2020 Dividend List

This year's dividend list is out! Dividend related topics have consistently been popular and this year we would like to introduce Poems screening tool to generate your own list. Poems have been one of the strongest Singapore brokers over all these years, despite it not being part of a bigger conglomerate. Perhaps, it's precisely because it's not part of any conglomerate that it understands what the small investors need.

Here's how the screener looks like (below). There are only a couple of factors to choose from, but it's good enough. For this year's list of Singapore stocks, I have chosen just a few criterias:

1. Market cap of more than a billion

2. ROA and ROE of more than 4% and 12% respectively.

3. Dividend yield of 3%.

Poems stock screener for SGX

This year's list is interesting given the backdrop of the global pandemic. While some global markets have recovered, Singapore has not. Many of our large caps are directly affected by COVID, like our beloved national carrier, and related to that, our aerospace names like ST Engineering and SIA Engineering (both shown here). Next, our oil and gas names are affected. With nobody flying and moving around, oil demand collapsed. Oil prices went negative in March! 

So, Keppel, Sembcorp and Sembmarine were impacted badly. They in turn hit our banks. With these names making up the majority of the STI, this could be why global investors shunned Singapore's stock market. Given our dependency on the big global players for export and trade and tourism, our economy and businesses are also impacted badly. But fear not, QE Infinity will save the day!

With or without QE, there are always interesting individual stock names. 

Jardine Cycle and Carriage is a stock discussed before. There could be an opportunity to buy here given it's now below its rights issue price in 2015! It went all the way to $47 and then collapsed during COVID, since no one's in the mood to buy new cars. The lesson to be learnt here is that Singapore, because of our environment, will have very few long term buy-and-hold stocks. I thought JCNC could be one,  unfortunately, it did not turn out that way. I am glad I took profit when it was doing very well. So, one has to truly stick to Ben Graham's philosophy of selling when these stocks are near its intrinsic values. 

Most of our Singapore names are not compounders, i.e. their intrinsic values do not go up exponentially. In fact, some of them do not go up. So we must sell when they trade near their intrinsic values and we buy only when there is a huge margin of safety to stocks' intrinsic values. Some of the names today might have that margin of safety today: Singapore Exchange, Thai Beverage. These companies have good business models and rarely trades cheaply. So at teens PE and 3% dividend yields, it's worth looking at more closely. 

Poems stock screener for NYSE

For the next list, we have our NYSE stocks. Poems allow for screening for a few exchanges and it is worth going through exchange by exchange. For the purpose of this post, I am doing just for NYSE. Using almost the same criterias, the screen churned out an interesting long list of names. Just to name a few: 3M (discussed here as well), Blackstone, Coca Cola and Kellogg. All of these give at least 3% dividend yield. 

So while markets are near all time high, there are still cheap interesting names. We are seeing the very similar dichotomy seen during the dotcom bubble. IT and tech names populated people's mindshare and old economy names were forgotten. Today, the FANGs stocks make up more than 20% of the US indices and Nasdaq is at all time high. Tesla, making 300,000 cars is bigger than Toyota making 10m cars. Meanwhile, interesting old economy names like 3M and Coke continue to generate 30-40% ROEs but are trading at significant discount to loss-making companies. 

Markets are as such. While they are efficient, they reflect the thoughts of all its participants and sometimes, these thoughts do not make sense. That said, we must always remember wisdom from the greats - John Maynard Keynes quote comes to mind:

"The market can remain irrational longer than you can stay solvent."

Don't bet the house on buying this list of names or go shorting FANGs or Tesla. Be prudent and do due diligence before betting. An investment operation is one, through analysis, provides capital protection and promises a satisfactory return. Anything else is speculation. Cheers!  

As usual, here's the past lists:

2019 Dividend List
2018 Dividend List - Part 4
2018 Dividend List - Part 3
2018 Dividend List - Part 2
2018 Dividend List - Part 1
2017 Oct Dividend List - Part 2
2017 Oct Dividend List - Part 1

2017 Mar Dividend List

2016 Dividend List - Part 2

2016 Dividend List - Part 1

2015 Dividend List - Part 2

2015 Dividend List - Part 1

2014 Dividend List

2013 Dividend List - Part 2

2013 Dividend List - Part 1

2012 Dividend List

2011 Dividend List

2010 Dividend List

2009 Dividend List

Huat Ah!

