May- July Had to take over my Dad's business

May Investment

Divested most of my shares (was caught by part of the fall) and shifted to gold & silver. After making some profits, my mind was affected by something that happend to my family. Anyway after clearing my Gold & Silver profits, I shorted Oil at 70 (Should have shorted S&P 1080), the lesson learnt (again) is to short the relevant one.

Portfolio July - YTD up 10% (excluding property taken as constant) - 20% Property, 40% shares, 40% cash

I had to take care of my family business.

1) First thing was to ensure I had the signatory authority so that my dad business can continue (pay supplier etc)

2) Check for outstanding payment - Eg. Singtel, CPF (pay by post), income tax etc

3) Next get the aging list and chase for outstanding payment from customers. Had to make sure cash comes in. My dad is an excellent Salesperson, but business-wise, he needs to convert this into cash, otherwise there are alot of bad debts. Some customers especially overseas are very hard to chase for payment. It is really tough to get money from customers. The accounts were terrible also, some payment were not recorded correctly and I had to investigate several times and correct them. There were also several bad paymasters and had to get them to commit dates to repay. After which many follow ups and even threatening for legal actions. We had to differentiate between

• i) Bad paymasters and no business dealings already (Tough action)
• ii) Bad paymasters and still have business dealings (Have to be polite but firm). Also have to withhold sending of goods unless they pay.
• iii) Those overseas r the most headache

4) Other operations, - Tried to resolve the dot-matrix printer problem but unsuccessful - Removed a wuauclt.exe virus (takes up hugh memory as I thought that could be the problem) - Downloaded - ATF Cleaner, DrWeb, SuperAntiSpyware, booted up in Safe mode and removed wuauclt.exe not in Windows32 directory. - Get Epson dot-matrix printer (280 + USB printer) from SLS and assembed it to work The above spent 3 days ( had to take 2 half days)

5) Got company on-line statement (Compay registry had to prepare a resolution) so that we can track TT payments/ cheques bounce, otherwise we have to wait till end of the month to countercheck payment

6) Spend my weekends doing inventory checks.

7) Now to get Singtel Giro and continue to chase for payment.

Property Investment in April

Shares

Divested my remaining SMRT at 2.16 and Best World. The visibility in Best world is really not there. And I feel that the startup cost for the circle line for SMRT will take a long time (at least 1 -2 years to recoup see NE line).

Property

- Bought my 2nd property at Dakota Residences. I was tempted to buy when I knew that Waterbank ( the property to be launched next to it was selling at 1200psf. So after much thoughts, I bought a 4-rm at Dakota at 1050 psf. Comparing around, i feel that it has more potential to appreciate comparing The Shore (1300 psf) which is not near any MRT/Shopping Centre, SilverSea (totally overhyped high end selling) at 1600 (no sea view)- 1900 psf. Also interest rate should be low for 1-2 years. + Dakota is next to the upcoming Sports Hub (Lifestyle and 2nd Singapore expensove Architectural Icon)

- Sibor/SOR Had to look for banks (Sibor/Sor) finally settled for OCBC (SOR).

SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).

The Swap Offer Rate (SOR) represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity

The simple reason why I settled for SOR is I believe the interest rate in US will be ultra low for a long time. The low interest rate will not help the US unemployment rate and with unemployment rate still high, interest rate will remain low in US. Also SOR (abt 0.38 as of today) is cheaper than SIBOR (0.438)

I got a very good deal at OCBC (1st year 0.5 +SOR, 2nd year 0.75+SOR and 3rd year 1.25+SOR). Also I got a mortage broker to get a mortage referral to get some dough back. Ha ! It looks like my property agent course got its refund.

- Sold my HDB flat ! I also advertised in the newspaper and sold my HDB property 50+ K over valuation (in 1 day!). Had to spend time advertising SPH and find free online

• cleaning up the house, paint (red wall & TV consle),
• fix several items (lights/kitchen cabinet door).
• And after that HDB inspection, had to fix up the aircon pipe to touch the basin(went to Lavender SimBH to buy pipes/ connectors and saws)

Jan - Mar Investment & Personal Update

Jan - Finally Fixmarket got strike off

2009 is up a paltry 9% compared to the 40-50% gains by most markets.
The main culprit was my biggest holding 40% Celestial which went down 50% (-20% in my portfolio) which unfortunately had to sell at a substantial loss. Celestial did not have $$ to pay off its bond and defaulted. Cashflow & profit grind to a halt and its survival is in the balance.

