Investment Moats

This is not a finance post. If you are looking for one, best turn away now. But if you like to read most of my stuff, read on.

For the first time in my life, I will reside in a GRC managed by the opposition.

If you asked me for 12 months, or 6 months ago whether this would happen, I would tell you the chances of this happening are very very slim.

The main reason I felt that way is that in the last few years, the government has sought to address many aspects of Singaporean’s concerns that the opposition may not be able to identify a “big monster” that needs to be slain.

It did not help that the strongest opposition party, the Workers Party has been painted as a pretty poor manager of their Aljunied-Hougang Town Council.

My friends and I looked at the situation and assess that the most likely outcome: A clean sweep.

The PAP will take back Hougang and Aljunied.

This election was special because the traditional rallies could not be held. This put a further dampener on the opposition party because traditionally that was their most popular communication.

Not many people felt like listening to what the PAP have to say. Many felt like going to the rock concert that is the Worker’s Party rally.

The ruling party with all their budget, would easily drown out the opposition in terms of online and social engagements.

The first surprise during the campaigning for myself was that the Singapore subreddit was very pro-opposition. I grew to discount what I see and read online, and the gripes from my friends.

They can complain all they like, but eventually, what they put on the paper might be a different thing all together.

This election feels weird.

At 11pm, my friend messaged me:

“I got a bad feeling of a clean sweep. PAP was really damn chilled this time round. Like they know it is going to be a damn easy win.”

At 11 plus, the sample count of each GRC/SMC starts coming in.

The sample count is not the final results but the final results usually do not veer too far from the sample count.

Most of the sample count points to business as usual.

But then we saw that the sample count for Marine Parade was 57% to PAP. That Worker’s party team in Marine Parade were not the strongest.

Then it was announced that Dr Chee got 43% in Bukit Batok. PSP’s Ang Yong Guan got 46% at Marymount.

That was when we know maybe Singaporeans is going to surprise both of us.

Why did Seng Kang Fell?

Honestly, I don’t know.

I have been living in Seng Kang for like at least 20 years. Everything has been good. The town center development was pretty slow though.

So I am not so sure why one in two Seng Kangers would vote for the opposition.

Here is what I gathered:

1. PMD is pretty big or important in Seng Kang. This is especially so because the Seng Kang resident base is pretty young, food delivery is pretty popular. And Lam Pin Min played a very big role in killing it.
2. Relatively credible opposition candidates. Compared to the previous two elections, this time Worker’s party candidates were fielded. The branding was better than the previous opposition party. Jamus Lim did well in his exchange on TV and He Ting Ru carried herself as pretty credible in the last election
3. Relatively young electorate. The majority of the people are in the sandwich generation that faced a lot of life stress at the moment (read Inderjit Singh’s Facebook post below). They might not like what they see currently and yearns for some fresh, alternative ideas
4. Electorate against Shithousery. On one hand, there are enough people condemning what Raeesah Khan said in her private social posts a year ago. On the other hand, there are enough people looking at this and see this as ruling party’s shithousery
5. The fxxking long vote queue. My friend was cursing and swearing about the 2-hour queue to vote at Palm View Primary School. I dunno about you, but many might attribute this mismanagement as a product of what is wrong with the policymaking in this country.
6. It is not a unique Seng Kang thing. With a little bad luck and a little good luck elsewhere, Seng Kang might go to the PAP, and West Coast or East Coast could have gone to the opposition. The reality is even Dr. Chee, with all his history, garnered 45% of the votes. Clearly, it is not only Seng Kang residents that were not very happy.

A few people would think that this is about the decision to vote for the opposition or the ruling party.

I will say most of those who voted for the opposition does not know what they will get by voting the opposition in.

But they took our chances anyway.

The electorate 5 years ago cannot believe how poor the quality of the opposition was. 5 years later, they might have realize they do not have a choice.

They have that feeling that there is something very corrosive eating at the core of the ruling party.

It has become less of what they think about the opposition but how they looked upon the ruling party.

Why The Ruling Party Didn’t Come Away with a Clean Sweep

There were many good commentaries about why the election went the way it went, but I want to highlight what former members of the ruling party said.

Here’s how former People’s Action Party (PAP) Member of Parliament Inderjit Singh assess why things are the way it is on his Facebook (Part 1 and Part 2):

Some have observed that the PAP’s campaign-style was similar to that of the 1980s and 1990s. Many have frowned upon personal attacks, name-calling, and character assassination.