Charts #33: Global REITs

 Found a good chart depicting the global REIT space.

The world has changed since COVID-19, but I don't think retail and office will collapse 30-40% over the long run. Humans are creatures of habits and we eventually revert back to our old ways.

Although, travel will take a much longer time to comeback, so hotels need to have sufficient cashflow to tide over the next 1-2 years. Hope this helps!

Books #10: Ray Dalio's Principles

I have not been able to put this book down for the last few weeks. Even though I read the very first version when it was published as a memo in pdf format many years ago. It was already very good then and I printed and kept a copy. But the book is 100x more awesome. If you have not read it, pls go pick it up today. This is one of the best books written ever.

For the un-initiated, Ray Dalio runs the world's largest macro hedge fund called Bridgewater. He is a multi-billionaire, made from investing and he attributes his success to his principles for work and life. Hence the eponymous book. He has never published his investment track record, but like Warren Buffett, he probably made most of his money in the earlier years. Bloomberg published a league table (below) a few years ago.

Bridgewater's returns

Well, track record aside. The book is a page turner because every sentence just made sense. At the core of it, as Ray puts it, life is about seeking the truth and embracing reality. More often than not, we do not want to face reality. We somehow believe that if we think hard enough, or want things bad enough, we can bend the truth. For instance, we want a nice body. No belly fat, good muscles, ideal BMI of 20. Yet, we do not schedule even an hour per week at the gym. We snack on potato chips, drink alcohol thrice a week and eat ice-cream all weekend. This is not understanding the truth nor reality. 

Yes, we can change reality by scheduling and actually going to the gym. Until then, we must look at the truth in the mirror. The verdict can always change, as Mariah Carey has shown us. The right pic below is unflattering but apparently she is now fit again (in 2020).

Mariah Carey: 90s vs 2018

Beating the markets is all about understanding reality. This reality takes the best minds to figure out. One head is not enough. Warren Buffett had Charlie Munger and George Soros had Stan Druckenmiller. So at Bridgewater, Ray Dalio made the best and the brightest put all their heads together and debate to seek the truth about markets. But it can be super tough. Smart people all have egos and all of them want to bend the truth to fit their own reality. So it takes time to figure out who's really interested to just seek out the truth.

To Ray, only 100% open minded and yet assertive people are able to achieve that. These people seek out others to disagree with them, in order to get to the truth. They will suppress their ego to do that. If they are wrong, they admit so, change their mind, reverse bets and make money. Closed minded, egoistic, smart people are the most dangerous. Naturally, nobody will volunteer to tell you they are closed minded and/or egoistic. So it took Ray 40 years to figure things out. Here's just a few best quotes:

1. Beware of assertive fast talkers, they use speed as a way to push their agenda past other's examinations. Slow them down, make sense of things before conceding.

2. Open minded people ask questions, closed minded people always tell you what they know, even if they hardly know anything. They are typically uncomfortable being around those who know a lot more than they do. Closed minded people will just waste your time.

3. Being open minded is more important than being smart. It is hard to be open minded and assertive. Some people are too willing to accept others' views at the expense of their own. One must be both open minded and assertive.

4. Watch out for people who think it is embarrassing not to know. They are likely to be more concerned with appearance than seeking the truth. These people go for style and form over substance.

5. Don't worry about looking good, worry about achieving your goals. Get over blame and credit and get on with accurate and inaccurate. The need for phoney praise needs to be unlearned.

6. Reflect on pain because pain leads to growth. Remember that the pain is all in your head. To evolve, we need to confront the pain and see clearly the paradoxes. Reflect, learn and resolve them. The past no longer matters except as a lesson for the future. 

7. Don't be naive, most people will pretend to operate in your interest while operating on their own.

8. Everyone has opinions and they are often bad, including your own. Only listen to the believable ones who are open minded. After making sure they have demonstrated believability, with track record, reason and logic.

There are way too many nuggets in this book. Hopefully I can find time to organize more of them. 

