80/20 Examined on All Aspects of Life

By Everlong, Bkpsusmitaa [CC BY-SA 3.0 (], via Wikimedia Commons

I talked about the need to enjoy the pleasures of life 20% of the time, so I wanted to thoroughly examine my life to ensure that for activities that mainly only brings pleasure, I can leave reasonable buffer for it.

Let’s start off with health.

For sleep, I will still aim for 8 hours of actual sleep (~9 hours of sleep time), since having enough sleep is the most crucial factor to physical and emotional healthiness. This one I can’t compromise with 20% of pleasure.

For food, I eat 21 meals a week, so my tolerance for bad food is 4 meals. Bad food is essentially anything that’s really processed.

For exercise, I aim to eventually be able to do 24 minutes of HIIT for 6 days a week. I see no need to compromise with 20% of pleasure since I love calisthenics and I really need to reduce my blood cholesterol. The reason for 144 minutes of HIIT a week is because the American Heart Association recommends at least 75 minutes of vigorous exercise / week, and the HIIT exercises I do are in 12 minute segments, so doing double the recommended minimum should help me optimize my physical fitness without eating into the time for other activities.

For solo time (as I’m an introvert), I will aim to have at least 20% of my waking hours reserved for solo time. That means for 105 hours a week, 21+ hours is spent alone to do whatever I want.

Let’s move onto relationships.

I will focus 80% of my socializing time on 20% of my friends, even after cutting our a significant portion of them from my life. That means of the 307 Facebook friends I currently have, I will focus on the 61 friends most of the time. As for the criteria of who would be the 20% I spend most of my energy on, it would be basically people who possess qualities I respect and admire, namely reasonable, open-minded, good tempered and graceful.

Regarding how much time I should spend on my friends, it would be the same for solo time, which is at least 20% of my waking hours. So for the 21+ hours I spend every week on relationships, 16.8+ hours is spent on my top 20% friends.

Next stop is financials.

For my budgeting, I will tolerate 20% of my budget for pleasure (thus I allow 25% expansion of budget on top of bare minimum expenses).

For positive budgeting surprises, I allow 20% of the positive surprise to go to my Regret Averse fund.

For investing, similar to time spent on solo time and friendships, I will spend at least 20% of waking hours to investing, with 80% of that time spent on researching on great companies worth buying and holding while 20% of that time is spent researching on companies that have decent moats at significant discounts to fair value.

Last stop is career.

I don’t think I have much of a choice but to yield at least 63 hours every week to work.

The only addition to my work would be to study at least 50XP every day on Duolingo for German.


Reflecting on “On Old Age” by Cicero

By Woodcut by unknown artist; book printed by Hieronymus Scotus; page scanned by Aristeas (Roman Eisele) from his own copy of the page. [Public domain], via Wikimedia Commons

As today’s my 24th birthday, I thought it appropriate to fast forward to my death bed to reflect on “On Old Age” by Cicero to provide insights on how I should conduct my life 24 years old onwards so that I can say I lived a good life.

First off, I should focus on improving my character everyday to be reasonable, open-minded, good tempered, and be graceful“For old men who are reasonable and neither cross-grained nor churlish find old age tolerable enough: whereas unreason and churlishness cause uneasiness at every time of life.”

Secondly, I need to focus on living a life of virtue, since “the arms best adapted to old age are culture and the active exercise of the virtues. For if they have been maintained at every period—if one has lived much as well as long—the harvest they produce is wonderful, not only because they never fail us even in our last days (though that in itself is supremely important), but also because the consciousness of a well-spent life and the recollection of many virtuous actions are exceedingly delightful.”

Since what constitutes a moral life is subjective depending on which school of thought, I’d like to define mine. For me, a life mixed between libertarian, Rawlsianism and utilitarian would be the ideal that I strive for. I strongly believe that everyone should be able to decide what they want to do with their body in life (libertarian), but in order for that to work, everyone needs to be economically sufficient enough to make choices out of free will rather than out of necessity, so for those who’ve won the ovarian lottery and thus possess aptitudes that are highly valued by society at this moment of time, these people need to give back to society whether through government tax or self-enforced tax (Rawlsianism and utilitarian). In the event that society faces upheaval that requires tough decisions in order to survive, personal liberties should be scarified if deemed as a temporary measure, but if the day comes that survival is impossible or extremely improbable, than personal liberties should be restored until the end of life.

The implications for me to living a life of virtue is thus this:

  • In everything that involves other people’s services, I must ensure to the best of my ability that the person is complying to service by self will rather than forced will.
  • Costs must be justified by benefits. When society or lives are not under serious threat, my stance is firmly on the side of people being able to do whatever they want with their bodies. If the ideal of personal liberties threatens existence, then no action or words should be enacted if the less than ideal existence is still pleasant and bearable in general.
  • I will try to be as tax efficient as possible (eg. Focus on capital gains rather than dividends to minimize tax impact of 30% dividend withholding tax), but not exploit loopholes to avoid paying taxes (eg. Not reporting income or setting up overseas entities for tax purposes). I will happily and promptly pay my taxes.
  • I will further self-tax my post-tax income based on Peter Singer’s The Life You Can Save calculator to ensure economic sufficiency can be effectively tackled in areas that aren’t reachable by government initiatives.
  • When investing, when it comes to long term holdings, I will only buy and hold stocks of companies that are good corporate citizens (tries their best to be fair to all stakeholders) and provide products / services that societies can’t live without. This ensures companies whose existence benefits society is rewarded accordingly by stock prices that are less likely to go down because I’m unwilling to sell.
  • Even though I will punch above my weight when it comes to giving back to society, my life is still my life, so I don’t owe it to society that every decision I make would optimize maximum compounded financial returns for society. As long as I fulfill above-weight class contributions, I can do whatever I want with my money as long as it doesn’t infringe on libertarian values (eg. purposefully buying products / services that further the agenda of slavery).

