CapitaLand's Q4 profit falls 45% on one-off loss

[SINGAPORE] Singapore's CapitaLand Ltd , Southeast Asia's largest property developer, said on Wednesday its fourth-quarter profit slumped 45.6 per cent on the year on a one-off loss on divestment of part of its Australand stake.

CapitaLand, which operates in Singapore and China among other countries, reported a profit after tax and minority interest (PATMI) of S$142.9 million for the October-December quarter.

The loss on the Australand Property Group stake sale in November also affected CapitaLand's full-year profit. Its 2013 PATMI dropped 8.7 per cent from a year earlier to S$849.8, undershooting an average forecast of S$976 million by five analysts polled by Reuters.

Operating PATMI, a gauge of profitability of core business, was S$527.7 million for the year, below a forecast average of S$555.7 million.

Biosensors share price jumps on rumours of China Citic's interest

By

Angela Tan angelat@sph.com.sg

         

 

 

Citic Private Equity Funds Management Co. is considering buying full control of medical devices maker Biosensors International Group Ltd., two people with knowledge of the deliberations told Bloomberg - PHOTO: BIOSENSORS INTERNATIONAL GROUP 

CITIC Private Equity Funds Management Co is considering buying full control of medical devices maker Biosensors International Group Ltd, two people with knowledge of the deliberations told Bloomberg.

The wire agency said the Beijing-based firm, an arm of China's state-backed Citic Group Corp. conglomerate, is in talks with several banks about financing for a deal. It owns about 22 percent of the Singapore-listed company, which had a market value of S$1.5 billion ($1.2 billion) as of Monday.

On Tuesday, Biosensors shares opened at 87 cents each before jumping to S$1.03. They are currently trading around S$1, up 13 cents or 15 per cent, the biggest intraday gain since September 2010, prompting a query from the Singapore Exchange. 

Sources told Bloomberg that Citic Private Equity is considering an offer for the rest of Biosensors after the company lost about half its value from a February 2012 peak.

Real income up for most working household

Singapore's median household income from work rose to S$7,870 in 2013, up 4 per cent from the year before. Taking inflation into account, the real income growth is 1.6 per cent, according to the Department of Statistics 2013 report on key household income trends.

 

  

SINGAPORE: The gap between the rich and poor in Singapore narrowed to its smallest in years, according to an annual report titled "Key Household Income Trends, 2013" by the Department of Statistics.

Last year, real income also went up for all working households, except for those in the top 10 per cent income bracket.

In 2013, Singapore's median monthly household income was S$7,870. Taking into account inflation, this is a 1.6 per cent increase from the year before.

For per household member, the increase is 3.2 per cent.

However, for the top 10 per cent of earners, the income per household member fell 5.2 per cent.

Among top earners, households with at least one member who was an employer saw the largest drop of 11 per cent in average household income per member.

Households headed by managers also saw a larger decline of 8.7 per cent, compared to those headed by professionals (+1.5 per cent), and associate professionals and technicians (-3.7 per cent).

Nevertheless, over the last five years, real incomes across all brackets still rose.

From 2008 to 2013, the median household saw its monthly income grow 11 per cent in real terms.

Experts say the pervasive real income growth was no surprise, given Singapore's better than expected economic performance in 2013 but Dr Tan Ern Ser, a sociologist at National University of Singapore, said the happy figures do not always reflect perceptions on the ground.

Dr Tan said: "I think the low income do feel they benefited from the government transfers but maybe the same cannot be said for the middle income. It's about expectations. I think the middle-income expect more, and if they're not getting as much as they expected, they may still feel that the figures don't really reflect their true sentiments or feelings about the whole matter."

The report also highlighted the country's narrower income gap in 2013.
Singapore's Gini coefficient, a measure of inequality, fell to its lowest at 0.412 in more than 10 years -- if government transfers and taxes are included.

Without government transfers, the Gini coefficient still fell from 0.478 in 2012 to 0.463 in 2013.

The report said various government schemes gave a boost to resident households living in smaller HDB flats.