Hope this helps! Huat Ah!

Charts #32: COVID Market and Currency Impact

COVID-19's impact on the markets and currencies provide interesting perspectives. Tech stocks has completely outperformed as social distancing forced people to carry out more activities online. Nasdaq zooming passed its all-time high is exemplary.

Source: Asian Nikkei Review

The impact on currencies tell two tales. Developed markets are doing much better than emerging markets. The virus does differentiate. If you live in a developing country, with poorer social infrastructure, chances of death is that much higher. The economies of weaker countries will find it harder to come back after the coronavirus crisis.

Is This The Beginning Of The End For Singapore?

Is this a new dawn for Singapore? Or the beginning of the end for Singapore? What does it mean for Singapore stocks? Or properties? Or just investment into the little red dot in general? These are investors' questions. 

Yesterday, we saw the results of Singapore's 13th election and the first held without any public rallies due to COVID-19. It was supposed to be a breeze for the ruling party, the handling of the COVID-19 crisis while having small hiccups was largely successful hitherto. The Government dough out huge payouts to Singaporeans during the crisis. That's helicopter money in SG style! And according to past experiences, Singaporeans always wanted strong and safe hands to steer them out of the woods. 

Yet, Singaporeans voted the most number of opposition candidates into the Parliament since independence. The ruling party lost the second Group Representation Constituency (GRC) after losing the first one in 2011. The Prime Minister in waiting Mr Heng Swee Keat only managed to secure 53.4% of his East Coast GRC votes. This was a body blow to his East Coast Plan!

Singapore Election Results from 1991-2020

The ruling party, People's Action Party or PAP, has always warned that Singapore cannot afford any mistakes. They are the best steward for this Little Red Dot. They have done it for 50 years and they have the track record. If we screw up, global investors will flee on the first flight out, or the first trading week. We will be doomed. No one owes Singapore a living. We have to make our own. That means not opposing the Gahmen (Singlish for Government).

But is it true?

Perhaps so, until the 2000s. But over the last twenty years, Singapore as elevated its position into one of the top global cities in the world. We have one of the world's most expensive properties and one of the highest standards of living globally. We are often mentioned in the same breathe as London, New York, Hong Kong and Tokyo. Singaporeans travel all over the world, see other cities and know this.

Our first few generations of leaders brought us here, kudos to them. 

Our properties prices has risen on the back our status elevation and global quantitative easing (QE) by the large central banks. QE has also been elevated to another unprecedented level in the name of fighting COVID-19. Central bankers simply printed money and shoved it down people's chimneys. This is also called helicopter money.

As such, Sky Habitat did not fall from $1,700psf despite my quadrilogy rambling seven years ago. Prices remained sky high as we became the global playground for the rich and famous. We may never see property prices falling, PAP or not. Well's that is barring a super major screw-up if the Opposition takes over, which is hard to imagine.  Hey, Worker's Party MPs also own properties right? So in short, Singapore property prices will continue to go up, as with Hong Kong and the other major cities. In fact, if Hong Kong properties are not falling, then Singapore should be even safer.

But what about stocks? Businesses? Foreign direct investments? Startups?

Straits Tines Index since 1987

Well the Straits Times Index (STI) has plateaued since the mid 1990s and peaked in 2007. We have not been able to break 3,800 since then. This has to do with our inherent strength as a young island-city nation. In the 1990s, the STI was driven by our SOEs: Singtel, SIA, DBS, Keppel and the likes. As our economy grew, they did well. They became big enough to go acquire other companies in the region. But that was that. Our market today is still dominated by these companies. There are no large home-grown listed companies run by Singapore entrepreneurs. 

Okay, there's probably one or two lah. Like Wilmar, part of the Robert Kuok Group, but the man Robert Kuok himself is more Malaysian than Singaporean. Then there is Thai Bev and Top Glove but these are also not started by Singaporean entrepreneurs. Going further down the market cap list, we have Olam (started by an Indian born in India) and Venture (both not in the chart below though). So perhaps today, it is Venture, our truly homegrown listed company run by a Singaporean entrepreneur. 