Further, police investigations and POFMA also appeared to rile voters up. On the other hand, some observers noted that the opposition was more gentlemanly in their campaign than the PAP this time. While the PAP had to deal with the issue arising from Ivan Lim’s suitability as a candidate, this did not appear to have been initiated by any political party. The opposition camps focused on attacking policies and not individuals which individuals perceived the PAP did. I think it is clear that Singaporeans are saying that it’s time to show magnanimity and focus on issues and constructive criticism.

The young voters were especially agitated by Raeesah Khan being hit with a sledgehammer. The young voters were disappointed by the PAP’s approach Forcing WP to declare their views on Khan was perceived as bullish which did not go down well with not just younger voters but even older voters who want to see a more compassionate PAP. In fact, many feel that what tipped the scales in Sengkang was the treatment of Raeesah Khan rather than Jamus Lim’s popularity.

This style of politics is outdated, and opposition members should not be viewed as enemies especially when we, as a nation, are plagued with the same concern – making Singapore competitive again. Contestation of ideas should have been the priority and not contestation among individuals.

– Part 1

Although the 4G leadership has said umpteenth times that the “fourth-generation leadership will listen to Singaporeans ‘with humility and respect’”, and that they will widely consult with Singaporeans when formulating policies, the reality is that many do not feel that these leaders have delivered on their promises based on their actions.

Instead, the general image of the 4G leaders is perceived to be one of arrogance, an elitist, natural aristocracy who projects a “we know best” attitude. The world is complex and many of the 4G leaders don’t have enough experience to solve some of the issues the nation is facing, especially related to the economy and some social issues which need a good feel and touch of grassroots issues. If the leaders could have developed efficient channels of feedback and sincerely listened, rather than depend on their narrow circles for feedback, they may have had a better sense of real issues plaguing companies and Singaporeans.

They should have adopted a collaborative approach in dealing with various cross-sections of society and Singaporeans who could contribute from outside government. The Covid-19 was an opportunity for the 4G leaders to demonstrate their capability. While they worked hard, we cannot characterize their performance as excellent, like how the leaders handled the SARS issues in 2003. The management of the Covid-19 pandemic how Singaporeans reacted to it seems to display a lack of complete trust in the government and the leadership.

Before and during the GE, a few blunders, audio leaks, poorly drafted PAP press statements further eroded confidence in 4G leadership. The PAP governments in the past have always had the complete trust of Singaporeans but this seems to have been shaken in recent years.

– Part 2

Former People’s Action Party (PAP) Member of Parliament Hong Hai wrote this extract from his book The Rule Of Culture: Corporate And State Governance In China And East Asia, published by Routledge (2020):

Fourth, voters young and old want a level playing field in political contention. The ruling party ignores this at its peril. In its wisdom, the Government introduced the group representation constituency (GRC) to ensure minority representation in Parliament.

Twinning, or two to a GRC, could have achieved this objective, but it was decided to have three.

That was selectively expanded to a maximum of six, before being reduced this election back to a cap of five.

This has been widely perceived as tweaking the system to allow political neophytes and unelectable candidates to hitch a ride with heavyweight ministers.

It undermines the legitimacy of these candidates, some of whom are catapulted to high-paying office-holder positions shortly after the election.

In the upgrading of Housing Board estates, priority was given to constituencies that voted PAP, in effect leveraging the resources of the state for partisan support of the ruling party.

The People’s Association does not allow opposition MPs to be advisers to grassroots organizations, effectively cutting off elected MPs who are not from the PAP from supervising grassroots organizations in their own wards, whereas PAP MPs automatically become advisers. Even PAP losing candidates are often appointed advisers, over the elected MP. It is manifestly unfair and the practice should stop.

The list goes on. Past PAP supporters were prepared to close an eye to these inequities for a greater cause, that of national solidarity under one-party flag.

Right from the start, the electorate saw the mudslinging take place when PAP’s Tan Wu Meng chides WP chief Pritam Singh for supporting poet and playwright Alfian Sa’at.

Then, they put Workers party on the spot again by asking the party to make a stand on the Raeesah Khan situation.

Too often in the past, the whole election got distracted by incidents such as this. But the younger electorate could clearly smell what they were trying to do. The more they tried to drag opponents through the mud, the more pissed off some of the younger electorate get.

Lee Kuan Yew’s Comments on Singapore’s Future

The Late Prime Minister Lee Kuan Yew gave his view about Singapore’s survival when he is not around anymore in the book, Singapore in Transition: Hope, Anxiety and Question Marks.