Households in HDB 1- and 2-room flats received S$8,630 per household member on average from the government, higher than the S$7,210 in 2012.
Annie Koh, associate professor of finance at the Singapore Management University said: "This government transfer element, there's nothing wrong with it. People might think, oh these are all schemes to move towards an election year, but this is what's happening across many (countries in the) developed world.

"If you leave it to market forces, you're going to see widening income gaps, and there're a lot of these trans-generational transfers, and taking from the richer in order to transfer so that you have more inclusive growth."

Looking ahead, while more government schemes may be expected, Dr Tan said Singapore's social safety nets will also remain focused on the idea of self-reliance.

"As a basic principle, it's still always about self-reliance but I can see that in the last few years, there have been a lot more transfers, in terms of subsidies. Going forward, there will be more, but at the same time I believe the principle remains, to ensure whatever programme we put forth is sustainable," said Dr Tan.

- CNA/xq/fa

Simple Asset Allocation : Only two classes!

Uncle8888's simple asset allocation strategy:


Two classes only: Volatile and Non-volatile

Asset Class 1: Volatile asset that is marked to current market price to generate investment income.It can expand or contract.

Asset Class 2: Non-volatile asset has been planned for draw-down when necessary to meet any shortfall in investment income generated from Asset Class 1. (Target: To be at least 67% of yearly household expenses @ 3% inflation rate till 2036)


A worry less model in an uncertain future market?

How are you preparing financially for your kids' university education???

Read Uncle88888's plan? Over Long Term We Are Safe?

55% of Singaporean parents not financially prepared for kids' education

By

Jacquelyn Cheok jaccheok@sph.com.sg

 

 

MORE than half of Singaporean parents are not financially prepared for their children's education, the 2013 OCBC survey on family financial awareness revealed.

The survey polled over 570 respondents comprising parents with children below 16 years old, parents-to-be and those planning to start a family on their investment attitudes and financial habits.

More than half say they are either behind target or have not begun saving for their children's education. Only 45 per cent of them proclaim to be financially prepared.

About a third of parents or parents-to-be also believe they will be able to fund their children's tertiary education through savings or fixed deposits.

Moreover, close to half of the parents claim to have no hospitalisation plans for their children. The top reasons for this are procrastination and concerns about cost.

Some dividends are not meant for investors to keep forever or spend them off???

Most of us will love dividends. Me too!


But, some dividends are not meant for investors to keep forever or spend them off.

Investors are just custodian for this type of dividends for a few years. After that these dividends will be taken back either part of them or all of them to the CEOs as capital for re-investment "opportunities".

CEOs will promise investors "bigger" dividends for them to keep as custodian for another few more years.

And the game continues .....

Read? Right issues


Great CEOs are great allocator of capital for growth and they don't keep coming back to long-term investors to ask for more capital.


Read this book? The manual of Ideas


If you are not aware or have read something new today, for a moment, think silently and deeply about it.


Allocator of capital or Alligator of capital?

Upgrading before it is too late???

Real People, Real Story ....

Down-grading at their 60s when they realized it is too late???



One Guy:


 ...   He told me he has no any other investment plan except to leave it in CPF to service his housing loan - another 11 years to go!!!

Read? leave it in CPF to service his housing loan - another 11 years to go!!!




Another guy:


He is 59. Instead of looking forward to his retirement, he is hoping that his boss will recommend him to work till 65.

HOW COME????


He took profit on his first HDB home and then took a second housing loan for his replacement home.

He still have another 7 more years to clear his housing loan.



Read? Home for Living and not for profit taking (8)

Cast Yourself in the Role of Capital Allocator

Just For Thinking ....
 


From The Manual of Ideas:

 

 

 

 

Looking back on hindsight, Uncle8888 has allocated significantly large portion of his investing capital into his best three ideas:  Kep Corp, Semb Corp and DBS

 

So far, he is not that bad as capital allocator.