There was also Creative, but it is way down the list today at just SGD200+m in market cap. There are a few that went delisted or never bothered to list, like our Popian King. But the moral of the story for the STI is this - we produce a dearth of entrepreneurs because of our Gahmen policies which include education, trade, foreign investments, public service affected everything including our talent pool's career paths, our business mix etc that resulted in the lack of entrepreneurs.

Market Cap Ranking on SGX

So the stock market is not likely to go ballistic from here. I don't think the Worker's Party will make it worse. Neither can the PAP make it better. It is probably gonna be status quo and global investors know this. We do have to continue to do well with foreign direct investments and drive the economy by attracting global talent and tourism. That way, our local businesses can thrive. The Opposition, or maybe the PAP itself, might screw things up here. We may not like it but we have to continue to grow to 8-10 million people. That is the city's evolutionary path, any city's evolutionary path.

What's the point if a city cannot grow? Let alone a city-nation without hinterland.

In the longer term future, we do have to do something with our education. We have discussed education here some time back. Our pressure cooker education system can produce exam smart students but they are not ready for the future. Our students can only score in exams. If they cannot talk well, cannot program and lack EQ, how do they fight children from the US, China and India? How to compete with A.I.? We need innovative students with more entrepreneurial spirit. Did the Sengkang parents bite on this issue and reject PAP? Maybe so. It is truly an important issue. Of course, the Government knows this. We have time to improve. Hopefully we can.

So in short, no. This is not the beginning of the end for Singapore. 

Our property market has the biggest tailwind behind its back called global QE. Neither WP nor PSP can stop it. Property prices will continue to go up. Even properties in Sengkang. Our stock market has plateaued and will stay so unless we make some radical improvement. We can do this by producing more entrepreneurs, and we need to fix our education system to do that. It is imperative we evolve and do that.

Huat Ah!

SIA at $10...Dream Long Long...

Here's two interesting charts on Singapore Airlines (SIA) that I found doing simple desktop research in late June. It shows the destructive nature of dilution including rights issue and other forms of equity capital raising. These charts illustrate how dilution works negatively for investors and they are great reminders that we have to invest in businesses with strong franchises which require little need for additional capital constantly.

The first chart below is a snapshot from Google showing SIA's share price since 2008 or so. This chart adjusts for the recent rights issue that SIA or SQ (its flight code) did in order to survive. The share count has since more than doubled and as such Google adjusted its share price accordingly. Historical prices now showed that SQ did not trade above $10 for the past 10 years based on the new share count (which is more than doubled before its rights issue).

SQ's price chart from Google

This is the correct representation. Kudos to Google. As old timers in the Singapore stock market would recall, SQ traded above $10 for most of its life as a listed stock. But it will almost never go back there because of the massive dilution/rights issue. 

The new $10 is $5. To reiterate what I wrote previously (in the post "What To Do with SQ's Rights Issue", the range of intrinsic value (IV) for SQ is probably in the vicinity of $3.3 to $5. Simplistically, I did a back of the envelope calculation which put the median of $4.2 as the new IV. As mentioned, if it falls close to $3, then we have a good margin of safety and SQ could be a profitable trade (but hey, we are value investors, not traders right?).

This second chart below shows SQ's share price but it's from Yahoo! Obviously Yahoo's A.I. or whoever is doing the charts hasn't gotten things right. We see SQ's share price showing some old prices, like SQ was trading at $16 in 2010 (which is shown as $8 in the Google price chart above). The Yahoo! price chart goes way back, so we see what the old timers see, SQ trading above $10 for most of its trading history. That's a mirage. A dream long gone. We see how the price then fall off the cliff from $8 to $3.75 today. Which is true, but with the adjustment not factored in, the whole picture doesn't gel.

Maybe that's why Yahoo! is no more and Google rocks!

SQ's wrong price chart from Yahoo!

When a dilution occurs, the share price has to work doubly hard to get back to where it was. Some companies like to do small rights issues in the name of M&A or other capital needs for growth, causing a 20-30% dilution. If we get lucky, or if the company's management is really good, this dilution is justified and the share price can compound growth and generate good returns to come back. 

But more often than not, this doesn't happen and investors get screwed.