Thirdly, I will keep improving myself so that I can be of value to society. “The great affairs of life are not performed by physical strength, or activity, or nimbleness of body, but by deliberation, character, expression of opinion”, “Old men retain their intellects well enough, if only they keep their minds active and fully employed. Nor is that the case only with men of high position and great office: it applies equally to private life and peaceful pursuits” and “But this is enough to show you how, so far from being listless and sluggish, old age is even a busy time, always doing and attempting something, of course of the same nature as each man’s taste had been in the previous part of his life.”

Fourthly, I will do things that my body permits me to do at different seasons of life if I really want to do it and it doesn’t infringe on libertarian principles, and make sure I exercise regularly (eg. HIIT) to improve my chances of still being physically active into old age. “You should use what you have, and whatever you may chance to be doing, do it with all your might”, “For what is more charming than old age surrounded by the enthusiasm of youth? Shall we not allow old age even the strength to teach the young, to train and equip them for all the duties of life? And what can be a nobler employment?”, “The course of life is fixed, and nature admits of its being run but in one way, and only once; and to each part of our life there is something specially seasonable; so that the feebleness of children, as well as the high spirit of youth, the soberness of maturer years, and the ripe wisdom of old age—all have a certain natural advantage which should be secured in its proper season”, “Active exercise, therefore, and temperance can preserve some part of one’s former strength even in old age.”

Fifthly, I will enjoy the pleasures of life in moderation using the 80/20 principle, where I will only indulge in the pleasures of life 20% of the time to yield 80% of the fun. “No ore deadly curse than sensual pleasure has been inflicted on mankind by nature, to gratify which our wanton appetites are roused beyond all prudence or restraint… For when appetite is our master, there is no place for self-control; nor where pleasure reigns supreme can virtue hold its ground”, ” For pleasure hinders thought, is a foe to reason, and, so to speak, blinds the eyes of the mind. It is, moreover, entirely alien to virtue”, ” Nor was I, in fact, ever wont to measure my enjoyment even of these banquets by the physical pleasures they gave more than by the gathering and conversation of friends”, “What pleasures are there is feasts, games, or mistresses comparable to pleasures such as these? And they are all tastes, too, connected with learning, which in men of sense and good education grow with their growth.”

Sixthly, I shall live everyday of my life reminding myself of my mortality so that there’s urgency to live life to its fullest, but to not be afraid of death when the day comes. “Death, that is either to be totally disregarded, if it entirely extinguishes the soul, or is even to be desired, if it brings him where he is to exist forever. A third alternative, at any rate, cannot possibly be discovered. Why then should I be afraid if I am destined either not to be miserable after death or even to be happy? After all, who is such a fool as to feel certain—however young he may be—that he will be alive in the evening? Nay, that time of life has many more chances of death than ours”, “Now the harvest of old age is, as I have often said, the memory and rich store of blessings laid up in earlier life. Again, all things that accord with nature are to be counted as good. But what can be more in accordance with Nature than for old men to die?”


Investment Thesis – US Bancorp

Warren Buffett / Charlie Munger’s Four Filters + Risk Factors

  1. Understand the Business
  2. Enduring Competitive Advantages
  3. Able and Trustworthy Managers
  4. Risk Factors
  5. Bargain Price = Margin of Safety (I will not explore this as everyone should devise their own fair value)

1. Understand the Business

US Bancorp engages in 4 businesses:

2. Enduring Competitive Advantages

US Bancorp’s Competitive Advantages stem from the following sources:

  • Low Cost Efficiency Ratio
  • High Asset Quality
  • Well-Capitalized
  • Low Derivative Exposure

Low Cost Efficiency Ratio, High Asset Quality and Well-Capitalized constitutes a positive reinforcing cycle:

US Bancorp Business Model.png

By being cost efficient, US Bancorp is able to be well-capitalized (retaining liquid capital that isn’t lent out) whilst being profitable. This ensures US Bancorp can play in the game of lending to companies with great credit rating and only engage when the interest rates are good since US Bancorp would still be profitable even at the extremely low interest rates that US Bancorp can charge to these companies whilst US Bancorp can afford to not make loans if it doesn’t make business sense.

By statistics, companies with great credit rating default much less than those without, which thus builds resilience to profitability as US Bancorp is expected to keep raking in the net interest income regardless of economic cycle.

This then further drives / maintains the low cost efficiency ratio since as long as expenses don’t increase faster than growth of profits, the resilience in profitability allows for the profit side of profit / expense to drive / maintain the cost efficiency ratio down.

I further deem having a low derivative exposure to be another key competitive advantage. The reason is simple, it’s extremely hard to decipher the real value of derivatives on a balance sheet, so the more derivative exposure a bank has, the higher the catastrophe risk. Whilst competitors are potentially blowing up left and right, US Bancorp’s low derivative exposure allows it to stay profitable throughout economic cycles.

And when you look at the derivative exposure of the Top 5 US Banks in Asset Size, you’ll understand what I mean by US Bancorp having a low derivative exposure:

Rank – Bank – Asset Size – Derivative Exposure $ – Derivative Exposure X

1 – JPMorgan Chase – 2.42 trillion48.76 trillion – 20.1x

2 – Bank of America – 2.15 trillion40.20 trillion – 18.7x

3 – Citigroup – 1.77 trillion53.47 trillion – 30.2x

4 – Wells Fargo – 1.75 trillion5.83 trillion – 3.3x

5 – US Bancorp – 0.42 trillion0.18 trillion0.4x (!!!)