 

Read? Why it is easier to become rich from property and not stocks? (3)

 

 

He must continue to execute this role of capital allocator more effectively in the next market cycle with his War Chest on standby.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book that I have read. May be useful to you too: The manual of Ideas

The Manual of Ideas: The Proven Framework for Finding the Best Value Investments

 

 

For those seeking the Kung Fu of Value Investing. It may be good for reading.

 

 

 

 

S'pore banks Q4 result

DBS CEO said that the bank "plans to stick to 58 cents for the foreseeable future"


CW8888:

That means dividend is raised by 3.6% from 56 to 58 cents

CPF OA rate @ 2.5% on regular CPF investment income peanuts return???

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

― Albert Einstein

 

 

 

 

CPF OA rate @ 2.5% on regular CPF investment income peanuts return???

 

 

What Uncel8888 has realised on his yearly dividend from Kep Corp credited to his CPF Investment Account.

 

Taking a conservative approach to compute yearly interest earned based on principal (accumulated dividends and interests) at the next year end.

 

For example:

 

The calculation is as follows for the first three year:

 

 

Year 1: Dividend = $0.50, Principal = $0, Interest earned = $0

Year 2: Dividend = $0.32, Principal = $0.50, Interest earned = $0.0125

Year 3: Dividend = $0.30, Principal = $0.833 ($0.50+0.32+0.0125), Interest earned = $0.0208

 

 

 

 

 

Additional investment return on Kep Corp arising from yearly compounded return at CPF 2.5% rate is 66% or annualised return at 4.7% over 13 years.

 

Not really peanut return. Right?

 

 

 

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”   

― Albert Einstein

 

 

How to become rich in stocks??? (22)

Read? How to become rich in stocks??? (21)


To become rich in stocks!



Many of us are still waiting for Mr. Fat Bear. Right?


Not only market timing matters.

We will need at least two Rights.


1. Right Timing

2. Right Growth-dividend stocks


See for yourself. It is self-explanatory.

 

 

 

 

No free lunch even for those have the patience to wait. Right?

 

Got homework to do?

 

 

 

 

 

DBS POSTS RECORD 2013 NET PROFIT OF SGD 3.50 BILLION

Total income rises 11% to new high of SGD 8.93 billion

 

SINGAPORE, 14 February 2014 – DBS Group Holdings’ net profit rose to a record SGD 3.50 billion for 2013. Including one-time items, net profit was SGD 3.67 billion.

 

Total income increased 11% to a new high of SGD 8.93 billion, propelled by higher loan volumes and broad-based non-interest income growth. The double-digit top-line growth reflected the depth and resilience of DBS’ regional franchise in a year marked by market volatility. Profit before allowances increased 13% to cross SGD 5 billion for the first time.

 

The stronger operating performance was partially offset by higher general and specific allowances, resulting in net profit growth of 4% before one-time items.

Full-year performance underpinned by double-digit income growth

Total income rose 11% to SGD 8.93 billion.

 

Net interest income rose 5% to a record SGD 5.57 billion. Loans increased 18% or SGD 38 billion to SGD 249 billion, led by regional trade loans, Singapore corporate borrowing and secured consumer loans. While the net interest margin of 1.62% was eight basis points below the previous year due to lower average loan spreads and yields on securities, it was stable during the course of the year with little quarterly fluctuations.

 

Non-interest income increased 21% to a record SGD 3.36 billion. Fee income rose 19% to SGD 1.89 billion. All fee segments grew by double-digit percentage terms, with contributions from wealth management and trade and transaction services reaching new highs. Stockbroking commissions and investment banking income benefited from stronger capital market activity, particularly in the first half. Other non-interest income increased 23% to SGD 1.47 billion as higher treasury customer income and trading gains were partially offset by lower income from investment securities.

 

By customer segments, Wealth Management income increased 18% to SGD 924 million and Small and Medium Enterprise Banking income grew 11% to SGD 1.37 billion. By product lines, income from treasury customer flows rose 19% to SGD 1.04 billion, accounting for a record 50% of total Treasury income from 44% in the previous year. Income from Global Transaction Services increased 5% to SGD 1.48 billion as double-digit percentage increases in loans and deposits were offset by lower rates.

