where you now have responsibilities and can no longer hide behind the excuse of "but I'm a student!" anymore.

There ton's of things you need to do to "adult" properly, like have a proper resume, cleaning up your social media, etc, but I'll just go through the finance aspect of it all. I am a financial blogger after all. Even though I'm a small time blogger, some people say I'm on course to be almost as famous as Andrea Chong. My influencer management agent is not doing so well, so maybe that's why I'm not so famous yet (please join Huat Ah! Sosher, then we can go for food tasting together!).

"Looking for financial rants? Look for GMGH!"
(no, she didn't really say that)

1. Watch this Video

The rest of the tips here will never be as good as this one. If your only takeaway from this post was watching this video, that's good enough for me. This video will probably give you the best advice you'll ever hear, but I'm pretty sure that you're not going to like it.

2. Count and consolidate your money

How much money do you have in your bank account? How many bank accounts do you have? Do you have all your passwords / tokens to control all your bank accounts?

Are your parents or any other relatives safekeeping money for you? Is there any money that has been stashed away for "when you graduate"? Well, it's time you took it back!

In the adult world, NO MONEY NO HONEY!

3. Pay back "Ah longs"

Did you already have an agreement about the funding of your higher education? Did you manage to scam your parents to promise to pay for your university if you could make it in?

Do you have any student loans, membership fees, student credit card bills?

Knowing your debts and clearing them off is a very important part of successfully being an adult.

4. Begin take-over sequence

Bank accounts. Handphone bills. Insurance policies. Shield Plan. GP and dentist clinic and contact numbers.

Basically, you should be taking over and be in control of all your big people adult stuff already. No self-respecting adult has their mother calling to make dental appointments for them.

5. Start Fresh

This is my recommendation for the best starter products:

Current Account: POSB Everyday Savings Account
Savings Account: CIMB FastSaver
Debit Card: PAssion POSB Debit Card
*Credit Card* (optional, recommended only for advanced users): SCB Cashback Card

The POSB Everyday Savings Account is a good basic account with a low minimum ($500). Don't expect much from it. POSB and DBS (they are basically the same) have one of the best ATM networks around, and that's probably the only reason why you would want to have a POSB account.

The CIMB FastSaver is handsdown the best savings account for people starting out. With no special terms and conditions to fulfill, you only need a minimum of $1000 to start earning a very decent 1% interest on your savings.

The PAssion POSB Debit Card is amazing. It is your ATM withdrawal card, your MasterCard debit card, your PAssion membership card and ALSO your EZ-Link-sorta transport card (link it directly to your bank account so you never need to top up again!).

*WARNING, ADVANCED USERS ONLY* If you have been using a debit card, or even a credit card, and you understand how they work and how to pay off your dues, then you can consider adding this card into your arsenal. The SCB Cashback card is a no-frills 1.5% cashback card. That's it. Spend on whatever, get 1.5% back. No minimum spending, no cashback cap. It's basic, but it does the trick when a debit card just won't cut it. The golden rule is: Always pay off your credit card balance every month, in full. ALWAYS.

6. Protection is important

All those insurance policies I told you to take over? Evaluate them now! You might have endowment plans bought for you that you need to evaluate - surrender or let it run its course? This is also the same for a whole life insurance product that you might have. Insurance salespeople can be slimy and deceiving. The policy that your parents bought for you might no longer fulfill your needs, or there might be better, cheaper and newer insurance products in the market for you.

Insurance premiums have been dropping like crazy. If you're locked-in on an old plan, you might actually be better off completely trashing your current plan and buying a brand new one with the same coverage and maybe half the premiums.

Maybe people don't understand insurance properly and many people (including agents) mistake insurance for investments. Insurance is not investing. Anybody that tells you so is either an agent trying to make a sell, or a misinformed person. I've written quite extensively about insurance, so you can search for keywords on my blog, find posts tagged with Insurance or at least read my take on insurance in Singapore.

7. Prepare for Emergencies

Zombie. Vampires. Aliens. You name it, be prepared for it.

However, it's more likely to be a sudden medical issue, or an unfortunate incident that will require you to break the piggybank.

You MUST have an emergency fund BEFORE you start doing any risk investments.

A good rule of thumb is 6-12 months of expenses, but it never hurts to play it safe and have a bit more. Stick that money into your savings account where it will less convenient for you to dip into it. What's the point of having an emergency fund if its empty when you need it?

8. Invest / Risk only what you can afford 

Investing involves risk. Risk means that you can lose money. If you're investing, you need to ensure that you aren't gambling away your rent/food money!

A simple and easy strategy is to put aside a fixed small amount into some tried and tested strategies with known risks.

$100 a month into POSB Invest Saver is a good start. Maybe $500 in a Singapore Savings Bond to get yourself a CDP account and understand bonds.

Giraffe Value has a massive guides with step-by-step instructions for a variety of investment instruments (slightly outdated though). I think dropping by is a great way to familiarize yourself before you start actually risking real money.

9. Freeze this moment

Once you start working, you're not going to realize how quickly time flies from month to month and from year to year. The next thing you know, you're 28 and writing a blog for people 4-7 years younger than you to read.

I think it is important to know that your career does not define your happiness. You're in your early 20s now. You know what happiness feels like, and you know that having a nice job contributes to that happiness, but in most cases, it is not the source of happiness.