3. Able and Trustworthy Management

Ever since former CEO John F. Grundhofer brought Wells Fargo’s playbook of simple banking, disciplined loan underwriting, and low cost efficiency over to US Bancorp in 1990, he and his successor Richard Davis has been diligently focusing on 5 priorities only:

And the results demonstrate management’s ability, since US Bancorp is now the best US bank in terms of ROA, ROE, Cost Efficiency Ratio, and 2nd place in terms of Charge-Off Ratio.

US Bancorp’s track record also demonstrates management’s trustworthiness of focusing on its 5 priorities over the 20+ years as US Bancorp has stuck to growing 4 pretty much the same core businesses, driven down cost efficiency ratio to be the best, never exceeded 2.4% net-charge offs even during 2008=2009 financial crisis, improved credit rating to be the best, and kept all of the aforementioned metrics on target whilst acquiring many institutions.

4. Risk Factors

I find US Bancorp to be extremely low risk if risk is defined as destroying shareholder value.

There are however 2 ways I can see US Bancorp destroying shareholder value.

One way is if US Bancorp starts destroying shareholder value is if it abandons its current 5 priorities. As long as it suddenly decides to change direction in just one of the 5 priorities (eg. aggressively grow investment banking business or being less disciplined in cost control, asset quality, being well-capitalized and acquisitions), then the positive reinforcing cycle mentioned above will fall apart. The scary part of this is that any change in culture will be hard to observe, so being tipped off by a delay in deterioration of metrics could already be too late as there’s going to be a delay between cause and effect.

Another way is pure bad luck. US Bancorp for all its conservatism could still be ruined by large scale debt defaults since it is currently 9.8x leveraged [1]. This is always an inherent risk that comes with the banking business.

As a result of these two key risks, I would at most allocate a 1/3 position size to US Bancorp based on Charlie Munger’s diversification rule of “In the United States, a person or institution with almost all wealth invested, long term, in just three fine domestic corporations is securely rich“.


[1] Reference –

14.3% ROE and 1.46% ROA implies 9.8x leverage as only through that leverage is US Bancorp able to juice up returns from 1.46% to 14.3%.


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)


Understanding US Bancorp – 1993 10-K

By Taber Andrew Bain from Richmond, VA, USA (US Bank  Uploaded by xnatedawgx) [CC BY 2.0 (], via Wikimedia Commons

In 1993, First Bank (predecessor namesake to US Bancorp) had 181 banking locations and 24 non-banking offices in:

  • Minnesota (23% deposit share, rank #1)
  • Colorado (19% deposit share, rank #1)
  • Montana (14% deposit share, rank #1)
  • North Dakota (9% deposit share, rank #1)
  • South Dakota (5% deposit share, rank #2)
  • Wisconsin

Its Core Businesses are:

  • Retail and Community Banking (60.5% of Total Net Income from 56.12% in 1992)
  • Commercial Banking (28.1% of Total Net Income from 32.07% in 1992)
  • Trust and Investment (11.5% of Total Net Income from 11.81% in 1992)

What immediately stood out to me was the clarity of CEO John F. Grundhofer’s strategy, which  was to increase Market Share and Long Term Profitability through (in no particular order):

  • Growing Core Businesses
  • Being Disciplined in Cost Control
  • Being Disciplined in Asset Quality
  • Being Well-Capitalized
  • Being Conservative in Acquisitions Favorable in Location and Price

This seemed like taking a page from Wells Fargo’s playbook (simple banking, disciplined loan underwriting, low cost efficiency), and it’s not surprising consider John F. Grundhofer was Vice Chairman and Senior Executive Officer of Wells Fargo before being CEO of First Bank in 1990.

And taking a page from Wells Fargo’s low cost efficiency playbook really showed. In terms of Cost Control, John F. Grundhofer helped drive Cost Efficiency Ratio from nearly 80% (!!!) in 1989 to 59.8% by 1993 through:

  • Centralizing Bank Office
  • Standardizing Products
  • Investing in Technology
  • Re-Engineering Operations to Improve Productivity, Customer Service and Cross-Sell Ratio
  • Create Culture of Cost Control through Incentive System that Focuses on Relentless Cost Reduction, Strongly Encouraging Senior Management to Own 1x-5x Their Salary in Shares within 5 Years, and also Accountability of Expenses through Internal Fund Transfer Pricing System

The target set in 1993 was to reduce Cost Efficiency Ratio down to mid-50s within 2 years (1995) and eventually stay at low-50s. In comparison, 2015’s average Cost Efficiency Ratio of US Banks was 60.45% [1]. Overall, the Cost Efficiency Ratio of the different Core Businesses were:

In terms of Asset Quality, Non-Performing Assets was only 1.20% of Total Gross Loans. In comparison, 2015’s average Non-Performing Assets to Total Gross Loans of US Banks was 1.50% (as of 16th Jul 2016). To achieve this:

  • First Bank always evaluates its own credit risk through factors like evaluating composition of loan portfolio (as diversified as possible by industry classification, size and type of loan), level of allowance coverage, macroeconomic concerns (eg. level of debt in public / private sector), and effects of domestic / regional / international issues.
  • First Bank also manages credit through centralized credit policy and underwriting criteria whilst large loans or any loans that experience deterioration of credit quality is reviewed quarterly by management.
  • First Bank also has been decreasing exposure to Highly Leveraged Transactions (commercial loans involving buyout, recapitalization or acquisition of an existing business)

For Well-Capitalization, First Bank targeted and achieved Well-Capitalized status as defined by Federal Deposit Insurance Corporation of all bank subsidiaries [2]. It also had Provision for Credit Losses of 2.25%, 1.9x more than Non-Performing Assets to Total Gross Loans.