 

Institutional Banking and Consumer Banking / Wealth Management, the two customer-facing business units, respectively accounted for 52% and 28% of the group’s total income. The remaining 20% was attributable to other activities, including balance sheet management, market making, and investment and trading gains.

 

Expense growth was contained at 8% to SGD 3.92 billion, giving a positive jaw of three percentage points. Cost-income ratio improved to 44% from 45% a year ago. Profit before allowances increased 13% to SGD 5.01 billion.

 

Total allowances rose 85% to SGD 770 million. General allowances increased in line with stronger loan growth while specific allowances doubled to 18 basis points of loans from exceptionally low levels a year ago.

 

One-time items amounted to SGD 171 million, comprising a gain of SGD 221 million for the partial divestment of a stake in the Bank of Philippine Islands less a sum of SGD 50 million set aside to establish the DBS Foundation to further the group’s commitment to social and community development.

 

Fourth-quarter income rises 10% from a year ago

Net profit for the fourth quarter rose 6% from a year ago to SGD 802 million. A 10% increase in total income to SGD 2.15 billion was partially offset by higher allowances. Strong business momentum resulted in fourth-quarter income crossing SGD 2 billion for the first time.

 

Net interest income increased 12% to SGD 1.45 billion as loans grew 18% and net interest margin was stable at 1.61%. Non-interest income rose 5% to SGD 697 million. Fee income increased 18% to SGD 439 million with wealth management, investment banking, trade and transaction services and cards leading the increase.

Other non-interest income declined 12% to SGD 258 million as there had been a gain on fixed asset sales of SGD 41 million a year ago.

 

Expenses rose 9% to SGD 1.03 billion. Profit before allowances was 10% higher at SGD 1.12 billion. Total allowances increased 32% to SGD 151 million as both general and specific allowances increased.

 

Fourth-quarter income maintained at previous quarter’s level

Total income was maintained at the previous quarter’s level as sustained growth in customer income offset lower trading gains.

 

Net interest income rose 3%. Loans grew 3% from regional corporate and secured consumer loans while net interest margin was stable. Fee income fell 5%, mainly due to lower contributions from loan-related activities. Contributions from other fee segments were generally maintained at recent quarters’ levels. Other non-interest income fell 9% from a decline in trading gains.

 

Expenses rose 9% due to higher computerisation and other non-staff costs. Total allowances were unchanged as both general and specific allowances were stable.

 

Fourth-quarter net profit was 7% below the previous quarter.

 

Balance sheet remains strong

Asset quality remained healthy. The non-performing loan rate was little changed from recent quarters at 1.1%. Allowance coverage was at 135% and at 204% if collateral was considered.

 

Liquidity continued to be ample. Deposits grew 15% or SGD 39 billion during the year to SGD 292 billion, in line with loan growth, and the loan-deposit ratio was maintained around recent quarters’ levels at 85%. Three-fifths of the deposit growth during the year was in US dollars from multi-national corporations, institutional investors and other customers.

 

The group was also well capitalised, with a total capital adequacy ratio of 16.3% and a Common Equity Tier-1 ratio of 13.7%.

 

The Board proposed a final dividend of 30 cents per share for approval at the forthcoming annual general meeting. This compares to a final dividend of 28 cents per share in 2012 and raises the full-year payout from 56 cents per share to 58 cents per share. The increase is in line with DBS’ dividend policy of paying sustainable dividends in line with its capital management objectives and long-term growth prospects. The scrip dividend scheme will be applicable to the final dividend. Scrip dividends will be issued at the average of the last-dealt share price on each of 12, 14 and 15 May 2014.

 

DBS CEO Piyush Gupta said, “Our record earnings in a year marked by significant market volatility are testament to the strength and resilience of our franchise. DBS is today operating on a higher trajectory and increasingly recognised as a leading Asian bank. To reward shareholders, we are pleased to raise our full-year payout to 58 cents per share. Going forward, we will invest in intensifying our efforts to digitise the bank and redefine the customer experience. We remain committed to stakeholder value creation and to shaping the future of banking."