In cases of massive dilution such as those we saw this year in Singapore: Singapore Airlines and Sembcorp Marine, investors are forced to cough out a lot more money and those who do not will never see their capital. Well, for those who do cough up, it's still tough. The $3 rights have 75c of profit given that SQ share price is now $3.75, but what about those lots invested previously at $6? It's just throwing money to stay in the game. The verdict is not out. We may see second waves and more rights issues.

So that's just investing. Buyers beware. We have dream long long to see SQ at $10 again. (Translation from Singlish to English: stop dreaming SQ will go back to $10 one day.) 

Caveat Emptor. Happy Independence Day! Huat Ah!

Book #9: Security Analysis - Chapter 2

Security Analysis is a seminal book written by the grandfather of value investing Benjamin Graham and David Dodd, a professor at the Columbia University. It was published in 1934. I started reading it about a couple of years ago but have yet to reach Chapter 3 (out of over 50 chapters). The book has over 700 pages.

The reason for such slowness is due to the way this book was written. First, it was written by two intellects espousing difficult concepts in investing. The language they used is not common day English and it does not help that it was written over 80 years ago when the usage of English wa probably different. Nevertheless, I believe there is value in finishing this book and as I complete these chapters, I hope to jot down my learnings here.

The first lesson learnt today is about trying to model earnings trend. As it is now vs 80 years ago, analysts like to model future earnings. They could create models for the next 5 years, or the next 10 and based on their model, they believed they can calculate the intrinsic value the stock. This is also what I have done for various stocks on this infosite.

To the grandfather of value investing, this is actually bullshit. The future earnings, in their minds, are not even quantitative numbers. They are merely qualitative assumptions of the future. The way they explained it, only past financial numbers are quantitative. They are track record achieved and they provide an idea how this business can perform and how cyclical or defensive the business can be.

They look for variance in earnings, look at long term (10 years) trends and is very discerning about what is truly quantitative i.e. not disputable. I guess this is simply another verification of how Ben Graham was always looking at hard numbers, net nets and balance sheets because everything else is just qualitative.

So this is it, first lesson from Security Analysis. Hope to come back with more in the future chapters!

Thoughts #21: Venezuela

I have followed Venezuela's cautionary tale with sadness. It is a reminder to me how GFC could have crippled the world. What we see in Venezuela today is what could have happened with we screw up our financial system. Here's a quote from FT:

Nearly 5m Venezuelans have left since 2015 — about 15 per cent of the population — and another million are expected to depart this year. That could make the crisis the world’s biggest refugee emergency, surpassing Syria. Unlike other humanitarian crises, it is a disaster caused not by war or natural disaster but by misrule on a grand scale.

With GDP collapsing more than 60% and hyperinflation rendering its currency worthless, it is a broken country now with no recovery in sight. It is another reminder how commodities (Venezuela has oil and soft commodities and benefitted from the boom 2007-2012) can be the biggest curse.

When the COVID Wave Strikes, those Swimming in Sembawang needs Rights Issues

Warren Buffett famously said, "when the tide is out, then we know who is swimming naked". Well in Singapore today, it's rights issue buffet for companies that start with S. COVID-19 has brought down our Singapore Inc companies like dominos. We saw Hin Leong, which didn't even had a chance to do rights issue and went belly up. Then our beloved national carrier Singapore Airlines raised S$15 billion in March which was more than twice its market cap. 

Who's swimming naked?

Now, we have the Sembawang Corporation Group in trouble. More specifically, Sembcorp Marine (SMM) is in trouble. Its parent, Sembcorp Industries (SCI) and grandparent Temasek are going to save it. Not without caveat though, SCI will disown the child by giving away SMM shares to its own shareholders. But the way it is done, minority shareholders of SMM will need to cough up a lot more money to stay in the game. Yes, minority shareholders in Singapore got screwed, again!