Combination of Cost Efficiency, Asset Quality and being Well-Capitalized meant that First Bank’s Net Interest Margin was 5.07%. In comparison, 1993’s average Net Interest Margin of US Banks was 4.51% [3].  At the same time, these factors helped First Bank improve its credit rating (Moody = A3 -> A2, S&P = A- -> A, Thomson Bankwatch (Fitch) = A+).

[Reference / Footnotes]

[1] (As of 16th July 2016) –

Couldn’t find data from 1992, so used 2015 as comparison

2015Q1 – 60.97%

2015 Q2 – 59.77%

2015 Q3 – 60.80%

2015 Q4 – 60.27%

[2] FDIC Well-Capitalization definition is:

  • Tier 1 Capital Ratio – >=6%
  • Total Risk-Based Capital Ratio – >=10%
  • Leverage Ratio – >=5%


1993 Q1 – 4.51%

1993 Q2 – 4.51%

1993 Q3 – 4.52%

1993 Q4 – 4.49%


I currently own US Bancorp (USB) stocks, and intend to keep increasing my position size of USB.


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)

Cover Photo

Catching Up with Friends Project

By NASA/JPL-Caltech/University of Arizona (NASA Image of the Day) [Public domain], via Wikimedia Commons

So I’ve actually been on a secret project for a few weeks now where I’ve been filtering out my friends based on two criteria:

  • Is that person willing to meet up with me once a year if we’re geographically nearby?
  • Am I willing to meet up with that person once a year if we’re geographically nearby?

If any “friend” didn’t meet either criteria, I’d unfriend on Facebook.

The objective was to leave behind only real friends so that anytime I go through my Facebook timeline, every update was related to someone I really cared about.

This to me is the purpose of social media, which is a medium to let me better keep in touch with my friends.

And the learnings from this project have been quite profound:

  • I’m surprised by how many real friends I still have
    • I was half expecting my friends number to drop from 550+ to around 100-200, but right now I’ve drop to 361 (as of Jul 16th 2016) and the pace of unfriending has dropped significantly
  • It’s been a quite heart breaking experience too
    • There were quite a lot of friends when I glanced at their names and realized that we were quite tight before. Now quite a few of them had become quite distant due to my procrastination. Newton’s law of an object in motion stays in motion really applies in this situation when you the word replace “object” with “relationship”.
  • “If it’s to be, it’s up to me”
    • You can really filter out who really gives a damn about your relationship with them when you try to get an appointment with them. People who really want to see me maybe too busy at this moment of time, but they would always proactively propose future dates that might work out. People who don’t want to see you would either not reply you or just say something to the extent of “oh I’m busy”
  • I have OCD with people replying me within 48 hours
    • I’m not sure if it’s because I’m really self centered (people should respond to me!), I’m impatient (I want things to happen now!) or my professional habits spilling over to my personal life (48 hours is standard business etiquette! Oh wait, this is a personal interaction…), but it REALLY GETS INTO my nerves when people don’t reply me within 48 hours (actually I already start getting irritated if it doesn’t happen within 24 hours…). I’m really unsure if it’s just good etiquette to reply people within 48 hours unless your physically unable (dead, seriously ill, no internet connection etc.) or if I’m just being a dick (could simply be that I’m just a dick). But anyways, I do see a strong correlation with unfriending and people not replying me within 48 hours.
  • Many friends are actually going through tough times
    • But at the same time, it’s hard to discern if someone’s not replying you within 48 hours because they are physically unable, or if they’re going through a tough time. One thing that surprised me most was how many of my friends were going through tough times simultaneously. If it weren’t for me reaching out because of this secret project and really following up on people who weren’t responding, I really wonder how many friends have I overlooked or ignored when I could’ve lent emotional support? Or to put it more bluntly, how much of a friend am I?
  • I find myself to be very boring
    • Like boring for other people. I love investing and anything related to investing (psychology, history, sociology, economics, finance, engineering, maths etc.), and I’m always reading, thinking or learning about it, so it’s really exciting for me to talk about these topics, but I sometimes catch myself just always talking about the same topics over and over again. I had deja vu just now when a friend of mine kept talking about the same topic over and over again on the phone just now, which absolutely drove me a bit nuts. I’m surprised how many of my friends haven’t flipped their tables on me yet (Or maybe they have psychologically and are proactively avoiding me, which probably is why people don’t reply me within 48 hours :/).
  • I burn people out, like literally
    • I sometimes question if I’m too hardcore when it comes to relationships. I take every conversation quite seriously (unless it’s just a joke), so I’m always diligently replying or following up and always putting serious thought behind what I’m about to say. One example of burning someone out with my intensity was the girl I’ve been seeing, where she told me that she really tried to adopt this intense method of communication with me but ended up just burning out because of me and along with other things going on in her life. Thankfully we’re still friends, but any progression beyond friendship is definitely out of play.
  • I have a hard time being very close to people
    • Follow-up to my previous point, my intensity either makes people burn out or make people feel uncomfortable. Either way, reflecting upon my whole life so far, I’ve realized I’ve never had a “best friend” by conventional definition since I would always never hang out with the same people out of school / work. I’ve always just been too intense, which is why I end up needing personal time and my friends ending up burnt out.
  • It really sucks when people don’t reciprocate
    • This should’ve been a given, considering my aforementioned point, but it still stung. Each time. I still remember today where there was a friend who was going to Bangkok and very happily shared his / her boarding pass on Facebook. Seeing that the barcodes were explicitly shown (it actually contains a lot of information about you), I gently reminded him / her about the security risk of doing so and wished him / her a safe trip. He / she promptly covered up the barcodes with images and deleted my comment. I promptly unfriended him / her as well. Although this was an extreme case (1st case where not responding = unfriend), I just got pissed off how my suggestion was adopted, discarded and not thanked for.
  • It’s starting to get hard to keep in touch with people
    • Basically for any meet up I’ve had with friends in past few weeks, I’ve basically scheduled to meet up on a more regular basis. The good side is it meant I was consistently seeing friends I wanted to see, but the downside is that time and energy is just not on my side. As much as I love to socialize, I’m an introvert by nature, so I realized that at most I can only have 3 appointments every week lest I start burning out. And if I have 361 friends (maybe around 150 after taking out colleagues whom I see everyday and people who aren’t geographically nearby) and there’s 52 weeks in a year and my objective is to see my friends that are geographically close at least once a year, then my weekends have to be packed full since I will be overlapping with existing recurring appointments whom I would see more than once per year. So far I’m managing, but I need to really figure out a system to deal with this
  • Starting to compete with life’s other priorities
    • Related to the above point, but in terms of time and energy, being a good friend has meant that it’s been competing with health and work and giving up on family. Spending so much time going through annual reports and 10-Ks as part of my investing hobby is almost like a second job in a sense, which leaves so much less time to cultivate other interests or organize / join socializing activities. Also every time I have an appointment during the week, it absolutely wrecks that night’s sleep and possibly 2-3 more days of sleep as I just always get sleep deprived on the same night due to appointments always lasting until 9-10 pm. It starts making me question where I want my priorities to be.