Divested most of my SMRT (1.87 and 2.16) and CDL (1.78) and move into tech (already make some movement upwards) (Hiap Seng & Broadway, Best World)

For work wise, my business orgnanisation got a new head and everything got restructed, which means I had to work several weekends (burn CNY) for new reports / meetings etc, same as last year. sigh This continued till March

Personally, my 2nd kid Hsien Yi really a handful, making us having little sleep ( wakes every 3 hours) at night.

D.O.G on Oilpods

WARNING: VERY LONG POST

For those thinking about Oilpods, here is some information that may prove useful.
1. Oilpods is a project of OL&M, Business International Pte Ltd, a company registered in Singapore. OL&M's website is: http://www.oilpods.com.

2. OL&M sells shares in oil and gas production leases, known as "working interests" in industry jargon.

3. Investors in working interests buy a percentage of all current and future oil and gas revenues for a particular project. An upfront payment is made, in exchange for a revenue stream tied to the sale of oil and gas from that particular project.

4. Revenue stops when that project's oil and gas is exhausted or uneconomic to extract. If the upfront payment is less than the NPV of the future oil and gas revenues, a profit is made. A loss is made if the converse is true.

5. The working interests are sold to OL&M by Powder River Basin Gas Corp, a company quoted under the code "PRVB" on the OTC BB in the US. OL&M in turn sells these working interests to investors. The websites for PRVB and the OTC BB are: http://www.powderrivergascorp.com http://www.otcbb.com

6. PRVB's business has 2 arms: a. Purchase of marginal / non-producing oilfields with the aim of increasing or restarting production; and b. Sale of 25% working interests in the above oilfields to generate working capital.

7. PRVB currently owns working interests on about 8,000 acres of land, in either 100% or 75% proportions.

8. According to the Form 10-K (available at the OTC BB website) filed with the SEC, for the year ended 31 Dec 2005, PRVB booked revenue of US$4,643,965 and net income of US$699,335.

9. The revenue breakdown was US$622,882 in oil and gas revenues, and US$4,021,083 from the sale of working interests.

10. The commission paid to outside investors of the working interests was US$482,500.

Some lay analysis:
PRVB sells working interests to OL&M, which then sells them to investors. Investors' funds flow to OL&M, which passes a portion of the funds to PRVB, which in turn books these as revenue.

As PRVB develops the oilfields and sells oil and gas, a portion of the revenues are paid out to OL&M, which in turn pays the investors. Therefore, the investors' income streams are dependent on the oil and gas production at the PRVB fields where they own a working interest.

However, we can see that PRVB sold only US$622,882 of oil and gas. Since it only sells 25% working interests and retains a 75% stake, the commissions paid to investors in the working interests should be at most 25% of oil and gas revenues i.e. US$155,720.50. However, the actual commissions paid were US$482,500. The extra US$326,779.50 paid out appears to simply be a return of capital.

In other words, it seems that PRVB may actually be operating an elaborate Ponzi scheme. For as long as it can sell working interests, it can generate cashflow, from which previous investors can be paid, regardless of whether it is actually selling any oil or gas.

Evidence:
FY05 administrative expenses were US$1,181,374, and lease operating costs were US$258,662. These expenditures supported the production and sale of oil and gas, yet the company only sold US$622,882 of oil and gas. The story is the same for FY04: adminstrative expenses of US$513,854 and lease operating expenses of US$97,025 were used to generate US$248,328 in oil and gas sales.

Clearly, the current cost structure of PRVB makes it impossible to actually earn any profits from selling oil and gas. It is deriving all its "profits" from selling working interests. These working interests appear to be overpriced with respect to the value of the oil and gas they appear to be producing. It is possible that PRVB is deliberately misrepresenting the true value of the recoverable oil and gas i.e. fraud may be occuring.