Too many people get caught up in the rat race and corporate ladder, chasing an ever shifting goalpost of what society's counts as success. Luxury accessories, private cars, condos. Next it'll be boats and airplanes. The race never ends. It is up to the runner to decide when to stop.

Just pause for a while and think about the things that make you happy right now. Good health, close relationships with family and friends, opportunities and time to explore your interests. I think most people can agree that delicious food, beautiful vacations, luxury goods and all are wonderful things to have, but they aren't essential things to happiness.


If material wealth is what drives you, you need to be able to pinpoint when enough is enough. Most people dream big and end up small. I advise to dream humbly and realistically, and anything above and beyond that should be happily cherished as a bonus.

10. Go forth and conquer the world

10 years ago, utter the words Uber, Airbnb and Groupon and people will think you were mumbling gibberish. Today, they are multi-billion dollar companies.

We live in a world today where the possibilities for tomorrow is endless. Want to start your own business? Want to pick up a new skill? Want to learn a new language? Want to live in a different country?

Nothing is stopping you.

Having a good financial base gives you a sturdy and stable foundation to fall back on when things don't turn out your way. It is also a solid foundation to keep you on track to easily do the right things.

Have cheap and simple insurances to transfer away your risk that you can't afford to deal with.
Don't buy things you can't afford.
Save diligently.
Live happily.


Tuesday, May 23, 2017

And Noble Dies

As some might know, I was actually a Noble shareholder, but I exited once I could verify the Iceberg report against them.

In fact, I actually made profits with Noble. A decent 3.4% for a month. Annualized is 50%, but that doesn't really matter, hehe. If you had cut loss in March 2015 after my post, eating a 15% loss then compared to what has happened now isn't that bad, right?

Even coming out in June 2015 when the next Iceberg report and Muddy Waters news would only be a 30% loss. That was the post where I called out Noble being a value trap.

As an investor that identifies himself as a deep value investor, it's times like this that really help me hone my craft. Being able to spot between value traps and discounted stocks is the main thing that determines the success of a value investor. Noble looked, smelt and tasted like a value trap to me. It has so far proven itself to be even more of a bad investment than I had thought.

(Coincidentally, this was the exact same time when I was buying into Super Group after its share price had slowly dwindled over 60%)

I think an interesting point to note is that Noble was part of the STI all the way until 21 March 2016, after losing about 70% since the Iceberg report about it came out. It took the STI more than a year to figure out at Noble was a risk and remove them from the index. So much for outsourcing stock picking to indices and let them decide the constituents, eh?

Today Noble is crashing due to the downgrading from B+ to CCC+. Basically it has moved from "junk" to "very junk" territory. Noble is down 28%, but trading has been halted. I wouldn't be surprised if everyone is grabbing anything they can and jumping off the ships. Speaking of ships, I would advise against blinding going in just because price has fallen, ie. "doing a Rickmers". We all know how that turned out, right?

"All I see is a bad company becoming even cheaper and cheaper. I don't see anything currently that can give it's share price support and form a price floor. What's stopping it from going to zero? Maybe it can turnaround in the future, but buying things that aren't obvious is gambling in my view, which is why I cannot wrap my brain around growth investing.
I'm going to stick my neck out here and call Noble a value trap. Maybe it is, maybe it isn't. I don't have to be invested in it to have front row seats to watch how this show ends." - GMGH, Jun 15

Are things going to start getting more exciting from here on out? Would there be contagion? What are the fall-out effects if Noble fails? What's the impact to Singapore, and the local economy and stock market?

GMGH, your favourite financial asshole, patiently awaits for all hell to break loose and for there to be blood on the streets. Or as your favourite unker Warren would say, to be greedy when others are fearful.

Do All The Little Things Add Up? (2017)

As per usual, I made my annual pilgrimage down to the Singapore Mint to change my coins into something more useful.

looks exactly the same as the last time I went

As I've explained before, one of the best life hacks that I've adopted that really has simplified my life is not caring about coins at all. I keep a coin box at my work desk, and another on my desk at home. Once I return from the horrible coin-giving outside world, I empty my pockets into my reliable companions who just gobble them up and keep them safe in their bellies.

I went almost exactly a year ago in May 2016, so I had about 1 year's worth of accumulated coins with me to deposit.

The total came up to a very respectable $307.32.

Since my first deposit in Jan 2014 until now (3.5 years), I've managed to put in a whopping $1200 worth of coins into these machines! That almost works out to be $1 a day. I can't believe I generate so much coins!

Anyway, the Mint's coin machine is back on tour, so you can look at the schedule here to find out where it's going to be next. The calendar actually stops this month, but I'm sure they will update it again soon once they decide where to site the machine for the rest of the year.

Sure, it's not exactly free ($0.00375 per coin after the 1st 1000 coins if you don't go to the HQ), but for someone with 1000 pieces of coins, paying about $3 odd for this service is not a bad deal. Especially when you compare it to the $0.012 per coin that POSB charges for the same service, this is cheap (~70% cheaper).

People of the world, I urge you to stop stalling the queue at the cashier while you fish for a 10c coin so you can get back a $1 coin or a note as your change. Just pay with what you have, drop the change into your coinbox and then never have to care about dirty coins for the rest of your life!