Questions on US Bancorp

By David Shankbone (Own work) [CC BY 3.0 (], via Wikimedia Commons

In my last post I mentioned that US Bancorp is arguably the best run US bank in terms of metrics, beating the golden standard Wells Fargo in ROA, ROE, and Efficiency Ratio.

What has eluded my comprehension is why US Bancorp can have such a low cost efficiency ratio.

Fitch thinks that US Bancorps’ low cost efficiency stems from two sources:

  • Low-cost deposit base
  • Corporate culture focused on operating expense management

The natural follow-up questions that confuse me right now are:

  • Why is US Bancorp’s deposit base lower cost than its peers?
  • What does it mean to have a corporate culture focused on operating expense management?

Let’s start off with my first confusion, which is “Why is US Bancorp’s deposit base lower cost than its peers?”

It’s definitely not because of having deposits making up a huge part of total assets, since for the top 20 banks in asset size, the average deposit to total asset % is 73.2% compared to US Bancorp’s 74.5% [1].

It’s not really because of size because all of the top 20 banks in asset size have past the threshold of $1 billion in assets, which marks the threshold where anymore assets doesn’t really contribute to cost efficiency.

It’s also not really unit-level economy of scale (which is supposedly another aspect that drives higher operational efficiency). There does seem to be a correlation (but not very strong) between deposits / branch versus cost efficiency (as seen in graph below) when looking at the top 20 banks in # of bank branches, but considering there are a total of 10 banks with higher deposits / branch but still possessing higher cost efficiency ratio than US Bancorp in this group [2], unit-level economy of scale isn’t a sufficient explanation.

Correlation Between Deposit per Branch to Cost Efficiency.png

What’s left is the illusive concept of culture being the source of lower cost deposit base, which I find to be extremely hard to judge, which is why I ask the question “What does it mean to have a corporate culture focused on operating expense management?”

And why is culture hard to judge? Well I’ve went through US Bancorp’s annual reports from 2000-2015, and all of them describe how cost efficient US Bancorp is and how cost efficiency is a key focus for US Bancorp, but none of the annual reports delve into details of how they do it.

The closest thing I have to gauging US Bancorp’s culture of focusing on operating expense management is US Bancorp:

But I don’t know enough about other banks to know if this already constitutes a culture of focusing on operating expense management that’s much more superior to peers, because in my mind, what US Bancorp can do with the aforementioned initiatives, its peers can also copy. The questions thus becomes:

  • Are US Bancorp’s peers cost cutting in the same way, same degree and same effectiveness?
  • If not, what’s stopping US Bancorp’s peers from following suit?


[1] As of Jul 9th 2016 ( + (

Ranking by Asset Size – Bank – Cost Efficiency Ratio (%)

  1. JPMorgan Chase – 62.10
  2. Wells Fargo – 55.39
  3. Bank of America – 59.68
  4. Citigroup – 55.68
  5. U.S. Bancorp – 54.32
  6. Capital One Financial – 57.63
  7. PNC Bank – 65.15
  8. Bank of New York Mellon – 70.32
  9. Toronto-Dominion Bank – 72.26
  10. State Street Bank – 80.08
  11. Branch Banking and Trust – 61.60
  12. HSBC Holdings – 71.15
  13. SunTrust Bank – 59.29
  14. Morgan Stanley – 21.45
  15. Charles Schwab Bank – 16.98
  16. Citizens Financial Group – 65.15
  17. Goldman Sachs – 33.14
  18. Fifth Third Bank – 59.47
  19. M&T Bank Corp – 58.63
  20. Regions Bank – 60.26

Above Average Cost Efficient Bank- Deposit % of Total Assets – Deposits ($) / Assets ($)

  • Wells Fargo – (75.87%) – 1,285,439,000,000 / 1,694,163,387,000
  • Citigroup – (70.53%) – 947,446,000,000 / 1,343,346,509,000
  • U.S. Bancorp – (74.48%) – 315,187,684,000 / 423,203,763,000
  • Morgan Stanley -(66.48%) – 119,548,000,000 / 179,838,000,000
  • Charles Schwab Bank – (92.32%) – 135,753,000,000 / 147,039,000,000
  • Citizens Financial Group – (52.67%) – 77,780,394,000 / 145,687,025,000
  • Goldman Sachs – (64.71%) – 92,800,000,000 / 143,403,000,000