 

Yield of dreams: Investors have "a once in a lifetime opportunity" in blue chips (2)

Read? Yield of dreams: Investors have "a once in a lifetime opportunity" in blue chips

DBS has raised its H2 FY 13 from $0.28 to $0.30 so Uncle8888's Yield of Dreams for DBS in FY 13 is 7.7% and 7% respective;y for his long-term pillow stocks.

Biosensors Q3 gain drops 55% to US$11.1m

By

Mindy Tan tanmindy@sph.com.sg

         

BIOSENSORS International's net profit for the third quarter ended December fell 55 per cent to US$11.1 million from US$24.9 million a year ago.

Revenue crept up one per cent to US$82.5 million from US$81.3 million.

This was largely due to growth in product revenue, which was offset by lower licensing revenue. Product revenue grew 6 per cent year-on-year to US$71.7 million, even as licensing and royalty revenue fell 21 per cent to US$10.8 million.

Basic earnings per share (EPS) fell to 0.65 US cents, from 1.41 US cents (before exceptional items) and 1.45 US cents (after exceptional items).

"In the third quarter, the operating environment for our business continued to be challenging. EMEA (Europe, the Middle East and Africa) and APAC (Asia Pacific) were the leading drug-eluting stents (DES) sales growth regions, although lower average selling prices remained as headwinds. In China, the weak market sentiment continued to cause some pressure on our revenue there," said Biosensors CEO Jack Wang.

Keppel FELS to build three jackups worth US$650 million for new customer

Keppel FELS Limited (Keppel FELS), a wholly owned subsidiary of Keppel Offshore & Marine (Keppel O&M), has secured contracts to build three high-specification KFELS B Class jackup rigs worth about US$650 million from new customer Fecon International Corp. (Fecon).

Backed by experienced industrial entrepreneur, A.P. Dobrov, Fecon is a new player to the offshore oil and gas industry, and is targeting the growing offshore drilling markets of Africa, Middle East, and Southeast Asia. In addition, Fecon's leadership team has extensive connections, experience and knowledge of working in Russia and has identified offshore drilling in Russia as a strategic market with good growth opportunities.

The three rigs are scheduled to be delivered progressively within 2H 2016.

Mr A.P. Dobrov, a representative of Fecon said, "The International Energy Agency estimates oil demand in the world to increase by 1.3 million barrels per day in 2014¹ and Barclays has forecast global E&P spending to reach a new record of US$723 billion in 2014, an increase of 6.1% from US$682 billion in 2013². There is a need for more high specification jackup rigs as the replacement cycle continues and we believe the robust KFELS B Class rig will be the most efficient rig in the greatest number of locations.

"Building three premium rigs at the same time will enable us to accelerate our presence in this industry and establish ourselves as a serious drilling contractor in the market. Being a new player, teaming up with the world's leading rig builder, Keppel FELS, will help fast track our entry into the market. Their track record of delivering on time, without incidents and on budget will ensure we get maximum value and returns on our investment."

The cost-effective and high-performance KFELS B Class rig is able to operate in water depths of up to 400 feet and drill to 30,000 feet deep. Customised to Fecon's requirements, the three jackup rigs will each have a full 15,000 psi BOP system, 75-feet cantilever outreach and be able to accommodate 150 persons.

Mr Wong Kok Seng, Managing Director (Offshore) of Keppel O&M and Managing Director of Keppel FELS said, "We are pleased that new customer Fecon has chosen to build three KFELS B Class rigs as the basis for their fleet of jackups. Our KFELS B Class rigs are the industry benchmark for jackup rigs with more than 50 delivered and operating successfully in various parts of the world including Southeast Asia, the Middle East, Gulf of Mexico and the Black Sea. I am confident these rigs for Fecon will be just as successful wherever they are deployed.