You can make your own judgement how far we are from what he has said:

Q1: How confident are you that Singapore will survive your death? 

Lee: “All I can say is, I think Singapore is safe for 10 years. No trouble because there’s a team in place that will handle it. Whether it will be 15, 20, or 30 years, depends on them getting a team of players very soon.

Part of the team is in place but you need a leader. You need somebody who can communicate, who can mobilize people, move people. It’s not enough to have a good policy. You got to convince people.”

Q2: What about beyond 10 years?

Lee: “I think there will come a time when eventually the public will say, look, let’s try the other side, either because the PAP has declined in quality or the opposition has put up a team which is equal to the PAP and they say, let’s try the other side. It must come.”

Q3: How will it happen?

Lee: “It depends on when it happens and whether it happens all of a sudden or it happens gradually. If the decline in standards happens gradually, an opposition will emerge of quality. I mean, the public can sense it.

I think the more likely is a gradual evolution because it is most unlikely the way we have evolved the party and the renewal of the party leadership that you will get such a clash of opinions that it will divide the whole leadership, the MPs and the party machinery into two, or into one major part, one minor part.”

Q4: What will happen if it takes place suddenly?

Lee: “If it is sudden, well, you’re landed with an emergency. In that emergency, I think the people will just take somebody like me and a few of those friends and say look, let’s make a bid and stop this from going down the drain.”

Q5: What could possibly make it happen suddenly?

Lee: “You have a rumpus in the leadership. They disagree profoundly, either for reasons of principle or personality and suddenly it breaks up… I cannot tell you what’s going to be in maybe 20, 30 or 40 years, not possible. We might have a genuine difference of perspective what the future should be, what kind of Singapore will survive, and thrive in that future. We might have a clash. I don’t know.

I’ve lived long enough to know that nobody settles the future of his country beyond more than a decade or so of his life. Stalin grabbed the whole of the eastern part of Europe, grabbed all the Asian republics right up to Siberia, and took Outer Mongolia, which belonged to China under his wing. That’s 1945. He’s dead. The 1950s or something, Khrushchev came up. In 1992, it dissolved – less than 40 years. They threw up a Gorbachev who never went through a revolution, who did not know that he was sitting on a boiling cauldron.”

Conclusion

A lot of people might have concluded that the opposition won pretty big in this general election 2020.

I think the people do not know if they have won or not.

They took risks because they think they had to. They saw how things are for 5 years and have more question marks than assurances the next 5 years would continue to be great if they gave the ruling party a strong mandate.

A few individuals risked $13,500 to put themselves up as opposition candidates. The chances of them forfeiting their money are big. On top of that, your employers, society, and the government will look at you very differently due to your political affiliations.

Joining an opposition party in itself is a risky endeavor.

Hell, a 80-year-old man feels that he does not have a choice but to come out from his bungalow to do something about it.

But maybe in times like this, the electorate feels that to pull us out of this rut, we need to turn to risk-takers.

Majority of the new candidates put out by the ruling party are either civil servants or lawyers. The candidates from opposition parties are more diverse, with more and more candidates with business backgrounds but there are still a fair number that are lawyers.

Those who voted for the opposition didn’t know if they won. They took risks.

For all we know, the residents of Seng Kang, West Coast (narrowly), and East Coast (narrowly) will start seeing the degradation of their estate due to the lack of amenities.

A lot of us didn’t win because a number of people are not confident the ruling party is willing to really listen and able to effectively bring us progressively forward.

In the last few elections, the emphasis by the ruling party was on sticking with people with “good track record”

Based on the election result, 40% of the Singaporeans seem to be questioning “what track record?”

Judging from the scary things I heard about non-ruling party managed town councils, I would probably have a chance next time to update everyone on the possible degradation of where I live.

This may make Seng Kang residents repent their decision.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works

In the last few articles, we have covered how to open your account with Interactive Brokers, funding your account, and converting to different currencies. Now, you are ready to buy and sell or trade stocks on Interactive Brokers.

This includes stocks and options on different stock exchanges.

Let us try to get down to it.

How Stock Exchanges Work

Before you trade on these stock exchanges, you would need to know the mechanics behind how they work.

By understanding the mechanics, you will not find what you have to do weird.

Intreactive Brokers is a broker that allows you to trade on a stock exchange.

The illustration above roughly the role they play in this system. They allow you to

1. Buy and sell
2. Get information about the stocks, including prices, volume and more information
3. Holds the records of what you own (official term is they are the one that custodize your stocks and option holdings)

At the background, Interactive Brokers help you place your order and handle the backend processing.