Below Average Cost Efficient Bank- Deposit % of Total Assets – Deposits ($) / Assets ($)

  • JPMorgan Chase – (64.47%) – 1,391,743,000,000 / 2,158,702,851,000
  • Bank of America – (77.39%) – 1,297,680,000,000 / 1,676,743,000,000
  • Capital One Financial – (56.33%) – 208,821,499,000 / 370,739,538,000
  • PNC Bank – (72.46%) – 254,089,464,000 / 350,643,006,000
  • Bank of New York Mellon – (77.03%) – 249,861,000,000 / 324,382,710,000
  • Toronto – Dominion Bank – (78.13%) – 213,629,023,000 / 273,414,002,000
  • State Street Bank – (79.77%) – 190,872,030,000 / 239,277,838,000
  • Branch Banking and Trust – (76.40%) – 158,050,500,000 / 206,874,891,000
  • HSBC Holdings – (72.84%) – 144,846,147,000 / 198,852,159,000
  • SunTrust Bank – (81.53%) – 154,833,252,000 / 189,907,589,000
  • Fifth Third Bank – (75.58%) – 105,781,664,000 / 139,966,392,000
  • M&T Banking Corp – (75.40%) – 95,316,346,000 / 126,407,811,000
  • Regions Bank – (79.95%) – 99,645,528,000 / 124,637,433,000

[2] As of Jul 9th 2016 ( + ( + (

Ranking by # of Branches – Bank – Cost Efficiency Ratio (%) – Deposit $ / Branch

  1. Wells Fargo – 55.39 – 205,440,147
  2. JPMorgan Chase – 62.10 – 251,217,148
  3. Bank of America – 59.68 – 270,350,000
  4. U.S. Bancorp – 54.32 – 97,672,043
  5. PNC Bank – 65.15 – 91,202,248
  6. Branch Banking and Trust – 61.60 – 69,198,993
  7. Regions Bank – 60.26 – 60,870,817
  8. SunTrust Bank – 59.29 – 105,257,139
  9. Toronto-Dominion Bank – 72.26 – 160,865,228
  10. Fifth Third Bank – 59.47 – 82,706,539
  11. KeyBank – 63.74 – 75,790,871
  12. The Huntington National Bank – 61.50 – 60,283,489
  13. M&T Bank Corp – 58.63 – 110,192,308
  14. Citizens Financial Group – 65.15 – 90,653,140
  15. Capital One Financial – 57.63 – 252,810,531
  16. Citigroup – 55.68 – 1,174,034,696
  17. Woodforest National Bank – N/A – 5,886,650
  18. Santander Bank, N.A – 88.47 – 91,801,086
  19. Compass Bank – 72.06 – 102,387,717
  20. BMO Harris Bank – 72.74 – 127,469,966


I currently own US Bancorp (USB) stocks, and intend to keep increasing my position size of USB.


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)


Questions About Banks

By Noël Zia Lee (Flickr: Big Pink) [CC BY 2.0 (], via Wikimedia Commons

There’s no answers or explanations, just a few questions that I haven’t finished thinking through:

  • What is it about Wells Fargo that Warren Buffett and Charlie Munger love so much about than US Bancorp? (Wells Fargo have much bigger position sizes than US Bancorp for both their portfolios (As of Jul 6th 2016, Warren Buffett – 18.04% Wells Fargo vs 2.69% US Bancorp; Charlie Munger – 67.4% Wells Fargo vs 4.98% US Bancorp) yet US Bancorp beats Wells Fargo in ROA, ROE, and Efficiency Ratio)? Isn’t US Bancorp a better run bank in general? Or is purely a valuation matter?
  • What does Warren Buffett and Charlie Munger’s position sizing in respective portfolios of US Bancorp reveal / hint to anyone’s appropriate position sizing for US Bancorp in their portfolio (eg. Is it a 90% position size stock? Is it a 33% position size stock? Or is it just one of many stocks like 5-10% position size?)
  • How do I know if a bank I now own stocks on is no longer as prudent as it should be? At what moment do you go “screw it, I’m leaving this stock”? (Wells Fargo is now entering Investment Banking, an area that’s fraught with much bigger dangers than just sticking to simple retail banking)
  • How strong are the moats of Canadian and Australian Big Banks? The Big 6 Banks in Canada have similar cost efficiency ratio (57.9%) as well run US banks like Wells Fargo (52.6%) and US Bancorp (52.1%), while the Big 4 Banks in Australia have an even more ridiculous low cost efficiency ratio of 45.9%. The questions I have in mind are:
    • Why are these banks so cost efficient on aggregate? (US Banks’ cost efficiency on aggregate is 70.8%…)
    • What’s the differentiation between the Big 6 in Canada and Big 4 in Australia? (I see not much)
    • How are the Big 6 and Big 4 able to keep a highly profitable oligopoly when differentiation is low between the banks? (What’s stopping them from one day going nuts and price war the crap out of each other?)
    • How well would the Big 6 and Big 4 fare if politicians suddenly changed their minds and banned all regulations that currently favor such domestic bank protectionism?
    • Is a moat that has a significant chunk of it upheld just because of favorable regulations really a moat? Or does the catastrophe risk inherent in it make it a great pillar to have but not something to entirely rely on?


I currently own US Bancorp (USB) stocks, and intend to keep increasing my position size of USB.