"Their efficiency, reliability, ease of operation as well as safety and environmental features make them the default rig of choice for both experienced and new operators. With these new orders, Keppel O&M currently has 27 KFELS B Class rigs on order."

Developed by Keppel's technology arms, Offshore Technology Development and Bennett Offshore, the KFELS B Class is customised to operate in a wide variety of environments and features an enhanced leg design for added robustness. The design incorporates Keppel's advanced and fully-automated high capacity rack and pinion jacking system, and Self-Positioning Fixation System.

The KFELS B Class provides maximum uptime with reduced emissions and discharges. For its environmental-friendly features, the KFELS B Class design was bestowed the prestigious Engineering Achievement Award from the Institution of Engineers Singapore in 2009.

The above contracts are not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the current financial year.

- End -

 

 

CW8888's own estimate on Keppel Order Book:

 

New customer Fecon International Corp. (Fecon).

 

Not bad!

 

Still can secure a new customer with three orders at one go. USD 217m per piece. Comparable to the previous order at USD 218.

 

 

 

 

 

 

 

 

 

Change Bait???

Catch no fish now.

Time to change bait?


STI back above 3,000

 

 

 

 

Plenty of cash available for baits. 

 

Income fish is easier to catch.

 

It is like catching Catfish.

 

We know where are they.

 

 

 

 

 

 

They said no action is also an action; but there will be an opportunity cost to it.

 

Counting the opportunity cost ....

 

No change bait!

 

Catch no fish!

 

What is likely to happen on 31 Dec 2014?

 

Likely to end up the year with - 4% off three-year target.

 

 

 

 

 

Change bait?

 

Still early in the year and plenty of time to think about it.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saving matters but Investing determines - Part 3 (Re-posted)

Current hot topic on 99-year leasehold HDB as an asset

Old blog post on 28 Apr 2010


Read? Saving matters but Investing determines - Part 3

US stocks soar on Fed, US debt ceiling progress

US stocks on Tuesday jumped more than one per cent after new US Federal Reserve chair Janet Yellen confirmed she would continue existing Fed monetary policy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NEW YORK: US stocks on Tuesday jumped more than one per cent after new US Federal Reserve chair Janet Yellen confirmed she would continue existing Fed monetary policy.

The Dow Jones Industrial Average leaped 192.98 points (1.22 per cent) to 15,994.77.

The broad-based S&P 500 surged 19.91 points (1.11 per cent) to 1,819.75, while the tech-rich Nasdaq Composite Index added 42.87 points (1.03 per cent) at 4,191.05.

The equities rally marked the fourth day in a row of gains.

Appearing in her first congressional hearing since taking the top post at the US central bank on February 1, Yellen said she expects to continue predecessor Ben Bernanke's plan to scale back stimulus and keep interest rates low until the labour market improves significantly.

The House of Representatives Republicans also signalled they would agree to extend the US borrowing authority without attaching controversial conditions. The announcement by House Speaker John Boehner averts a major showdown with President Barack Obama over raising the debt limit that could have rattled markets.

"The fact that Fed Chair Yellen didn't rock the hawkish boat with her testimony today and that the GOP-led House has agreed to bring a clean debt limit bill to a vote on Wednesday has bolstered the turnaround sentiment," Briefing.com analysts said in a market note.

Dan Greenhaus, chief global strategist at BTIG, attributed the market's rally since last Wednesday to solid earnings and recognition that financial headwinds in emerging economies are "somewhat country-specific" and not an instance of contagion.

CVS Caremark rose 2.7 per cent as earnings of $1.12 per share bested expectations by a penny on a four per cent gain in retail pharmacy same-store sales.

Telecom company Sprint reported its highest-ever level of subscribers with 53.9 million after adding 682,000 in the fourth quarter. Those gains helped the stock rise 2.7 per cent despite an operating loss of $576 million.
ConAgra Foods slashed its full-year profit forecast to $2.22-$2.25 per share from $2.34-2.38, citing customer-service problems following a reorganization, among other issues. Shares sank 6.3 per cent.