Implications:

So, back to Oilpods. If someone was to invest with OL&M, he would be buying a working interest directly from OL&M and indirectly from PRVB, and his future cashflow would ultimately depend on the sale of oil and gas from the corresponding field being operated by PRVB.

As shown above, the cashflow being paid out is coming from other new investors purchasing working interests as well as from the sale of oil and gas. For as long as PRVB can find new investors, current investors will be able to receive an income stream.

If, however, PRVB is unable to continuously sell additional working interests, based on its current cost structure, its oil and gas revenues alone will not suffice to pay the investors their due commissions. PRVB will then default on its payments to OL&M.

If OL&M is not able or willing to make good the payments out of its own pocket, it too will default. The investors can then choose to either write off their investment, or sue OL&M for misrepresentation, fraud, etc. Of course, their legal choices may be limited by any waivers that they signed when purchasing the investment in the beginning.

As usual, YMMV. The analysis above is based on public information only. It may be flawed and is not conclusive. IMHO anyone interested in Oilpods should visit the 3 websites (OL&M, OTC BB, PRVB) and do some reading, so that they can make an informed choice

D.O.G Investment Lessons

1. When fundamentals deteriorate, sell NOW.

I wish I'd listened to myself in 2008. I would have ended 2008 with a lot more money! By the time 2009 rolled around the fundamentals were pretty much at the bottom. So it would have been time to start buying instead.For 2009 there wasn't much more deterioration in fundamentals so I was a net buyer.

2. The market leader is not always a good investment.

The market leaders in finance and property e.g. DBS, Capitaland and Capitamall Trust were also the ones who did rights issues. These were severely dilutive to existing shareholders. Those who managed to pick up excess rights ended up doing very well, but since their profits were at the expense of the original shareholders I think it speaks poorly of the company management to have given so much wealth away.I did much better with companies who were not market leaders but had outstanding balance sheets. No rights issues, no business risk, and many of them doubled anyway.I will continue to ignore "market leaders" in favour of what the financial statements tell me.

3. AGMs and EGMs are a valuable source of information.

I made it to a few AGMs and again, it was good to read the body language of the management and see how they answered shareholders' questions. In one case where I sat in as an observer, the management gave a reason for not paying dividends. I went home and counterchecked, and concluded the excuse was nonsense. I stayed away, and later in the year the company's results took a significant turn for the worse.I also made appointments to visit a few companies, and called some others. All very useful, and sufficient to seal the buy/don't buy decision.I continue to believe it is vital to meet management every chance you get.

4. The margin of safety must be sufficient.

A hard lesson here. I took an unnecessary 25% loss on a large holding because I thought a low price was sufficent to compensate for a so-so business. Nope. As it turns out, if I'd held on and sold later the strong market would have rescued me. But I was proven right about the business: fundamentals declined in the quarters after I sold out.

5. Beware companies in cyclical industries.

No kidding. The business decline for cyclicals like steel, airlines and shipping (both container and bulk) was not funny. Since I was on the sidelines here it was not painful, merely interesting.On the other hand, the buyout of SPC pointed to the importance of understanding replacement value. SPC couldn't be easily replaced, so even in the worst of times it had a value. Maybe this will be useful in future when looking at steel mills. But aircraft and ships are fungible assets so replacement value doesn't hold here.Property is also cyclical, and here I did well with the replacement/liquidation value method.

6. Dividends are important.

All hail the almighty dividend! Cash is indeed king. Dividend yield was a great screening tool in 2009. From the list of high-yielders, I bought the strongest balance sheets. Many yielded 10% and some over 15%. Low risk, high return. Best deal I'd seen in years.

7. Keep some spare investment ammunition.

I started 2009 with 47% in cash so it was a blessing to be able to invest on the way down (into March). If I'd been fully invested I would have been unable to take advantage of the fantastic prices.As prices went up I began to sell. I think it is good to keep some spare cashavailable at all times. You never know when you'll find something good.

8. Watch out for changes in the core business

None of the companies I followed had significant changes to their businesses. Only those who were floundering were trying to buy new businesses. Environmentally-friendly businesses like water treatment, waste treatment, solar energy etc seemed rather popular. Maybe that's where the next bubble will be.