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)


Treat Yourself As a US Technology Company

By Heiti Paves (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

Going into the US stock markets on Jun 24th after Brexit was confirmed made me confront the issue of how much cash to retain for emergency reserves, which then determines how much cash I can deploy to take advantage of the correction.

And I realized as a person who’s income is mainly from one source (employment) and would be completely obliterated in the event of a lay-off, I displayed characteristics like a typical US technology company – Once a disruption happens (technological disruption such as digital cameras for technology companies like Kodak, or economic recession after 1929’s Black Thursday that had 19% unemployment for people like me), income sharply drops to zero.

One could even argue, anyone who relies heavily on employment as their source of income displays characteristics of a typical US technology company on steroids. Any technology company that gets disrupted has their income sharply drop to zero, but it doesn’t drop to zero over night. For people like me, the income goes to zero over night once I’m laid off and receive my severance payment.

And that’s terrifying. Conventional advice for emergency reserves has always been around 6 months of cash. Let’s be generous and double it, but for the emergency reserves to work it assumes you can find a job within 12 months. Under normal economic conditions, the search for a new job could easily take 24 months, let alone during bad economic conditions where the economy was the reason that you got laid off and the reason why the job search gets prolonged.

So if the top 10 cash hoarding companies (IT and pharmaceuticals) have an average current ratio of 3[1] (which means if they had zero income they could survive for 3 years), and they have multiple lines of products / services that reduce the probability of all sources of income going to zero, shouldn’t employees like me who rely almost exclusively on employment for my source of income hold even more cash?

After all,wasn’t the book name of Intel’s Co-Founders Andrew Grove called “Only the Paranoid Survive“?


[1] As of Jul 1st 2016, the current ratio of the following companies:

Apple – 1.28

Microsoft – 2.90

Alphabet – 5.14

Cisco – 3.27

Oracle – 3.74

Pfizer – 1.44

Johnson & Johnson – 2.83

Amgen – 4.95

Intel – 1.56

Qualcomm – 2.87

L0038411 An Italian 'Contadina', rustic peasant with a basket
Credit: Wellcome Library, London. Wellcome Images
An illustration of a well-dressed female peasant or 'Contadina' carrying a basket.
1598 By: Vecellio, CesareHabiti antichi, et moderni di tutto il mondo / Di Cesare Vecellio. Di nuouo accresciuti di molte figure. Vestitus antiquorum, recentiorúmque totius orbis. Per Sulstatium Gratilianum Senapolensis latinè declarati 
Published:  - 
Printed: 1598

Copyrighted work available under Creative Commons Attribution only licence CC BY 4.0

Tax & Cost Efficient Fundamental Trading Strategy

See page for author [CC BY 4.0 (], via Wikimedia Commons

I must admit, my temperament isn’t suited for Charlie Munger’s Sit On Your Ass investing style or Joel Greenblatt’s Magic Formula style.

The reasons are as follows:

  • (Charlie Munger) In theory it’s great (only buy great businesses at great prices and be idle most of the time), but in practice it’s damn hard regarding the “great price” aspect. I don’t have Charlie Munger’s golden touch of sitting idle in cash for a decade and suddenly buying stocks at the perfect rock bottom of the 2008-2009 bear market. Attempts at this strategy myself with the lack of Charlie Munger’s aptitude, temperament and experience would be near suicide as I’m most likely going to keep second guessing on whether prices can get any better and miss out the whole bear market entirely.
  • (Joel Greenblatt) I also can’t execute Joel Greenblatt’s strategy because his strategy essentially forces each position to be 3% – 5% without the option to average down lest you become overweight. This drives me crazy because every time a stock’s price drops my head keeps telling me “Buy more! It’s even more of a bargain!”

So I have to adopt my style to suit my temperament while still incorporating the principles of both styles.

My strategy now is more of a high turnover strategy that still takes company quality and valuation into consideration, but instead now takes market sentiment into consideration as well to approximate Charlie Munger’s golden touch of hitting perfect rock bottom:

  • (Charlie Munger) Still identify great businesses that I would be comfortable to invest 90% of my net worth in. That way I can happily average down like crazy on the most under-valued of the great businesses shortlist of mine if the stock market keeps dropping
  • (Tax Efficiency) Further filter the list of great businesses shortlist by taking out any company that pays dividends. As a non-US investor I pay 30% tax on dividends and 0% on capital gains, and in a long term it would absolutely kill my compounded returns if I had to keep bleeding away with dividend taxes
  • (Charlie Munger) Let market sentiment guide half the decision on how much of your portfolio should be in stocks or cash. This will be my proxy to Charlie Munger’s golden touch by overweighing my portfolio more and more into stocks as the market sentiment turns sour. I won’t hit perfect rock bottom, but by the time rock bottom happens my cost basis has been averaged down so much it would good enough for my purposes.
  • (Joel Greenblatt) Let valuation guide the other half of the decision on how much of your portfolio should be in stocks or cash, with the potential upside (1 / discount %) of the most under-valued of the great businesses shortlist being the yardstick.
  • (Joel Greenblatt) Rebalance constantly as market sentiment and valuation changes, so that my investments always reflect the most up to date information and is concentrated in the most under-valued opportunity. Rebalance frequency is ~bi-weekly to monthly, which is similar to Magic Formula’s rebalance frequency
  • (Cost Efficiency) Only rebalance in increments of fees being max. 10% of returns [1]. I determine the returns based on typical amount of stock market fluctuation in a month, which is 2.6%.

As for my list of great businesses that don’t pay dividends, I’ve only identified 3 that I would be comfortable investing 90% of my net worth in, namely Amazon, Berkshire Hathaway, and Fiserv (why these 3 would probably be for another post).