News that Groupon senior vice president Jeffrey Holden was leaving the online coupon distributor pushed shares 6.1 per cent lower.

A surprise departure at open-cloud company Rackspace Hosting also rattled investors. An announcement that chief executive Lanham Rapier had retired shaved 19.1 per cent from the stock.
Bond prices fell. The yield on the 10-year US Treasury rose to 2.72 per cent from 2.68 per cent, while the 30-year increased to 3.68 per cent from 3.66 per cent.

- AFP/fa

John Maynard Keynes’s Own Portfolio Not Too Dismal

By JOHN F. WASIKFEB. 10, 2014

 

 

 

WHEN it comes to John Maynard Keynes and his economic theories, the economist has long been a lightning rod as tall as the Empire State Building. Yet examining his investment success is another matter, and far less prickly.
 
Although this is a largely unknown side of his life, Keynes, while scourging Wall Street and advocating public spending to create jobs, was creating several fortunes by managing money. This part of his life should be of great value to anyone interested in creating and managing wealth.
 
The Keynes whom history knows best was the guiding light behind the many New Deal job-creation programs and several Keynesian stimulus programs since then, including the Obama stimulus plan of 2009. He was the intellectual father of the Bretton Woods postwar economic accords. He was also a bon vivant at the heart of the quasi-bohemian Bloomsbury group, a patron of the arts and a philosopher.
         
While he was extolling what eventually became known as “Keynesian economics,” he was also managing money for himself, as well as King’s College at Cambridge, his Bloomsbury friends and family, two British insurance companies, and investment funds that we would call hedge funds today.
 
After a few near-catastrophic market turns, he became one of the most innovative investors ever, inspiring investors and economic thinkers from Warren E. Buffett to Robert J. Shiller.
 
 
In researching a book on Keynes, I was astounded to find that none of his many biographies contained meaningful detail on his investment activities, although they were fairly well known by the cognoscenti in London and New York during the 1920s and 1930s. What I found was that Keynes stumbled several times before he succeeded — he was almost financially wiped out three separate times — but he got back in the game and altered his thinking to build wealth long term.
 
Most of what Keynes did in terms of investment innovation has been intricately documented by David Chambers, a professor at the Judge School of Business at Cambridge, and Elroy Dimson, emeritus professor at the London Business School. “Discovering a high degree of overlap with his personal stock portfolio,” Professor Chambers notes, the two researchers took an incisive look at Keynes’s portfolios at the King’s College endowment he managed from 1922 to 1946, when he died.
 
What emerges from Professor Chambers and Professor Dimson’s research, published in a Journal of Economics Perspectives paper, is a surprising portrait of an investment pioneer who started out as a “top-down” manager relying upon macroeconomic predictions of the economy’s movement and switched to become a “bottom-up” value investor focused on finding solid companies that paid dividends and had promising, long-term prospects.
 
 
Keynes vaulted into professional investing with a cocksure insider’s attitude. He had been an adviser to the British Treasury during World War I — until he walked out of the Versailles Treaty talks. Although he maintained and enhanced his Treasury and London financial district connections, he would publicly denounce the Versailles reparations forced upon Germany. Keynes correctly predicted that the treaty would lead to catastrophic economic instability in Germany, which he detailed in his classic “The Economic Consequences of the Peace.”
 
After the war, Keynes speculated heavily in currencies, but lost most of his capital in 1920 when several European currencies he was betting against recovered. Undaunted, he broadened his portfolio to commodities and eventually common stocks, which at the time was a rarity for institutional investors, who preferred safe bonds and real estate.
 
Although he was building wealth for his own account and the institutional funds throughout the 1920s, he did not see the 1929 debacle coming and was almost cleaned out again.
 
The 1929 crash and resulting Great Depression left Keynes intellectually shellshocked, so he changed his strategy. Professor Chambers and Professor Dimson discovered that sometime in the early 1930s he backed away from short-term trades and commodities and focused on stocks. No longer would he pay attention to overarching economic theories or short-term sentiment: The “animal spirits” of the market’s unpredictable pixies could not be trusted. He sensed that security prices were not true indicators of company values.
 