Here's the key highlights of the proposed transaction taken from SCI's website:

1. S$2.1 billion renounceable Rights Issue 

• Sembcorp Marine to undertake a S$2.1 billion renounceable Rights Issue 

• 5 for 1 at S$0.20 per share at 31.0% discount to TERP based on 76.5% discount to last close of S$0.85 on 3 June 2020 

• Sembcorp Industries to subscribe for its pro rata entitlement of S$1.27 billion and take up an additional S$0.23 billion if necessary to a total commitment of up to S$1.5 billion 

• Sembcorp Industries will set off its outstanding S$1.5 billion subordinated loan extended to Sembcorp Marine in June 2019 to subscribe for the rights issue; the loan will convert into equity on Sembcorp Marine’s balance sheet 

• Temasek has agreed to sub-underwrite the remaining S$0.6 billion of the rights issue with no sub-underwriting fees 

2. Proposed Distribution of Sembcorp Marine shares to Sembcorp Industries shareholders 

• After the completion of the rights issue, Sembcorp Industries proposes to undertake a distribution of its stake in the recapitalised Sembcorp Marine to Sembcorp Industries shareholders on a pro rata basis as dividends 

• Sembcorp Industries shareholders will receive between 427 and 491 Sembcorp Marine shares for every 100 Sembcorp Industries shares owned, with no cash outlay 

• The transaction will result in the demerger of Sembcorp Marine from Sembcorp Industries

The chart below shows clearly how SCI will no longer own SMM after everything is said and done. Temasek will still own both entities but SCI's shares in SMM will be transferred to SCI's own shareholders. As such, SCI's public shareholders will own 30.9 to 35.4% of SMM. This effectively demerge SCI and SMM. Some say paving the way for merger between Sembcorp Marine and Keppel O&M. But, we shall see, it is never so simple.

SCI to gives its SMM shares to its shareholders

To sum things up, SCI shareholders got the long end of the stick, while SMM shareholders got screwed. SMM share price collapsed 30-40% today dropping to 50 cents at one point before recovering while SCI share price rose 30-40% to above S$2. The market verified that this is a transfer of wealth from SMM minority shareholders to SCI minority shareholders. SMM shareholders will not see their capital if they do not subscribe to the rights issue. Well, also not that high a probability if they do! SCI shareholders will get SMM shares at the end of day and get to sell them for a bit more profit. 

Similar to SIA's situation, SMM raised an amount more than its market cap. S$2.1 billion vs its market cap at S$1.6 billion-ish before the announcement. So the share price will have to more than double just to get back to where it was. During the best of times, its market cap went to S$11 billion! Barring any miracle, we can say that it will never get near that market cap. For the last five years, its market cap hovered between S$2.8 to S$3.6 billion.

Looking past the last two decades, there are almost as many years as it was free cashflow (FCF) positive as it was negative. It's so volatile we cannot even compute a FCF number. For what it is worth, the average annual FCF is minus S$700m over the last 20 years. It did make an average of c.S$250m from 2000 to 2009 but a huge negative from 2010 to 2019. In short, it's hard to justify any market cap using FCF. Well, it is a similar situation with SQ but airlines, rightly or wrongly, command a higher EBITDA multiple and fortunately for airlines, EBITDA is not FCF. 

Capex heavy businesses

Again as with airlines, the oil and gas industry is highly capital intensive, which means it is always in need of capital to drill, to grow and to compete. Look at the stuff Sembmarine needs to build (above), it sucks, time, capital, manpower. It needs land, large building and factories, permits etc. It's just not good business. To make things worse, companies like Sembmarine has to take on leverage to manufacture these rigs and ships which weakens its balance sheet. So when the tide goes out, or when shit happens, everyone is screwed. 

Once upon a time, I liked that Keppel and Sembmarine ruled the world with high market share in rigs. They got scale, they even monopolized the design of the rigs. They were riding high on high oil and gas prices. COVID-19 showed us high oil price was a mirage, something that just goes up and down. It can also go negative. Well, I guess there's a lesson to relearn here: avoid capex heavy businesses. 

So while Sembcorp Industries shareholders are laughing now, well, SCI is in the same capex heavy shit business. Building power plants and utilities is not like selling ice creams. SCI shareholders might want to think about selling out before the next wave goes in (or goes out) depending on which metaphor you like. Meanwhile, stay safe!

Huat Ah!

 

Book #8: Billion Dollar Whale's Life Lessons

This is a continuation of the previous post.