Some years ago, I wrote a comprehensive article explaining how to Buy and Sell Stocks, Bonds, REITs, and ETFs in Singapore.

It is very comprehensive and I urge you to read it before you get started with this.

Be Clear What You Wish to Buy and sell

After you understand the general trading process, it is time to start trading.

You need to have a certain understanding about what you are trying to do. Are you buying a company with a 3 day or 2 years time frame. Or are you selling a company whose fundamentals have broken down.

Interactive Brokers is the broker and the stock exchange is just a place that lists the prevailing market price of the companies you wish to buy and sell.

For some of my readers out there, you are passive, index investors who prefer to do-it-yourself.

You wish to periodically buy exchange-traded funds (ETF) listed on the London Stock Exchange. These ETFs allow you to own a basket of stocks at a low cost. Owning an ETF is a very simple way to be diversified, capture the returns and prevent a handful of stocks from permanently impairing your capital.

Some popular ETFs are:

1. iShares Core MSCI World UCITS ETF – Ticker: IWDA
2. Vanguard FTSE All-World UCITS ETF – Ticker: VWRA

I wrote an article not long ago exploring whether there are differences in the historical performances of these two ETFs. It provides more information about these two ETFs.

For others, you are interested in owning great businesses around the world such as Tencent listed on the Hong Kong Stock Exchange, Adyen listed in the Netherlands, or PayPal listed in the United States.

Whichever, you need to know the ticker/quote of the stock/ETF that you are buying/selling.

You will also need to know the price that you wish to buy/sell.

For the demonstration, I will use the iShares Core MSCI World UCITS ETF or IWDA as an example.

Finding the security IWDA on Interactive Brokers

Suppose I wish to add IWDA to my existing holdings.

I wish to purchase 10 shares of IWDA.

For most of us, we would trade through the Interactive Brokers mobile application (which is available on Apple App Store or Google Play). However, if you wish to use Interactive Brokers on the desktop, you could do it the same way as well.

If you have an ETF or stock that you wish to buy, first you got to search for the stock.

At most screens on the mobile app, there is a magnifying glass icon. If you click on it, it allows you to search for the securities.

In this case, we are interested in IWDA, so we search using the ticker IWDA. We came up with two entries. The one that we wish to purchase is the IWDA that is listed in the London Stock Exchange or LSE.

Interactive Brokers will show you some details about the securities that you wish to purchase. You can scroll through to take a look.

Understanding the BID and ASK Queue system

If the market is open, you can see the BID and ASK prices and the amount of stocks in the BID queue and ASK queue.

The BID queue are the people queuing to buy IWDA. The ASK queue are the people queuing to sell IWDA.

The best way to think about the Bid and Ask queue is to use the Ascendas REIT illustration in my previous article. Currently, Ascendas REIT trades at $2.41. You can choose to buy at $2.41, but there are a lot of people who are only willing to buy at $2.39, $2.38, $2.35.

So they will queue and wait.

Similarily, there are people who wish to sell at $2.41, $2.43, $2.46, $2.50.

So they will queue and wait.

At some point, someone will grow impatient and decide to sell at $2.40 instead of where they are currently queuing.

So the transacted price became $2.40 instead of $2.41.

This is how the stock exchange work.

What this means is that if you wish to purchase IWDA, you could choose to buy at $61.00 or $61.29 or any price.

But if no one wishes to sell to you, at that very moment, you will not get the 10 shares of IWDA.

If you are impatient, you will just BID at $61.29 and you will get it.

BID and ASK Prices May Not Be Real Time

One thing to note is that the prevailing price $61, 21, BID and ASK price of $61.00 and $61.29 is not the real time prices.

By default Interactive Brokers shows the delayed prices.

In order to get the real-time price, you have to pay a monthly subscription to get the real-time prices for certain exchanges.

This may sound like a deal breaker but this is seldom a problem for a lot of us.

The reason is that:

1. There are other website that you can reference the real-time prices. For example AAStocks.com gives real-time Hong Kong prices. Investing.com has real time prices for US stock prices
2. You can purchase the latest price when you wish to purchase at a very small fee (more on this later)

Filling in the Buy Order

There is a Buy and Sell button at the bottom of the IWDA information screen.

Click on the Buy button.

You would need to fill in #1 the quantity, #2 the order type, #3 the price, #4 time-in-force.

And then you will slide #5 to buy.