 
”Keynes anticipated Eugene Fama, the 2013 Nobel Economics Prize co-winner, in that he clearly did not believe that stock prices must be good indicators of fundamental value,” Professor Chambers said in a recent email. “Consequently, there could be periods when the irrational behavior of investors and what he called animal spirits play a significant role in determining prices on both the upside and downside.”
 
Unlike millions of modern investors, who latch onto every headline and interview on business television shows to gauge market sentiment, Keynes went about-face in the early to mid-1930s to concentrate on a company’s “enterprise” value, which is also known as “book” or “breakup” value. This intrinsic view of a company’s true worth stripped out the overly emotional component that is often reflected in stock prices. As a result, he often picked companies that had promising futures, but were unloved at the time.
 
When Keynes adopted his new investment strategy — which paralleled work by Benjamin Graham, a Columbia University professor and mentor to Mr. Buffett — he did quite well. Even with setbacks in 1929-30, 1937-38 and the early years of World War II, Keynes managed a 16 percent annualized return in the Cambridge discretionary portfolio, which mirrored his other holdings. That compares with 10.4 percent for a basket of British stocks over the same period, Professor Chambers and Professor Dimson found.
 
More important, Keynes staged some striking rebounds after two major declines from 1929 to 1940. According to Professor Chambers and Professor Dimson, although his Cambridge discretionary portfolio lagged the British market by a cumulative 12 percent in 1930 from inception, his performance rallied in the 1930s and ’40s and posted a 0.73 risk/return or Sharpe ratio during his tenure, compared with 0.49 for the British market.
 
Considering that Keynes was investing during some of the worst years in history, his returns are astounding. How did he do it?
 
In addition to focusing on bargain-priced small and midsize stocks, Keynes carefully evaluated managements. Could they prosper long term? Did they have a plan for when the economy turned around? “I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes,” Keynes wrote in 1934.
 
 
Shades of Benjamin Graham and Warren Buffett, and the whole school of value investing. Keynes also loved dividend payers, some of which were paying up to 6 percent during the deflationary 1930s. His portfolios were full of old-line companies in mining, railroads and shipping. Although they were perhaps boring and suspect choices at the time, he bought more shares when they became cheaper and predicted they would be worth more when the general economy recovered.
 
Ultimately, Keynes was vindicated, building wealth for all of his institutional clients, and he built a personal fortune worth more than $30 million in 2013 dollars at the time of his death, which did not include a tally of his extensive collection of artwork and rare manuscripts. Keynes was not only an investment innovator, but one of the richest economists ever.
 
While Keynes was most likely the recipient of price-sensitive information during his career, it is hard to discern if he profited from it. Insider trading was not broadly restricted in Britain until 1980. It is also hard to pin down whether Keynes invested along the lines of his famous economic theories, although it is clear that his investment activities informed his view of economics.
 
Nevertheless, one of Keynes’s most important insights was one that most investors still ignore: A prudent plan does not include timing the market, but focuses on long-term value and total return. It is a view that has not only worked for millions of investors who now invest in index funds — and do not time the market — but is also the foundation of a long-term strategy.
 
Although Keynes’s economic persona may still be the St. Sebastian of intellectual debate, Keynesian investing has proved to be a solid way to build wealth over time.
 
John F. Wasik is author of “Keynes’s Way to Wealth: Timeless Investment Lessons From the Great Economist.” (McGraw-Hill, 2013)



 

CPF eats money. Children eat money. Housewife eats money.

Thank to "CPF eat money" where it is "Pay Me First" for single household income where his children eat money and his housewife also eats money.

He can't imagine if CPF doesn't eat money!!!

But, now, his two children have stopped eating his money and his housewife also eating less money as she is now working part-time after retiring from full-time job some 20 years ago.


Moral of Story:


Children will one day stop eating money.

Don't worry.

Have kids.

Horse?


Two years of negative saving (Overspending due to expensive overseas family vacations)