What I’ll be doing in the next couple of months is read the annual reports since inception of each of these 3 companies, books / videos about these 3 companies and their management team, and just any dis-confirming evidence I can gather to better assess the catastrophe risk of these 3 companies.

Since Berkshire Hathaway’s the most undervalued of the 3 right now, I’m starting to read Warren Buffett’s letters to shareholders since 1965. I’m currently up to 1978 and it’s been a wonderful gateway to understanding why Warren Buffett operates the way he does today, and how Berkshire Hathaway’s competitive advantage that he’s built over half a century will endure now and beyond Warren Buffett.


[1] Determined by my best alternative, which is S&P 500. If I used Vanguard’s S&P 500 which costs 0.05% annual management fee and also costs 0.9% in dividend taxes if S&P 500 was 3% dividend yield and the potential S&P 500 return is 9%, then essentially my best alternative’s implied okay amount of costs is fees being max. 10% of returns


Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)

Time Spent

Reflecting on Four Burners Theory

I’ve been constantly thinking about the Four Burners Theory since James Clear released an article about it 7 days ago. The gist of the theory is that everyone has to juggle with four burners in life, namely family, friends, health and work. The dilemma that everyone has to face is that if you want to be successful you need to turn one burner off, and if you want to be really successful you need to turn two burners off.

The reason why I kept thinking about the Four Burners Theory was because it coincided with a recent period of feeling lost, where I was and still am in a middle of a period of reflection upon where I am in life and where I want to go in life.

So where am I in life? Actions speak louder than words, and so when I look at how my days are scheduled, I see a pattern emerging already on what my current habits implicitly prioritize:

[Weekdays] – 8 hours of sleep (Health), 1 hour of walking + calisthenics (Health), 30 minutes of filtering menus for the most healthy food option (Health), 75 minutes of eating healthy food (Health), 9 hours of work (Work), 1 hour reading / thinking about investing (Work), 3 hours 45 minutes of doing random things (Neutral)

[Weekends] – 8 hours of sleep (Health), 1 hour of walking + calisthenics (Health), 30 minutes of filtering menus for the most healthy food option (Health), 75 minutes of eating healthy food (Health), 3 hours reading / thinking about investing (Work), 2 hours chatting with mum (Family), 60 minutes chatting with friends (Friends)

So what do we have? 45% of my time spent on health, 33% of my time spent on work, 18% of my time spent on random things, 3% of my time spent on family and 1% of my time spent on friends.

Time Spent
I must say I’m surprised for the family and friends part. For someone who always publicly espoused that relationships are important to me (heck I even did a Europe trip just to exclusively meet friends), I look very like a hypocrite. Even if I merged family time with friends (I consider my mum to be a very close friend), that still only makes up a meager 4% of my spent time.

And I think that’s why I’m in a period of feeling lost. The recent combination of being friend zoned and getting promoted within a very short time frame made me really question my priorities.

Maybe it’s the pent up sadness / frustration that came from being friend zoned by someone you explicitly told you liked and whom reciprocated and was willing to try out but eventually found out that being in a relationship wasn’t for her that’s still affecting how I feel, but I can just sense how hollow I felt ever since even though I don’t really feel it since I’m very good at subconsciously disguising my emotions even to myself.

And that hollowness is telling me that something’s wrong, and that what’s wrong is my priorities aren’t aligned with what I want.

I think what it boils down is that I have no intention to be very successful in two aspects of life (which I am implicitly doing by spending 78% of my time on work and health), but rather be successful in three aspects of life (work, health and friends). And I am failing miserably on the latter.

One reason why I’m failing miserably is that I’m looking for heart to heart friendships in the wrong places. The workplace is a horrible place to find such relationships due to the need for professionalism and the huge amounts of conflict of interests between colleagues. Going to interest groups in hasn’t been satisfying so far as they usually just end up being very small talk oriented. Overall my experience since university graduation is that it’s been very hard to get to know new friends which might develop into more heart to heart friendships.

Another reason why I’m failing miserably is that I seem to attract people who don’t like spending too much time together all the time. I mean sure that means that I can keep the friendships of a lot of people while I spend personal time with myself. But the downside is that I’m just never close to any particular friend. And come to think of it, I’ve never had any close friends in a conventional sense since I’m never always thinking of someone when I make plans or want to find someone to talk to.

Which leads to the other reason why I’m failing miserably. I’ve become very reclusive. I don’t know if it’s because the amount of time spent being by myself when outside of work, but whenever there’s a problem (emotionally, financially, physically etc.), my first reaction is never to ask for help or reach out – my first reaction is to deal with it myself. And the thing is, I’m usually able to solve it almost all the time. Even for the friend zone incident, sure it hurt like hell and I sure would like to cry those negative emotions out and get it over with, but I never sought out anyone for a crying shoulder or attentive ear, I just dealt with it just like how I deal with any other adversity I’ve faced since university graduation – with Stoic calm. I just acknowledge that the negative emotions are there but I’m able to keep my composure and keep my performance level or decision making at the same level. And this to a certain extent makes me less human as I just rarely share with others how I really feel, and thus it’s hard to expect anyone to reciprocate and share with you how they really feel too, so I just end up not having close heart to heart relationships.

So for all the success I’m having so far in my career, it’s as I expected, not fulfilling. I always knew I didn’t want career to be my only focus in life, but ironically it has been. For someone who keeps defending himself as not a workaholic but an unwilling person who’s working workaholic hours, I sure do act like one.

So I don’t know. I’m stuck. It’s not the first time where I kind of feel lost and sad about being lonely. The only difference is I would really break down and cry during high school or university while now I’m just calmly typing up this article and being very callous to my emotions.