9. Watch the gross profit margin

I looked into many companies and concluded that companies with a long-term trend of declining gross margins were headed for mediocrity. Declining gross margins point to severe competition as well as lack of pricing power. Good for customers, bad for shareholdes. Given the many bargains available I decided to reserve my money for companies that had demonstrated pricing power. At least those will have a fighting chance against the secular background trend of inflation.

D.O.G on REITS

There is a sinister reason why Management are paid in units which I learnt in Wallstraits. Quoted from D.O.G

That depends on who the REIT manager is. For REITs where the managers were originally the asset owners i.e. virtually all the S-REITs, the owners have basically already divested their real estate at a good price in the REIT IPO. Any remaining stake is a call option, and it continues to pay out cash. So these ex-owners are having their cake and eating it - they sold most of their stake, and now they are slowly clawing it back via payment in units.

One analogy might be - I sell you a house for cash, and I manage the tenants for you. Instead of sharing in the rental, I am paid in shares of the house. So each quarter I own a few more bricks in the house. Given enough time, ownership of the house will revert to me. All this while, I get more and more cash from my increasing ownership of the house. So the net effect is that I get cash upfront from selling you the house, then I get paid to wait while the house reverts back to me. Nice deal for me, not so nice for you.

For REIT managers who were not the original owners of the REIT assets, payment in units does increase alignment of interest. However, if they then sell the units for cash (see: ARA Asset Management), alignment of interest is eroded.

Dec09 Personal - HYis borned , HZ sick and Fixmarket

Wah a really exhausting 2 Months for myself.

Hsien Yi is borned:)
My second son Hsien Yi is born on 17th November 09 Tuesday, hurray ! :) (37+ week)
It was in the evening time (the day before) when my wife suddenly felt water flowing, and after awhile we realised it is not your usual unable to hold the bladder. At that moment, we were caught unprepared and started to panic. We were actually trying to schedule a surgery next week on the 28th December (another 11 days later). We quickly got my parents here to take care of my elder son (3 yr old) and got the bag (luckily prepared in advance) with my wife's clothes and medical stuff and went straight to the hospital. As I was quite unprepared for a waterbag burst delivery (my first son symptons was actually slight bleeding) , I quickly grap some towels and a plastic sheet from somewhere and placed in the car.

As my wife started contraction, we think it was good to try a natural birth. However though there were contraction, there were no dilation, and there was a risk that the placenta may drop first , endangering the baby in the process, thus our gynae advised us for a cesarean surgery. The gynae came just before midnight and started the operation. And quite a coincidence, it is the Chinese Chu Yi. According to the Chinese it is a Da Ri Zhi (Big day) and only people with the ming (fortune) - you can be very successful and be the other opposite.

At 12am, Hsien Yi is borned, weighing 3.41 Kg and measuring 51 cm long with a very big head (39cm) - 90th percentile. It seems that my kids have something with being big headed haha :)

Hsien Yi is extremely alert, with his eyes opening on the next day already. (unlike my first one who only opened his eyes 1-2 days after being discharged in hospital)

The next month was a hectic month for us. The nanny who came is very unprofessional, she has an attitude problem ( I asked her to wake up at a certain timing to feed my son, while she say if she can wake up she will do so) - it really pissed me off. She also do some things which really got on my nerve, for instance washing vegetable in the basin ( extremely dirty !) , and washed ginger in the pail that I put my clothes in ! During the day time, she will also chit chat with my maid, sometimes oblivion to my wife asking for help (still recovering). It was a fustrating month for us. And although we though of changing the nanny, we viewed it week by week and thought that she will improve and we tried to close 1 eye. Well so we did not change and endured the 4 weeks. Also although the nanny takes care at night, when our son cries, we also wake up, and when he cries continously we as parents will also wake up in the night to see what is wrong.