In the last post discussing Billion Dollar Whale, the book depicting fully the 1MDB scandal and Jho Low's craziness, we learnt a few lessons on fraud detection. Today, we would discuss the last simple trick he used - putting in slight discrepancy in names of bank accounts and incorporated entities.

In order to fool people, Jho Low created shell companies which he controlled in Cayman Islands and other jurisdictions with very relaxed rules and regulations. These jurisdictions are happy to simply collect fees, without doing too many checks, including the previously discussed blatant oversight on lack of beneficiary name during bank transfer.

Jho used an ingenious trick which was to create shell companies with names that were very similar to the real beneficiaries. So it would be like 1MDB Investment Corp Ltd, which have nothing to do with the real 1MDB because the actual entity was 1Malaysia Development Berhad Ltd. Okay, I simply created these names without referring back to the book. But you get the idea.

The book introduced half a dozen of these examples used by Jho Low to wire money illegal to himself or his cronies. This allowed him to siphoned off a few billion dollars from Malaysia. He used the money to party, buy luxury yacht and financed his crazy lifestyle.

Google screenshot of Jho's various party photos

There are two lessons here: always double check when names are similar but not a 100% match and when there is something fishy, make sure we figure the whole damn thing out. The second lesson is that we cannot rely others to do the checks. The 1MDB saga showed that a lot of international wire transfers are simply done unchecked or even if checks were done and questions were asked, those not involved tend to let things slip through. So it ties back to the point made in the previous post. When there is no oversight, then chances are that things will go wrong.

Here's the summary of the three financial lessons:

1. Be careful when there is no transparency

2. Be very vigilant when there is a lack of independent oversight

3. Look out for the small discrepancies and figure things out when the parts doesn't gel

The life lessons from Billion Dollar Whale were more interesting, in my opinion. It is also related to what Warren Buffett referred to as people's inner scorecard as opposed to outer scorecards. According to the book, Jho Low lived by other people's scorecards of himself. It was this desire to prove himself that led him down the dark path. Well, that's Billion Dollar Whale's authors interpretation, we will never know for sure, but it's important to understand this scorecard concept.

People who live by how others score them will forever be chasing other people's dreams. Outer scorecard matters, if someone whom you trust and respect gives a realistic scorecard of you and would like you to improve. It then helps to compare our own inner scorecards to these important outer scorecards. So not all outer scorecards are bad, but when all outer scorecards matter more than inner scorecards, then the balance is upset and things can go wrong. 

In the book, Jho Low was being describe as an Asian boy who wasn't in this place during his school years in UK's top elite schools. This planted the seed of desire to prove himself and impress others. He wanted it so badly to the extent that he borrowed his friend's bungalow and put his own family photos to trick visitors that the big house was his. There were other episodes mentioned to put forth the story as well. If true, then Jho Low's story really is the cautionary tale to remind ourselves how living by outer scorecards can screw up everything.

His balance was totally upset. 

The other big life lesson was how Jho Low failed to get himself out of trouble when he had the chance. This was at the time of the so-called "third heist" of USD 3 billion dollars which Goldman Sachs helped 1MDB raised by selling bonds to gullible investors. After jumping several hoops and hurdles, this ridiculously went through all the checks and Jho Low got the money. All 3,000,000,000 US dollars! At that point, he could have used part of the 3 billion to plug his previous holes, which amounted to a billion or so (if I recall correctly). That way, he could have bought time to finally invest and claw back his losses. But he didn't and spent it on luxury yacht, pointless stuff and parties again. So here's the last lesson.

Once we do something wrong, it is very hard to turn back from black to white. It's a slippery slope down, like joining the dark side. Jho Low couldn't stop himself. It was akin to an addiction. Once you crossed the line, your mind tells you just keep going. It's been crossed, no point turning back. I stole a billion, why not steal three? Who's counting anyways? It takes a lot to redeem oneself. It is also very difficult for people from the other side to help. It is almost has to be one's own journey back. We have real life, fictional and historical examples of this: Benny Teo, founder of 18 Chef in Singapore, Darth Vader and St Paul from the Bible. Yes, only one real life example. Such redemptions are truly far and few in between.

So, don't cross the line. 

Circuit Breaker Ending! Huat Ah!