Interactive Brokers by default set your order to order type Limit, and Time-in-force Day. At the grey area in the quantity, it shows you roughly how much this order will cost (6,130 USD)

A. Filling in the Price

In order to know what price to queue your BID at, you need to know roughly what is the price IWDA is traded at.

For that, you could check the price at another platform like Investing.com.

Or you can use the Snapshot function in Interactive Brokers.

IBKR offers eligible clients the option of receiving a real-time price quote for a single instrument on a request basis. This service, referred to as “Snapshot Quotes” differs from the traditional quote services which offer continuous streaming and updates of real-time prices. Snapshot Quotes are offered as a low-cost alternative to clients who do not trade regularly and do not want to rely upon delayed quotes1 when submitting an order. Additional details regarding this quote service is provided below.

You can check out the snapshot cost for various exchanges here. For most exchange it is USD0.03 and for United States Exchange it is USD0.01.

I think it is not too expensive.

If you click on the Snapshot word under ASK, IB will remind you that they charge a small fee for every Snapshot request.

So instead of $61.00 and $61.29, the real time BID and ASK is $61.24 and $61.28. The current traded price is $61.21. This allows you to make better decision.

You can then fill in the price.

B. Order Type

There are a few order type.

1. Limit – Your buy or sell order will only be executed if it hits your price. For example, if the current price is 61.21 and you queued at 61.11, your order will not execute unless the price gets down to 61.11. Limit Order is the default option and what I use most of the time.
2. Market – Instead of specifying the price you want to buy or sell at, you take the latest price IWDA is traded at. For example, if currently, IWDA trades at 61.20, it will execute at this price. Market orders are pretty dangerous if there is a liquidity vacuum in the stock you are trading in or sudden price spike and fall. Generally, do be careful of market order
3. There are other order types that I have not tried. Some are stop-loss orders or trailing stop-loss orders. (You can let me know if you find that some are significant enough for me to mention)

C. Time-in-force

Time-in-force determines the length of time over which an order will continue working before it is canceled.

There are three types:

1. Day – Order will work throughout the trading day during regular trading hours until it is filled, is canceled by the user, or expires at the end of the trading day. Default option and what I used most of the time
2. Good Till Cancel – Order will continue to work within the system and in the marketplace until it executes or is canceled. Good till Cancel orders will be canceled in some conditions
   1. If you do log into IB to more than 90 days
   2. At the next calendar quarter after the current
3. At the Opening – The Order will try and execute at the opening. If it does not, then it will expire

For most of us, a Day order would be adequate.

D. Preview Order

There is a calculator-like button at the bottom. If you click on the button, it will show you a preview of the order. You can see the estimated commission range and how much the total transaction will come up to.

If you have a margin account, it will also show you the margin impact.

E. Submitting Your Order

When you Slide to Submit Buy, you will encounter the following screen.

It is a compliance message letting you know that you are submitting an order without having market data on this instrument.

Just be sure that you know that you have keyed in the price you intend to buy at.

There is another compliance message to inform you that IB have placed a ceiling and floor on orders due to regulatory obligations. The explanation is below:

After you are aware, click Accept and Continue.

Your Order is Submitted.

Checking on Your Outstanding Order

If you go to your Menu (the Button on the top left with three lines), then Order & Trades, you can check up on how your order is doing.

In this screen capture, you can see my limit order is still not executed. 0 out of 10 quantity are filled.

If you would like to modify your order, click on the IWDA.

You can amend the quantity, order type, price and time-in-force.

If you click over to the Trades tab, you could review those trades that have been executed on different days.

Clicking on each trade log will allow you to see more details of the trade.

You can see roughly the commission and what price the trade was executed at.

Selling a Security

I will not go through the sell process as it will be similar to the buy, except you click on the Sell button and put in the quantity and price you wish to sell.

Then you submit the order and see whether it gets executed.

Summary

I do find the trade execution on the web application to be rather user friendly.

On their desktop application TWS, that is another matter altogether.

Let me know if you have further questions.

To get started, create an Interactive Brokers account today through this Link here today.

My Comprehensive Interactive Brokers How-to Funpack

Here are some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.

1. An Easy Step-By-Step Guide to Setup Interactive Brokers (IBKR)
2. How to Fund & Withdraw Funds from Your Interactive Brokers Account
3. How to Convert Currencies in Interactive Brokers
4. How to Buy and Sell Stocks and Securities on Interactive Brokers
5. How Competitive are Interactive Brokers Commissions Pricing? And Also Explaining the US$10 Monthly Activity Fee

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works