The worst thing was during that time, my old neck problem came back. It pains after siting for some time. This problem came because I was too tired taking care of my wife and eldest son, such that when I fell asleep and slept in an awkward postion trigering the neck pain ( and I though it went away after not feeling the effects for more than the last 6 months)

The pain finally subsided after 4 weeks and luckily just in time after the nanny left. My this son is really difficult to take care. He drinks every 3 hours, meaning to say after 12 midnight, we have to feed 3am, 6am. And usually it takes about 45min to feed him, and burp him. Also, he has a habit of vomitting out milk quite easily. And he seems very alert and after awhile he will get very agitated and seems frightened (big eyes and panting heavily and cries if not pacified).

The first day the gynae left, I took the night shift, and after feeding him at 11am, I tried with no avail to get him to sleep. In the process I gave him another 2 bottles of additional feed before the 2am as he seems agitated and will only cool down after drinking the milk. The problem now on hindsight is that probably he is getting used to me and I am still inexperienced. ( everytime he sleeps, and when I put him down he gets up again and refuses to sleep. He then gets frightend and agitated and the cycle repeats itslef). That nightmare finally came to a rest when my wife woke up at around 3 am and I asked her for the pacifier. That really solved my problem partially.
Partially because we found out the next few days is that although he gets pacified, when the pacifier comes out he gets agitated again.

I have been taking night shift so that my wife can recover from her maternity. I have taken leave/scheduled leave which will last till next year. (2 weeks after HY 1 month) . Every night I sleep about 4-5 hours or less. 1 hr b/w 9pm-12am, 1-2 hr b/w 12am-3am, 1-2 hr b/w 3am -6am, and 2 hr fr 6am-9am. Sometimes he doesn't sleep from 12-3am, really exhausted. And this has been going on for the last 14 days...really shack.

Okay, lets see and hope this kid get better after the 2nd month. My eldest son is coping well with the new additional member. of course there is the ocassionally asking for attention and throwing tantrums , but he is happy with the new addition the the family.

Hsien Zheng falls sick - gastric intestinal
Also, just the day after the nanny left, my eldest son fell ill (Thu/Fri). He vomitted in the middle of the night 2-3 times and had diahorrea, resulting in everybody not having enough rest. The next day I went to the clinic downstairs. At first, his vomitting stopped on Friday, but his diahorrea still perisisted. On Sunday when my in-laws came, HZ went wih my wife to Orchard road, and his vomitting came back. After a short rest, he seems to have recovered and wanted to follow his cousins to Mount Faber Jewel box to see the snow show. After coming back from there, he started vomitting again, and this time whatever we gave him (water, milk (soya bean)) he keep on vomitting. I quickly decided to send my son to the hospital (Mount E), as I am afraid it was something serious like food poisoning. At the hospital, the doctor (specialising in gastronomy- stomache) examined him and told us that his stomach is quite bloated (alot of air) and still do not seem to be very dehydrated. He gave us 2 options, either leave him at the hospital for drip or take medicine recommended by him. As he seems not that dehydrated, the doctor recommended the latter, as drip can be traumatic/painful even for an adult. And so, he was prescribed - Debridat ( for stomach pain), and continued with his lacteol fort sachet (antidiarrheal drug) , dramamine used for preventing vomitting.

Lacteol Fort - Lactic acid producing organisms ; Belongs to the class of antidiarrheal microorganisms. Used in the treatment of diarrhea, for patients suffering from the chronic intestinal disease known as irritable bowel syndrome. Patients show symptons of abdominal pain, bloating or gas, daily number of stools, etc


Fixmarket -Urghh ..I got a letter from ACRA to submit AGM, which I have to hold AGM withinin every calendar year . I am in the process of striking of the company which I applied in August, and unfortunately I believe the strike off process may run till January (5 months) the next calender year. After reading the website, I came across Section 175, Application for Extension of Time to Hold Annual General Meeting. Since I do not know when the strike of will end, I applied for 3 months (50 dollars per month). After reading further I saw Section 201, Extension of Time to Lay Accounts at Annual General Meeting under Section 201 of the Companies Act- the account must be laid not more than 6 months before the date of the AGM. Really pek chek and according to ACRA I have to sought legal advice to see whether I need to apply Section 201 as their ACRA officers are not empowered to give such advice. What the heck , I also applied 3 months extension. So I paid an additional 300 to the stupid cost. Vomit blood. I really hope to close this shit this year (or early next year).