Monday, December 31, 2007

Electricity Tariffs Hiked!!!

I guess you have all heard the good news about our electricity tariffs going up by 6%. For those barely staying afloat, that should be enough to sink them and motivate them to upgrade their skills, take up more OT or get a 2nd (3rd) job to make ends meet.
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There have been many of articles in the newspapers telling us that the hike is fair as our electricity tariffs is linked to the price of fuel oil. See how reasonable Singapore Power is - they understand the plight of Singaporeans and won't burden us by hiking prices unnecessarily especially when Singaporeans have already gone through many rounds of price hikes. Yes, the price of oil has increase so electricity tariffs have to go up.

From the Singapore Power website:

Q2 What are the main cost components in the tariff?
A2 Generation cost accounts for more than 70% of the total electricity cost. Fuel is the key component which takes up about 50% of the power generation cost. The quarterly tariff adjustments mainly reflect the changes in the fuel component of the generation cost

Q3 Why do tariffs increase in tandem with higher fuel oil prices when 60% of our country’s power generation uses natural gas as fuel?
A3 The natural gas contracts are pegged to fuel oil prices. Hence the prices of natural gas will also change accordingly when there is a change in fuel oil prices.

The Q&A is from 2005, today a higher % (>80%)of our electricity is generated using natural gas. Some of you find that it is strange that our tariffs are pegged to oil prices rather than natural gas prices. Here's why:

See the price of natural gas has fallen from a peak of $16 a year ago to about $7.7. Throughout 2007, it has remained relatively flat.

Singapore Power make $800-$1B a year in profits and has been active in acquisitions:

The list is above is not exhausive but you get the idea.
Isn't it great? Singaporeans are paying not just for electricity but for Singapore Power to make enough profits to takeover companies overseas. It is something that Singaporeans can be proud of.

While public utilities of other countries have are perpetually under pressure to provide electricity at he lowest possible cost to its citizens, as a monopoly Singapore Power makes enough to make billion $ acquisitions overseas. In other countries, people would clamor for the profits/reserves to be used to offset future costs to keep prices down especially in hard times but Singaporeans are more enlightened than that. They know how important it is for their power elite to expand its opportunities overseas using Singaporeans' money.

Friday, December 28, 2007

GIC & Temasek Outfoxed Warren Buffett!!!

Segment of an interview by CNBC:

Melissa Lee (CNBC): Mr. Buffett, if I can just jump in. It's Melissa Lee. I'm just curious. Have you been approached by a major financial institution in terms of whether or not you would be interested in buying a stake?

Buffett: Yeah. Yeah.

Melissa: You have been? You turned them down?

Buffett: They sometimes do it indirectly because they don't like to hear 'no' directly. (Laughter)

The reason Buffett gave for not investing in the financials was:

Buffett: No, I mean, there have been some mistakes made in banking. As (CEO) John Stumpf of Wells Fargo said, he said, 'I don't know why the banks had to find new ways to lose money when the old ones were working so well.' And they managed to do so. And you don't get all those, you don't get all the problems behind you in a short period of time. So I would say that there are a number of banks that may do as well or better than they did in 2007, because they already started getting hit then. But, there were some sources of income that were kind-of illusionary but nevertheless got reported as income over the last few years. They won't have those. They'll have the clean-up of those. So it's certainly possible some of the big banks aren't going to hit their highs on earnings for a few years.

Oh Warren Buffett is such a whimpy indecisive investor. He failed to spot the value that our GIC & Temasek saw in UBS and Merrill Lynch. You can tell from what he said that he is also not as far sighted as the people running our GIC and Temasek. I guess Ho Ching must have picked up investing skills more advanced than Buffett to be able to see so much value in these trouble entities.

Warren Buffett has been beaten by GIC & Temasek to these deals. As Singaporeans, we should feel very proud of this.

Here's a Singaporean who appreciate what has been accomplished by our very own GIC & Temasek. (click on image it to read).

Sunday, December 23, 2007

2007 : A year of great PAP achievements!!!

Even for the 66.6% who voted for new gardens and fountains around their estate, what the PAP managed to achieve this year is simply unparalleled. I can't think of another year when so much was accomplished in so short a time. US$10B for UBS, US$5B for other govt has been able to toss a few billions into troubled foreign banks while asking its old, sick and disabled to live on 2 meals a day under its Public Assistance Scheme. That was a final act to top of a year of grand achievements.... even by PAP standards, it has been a great year:

1. Finally justice for our suffering elites. The minister pay hike must be the single biggest achievement of the year. It has been too unfair too ridiculous for our ministers to have to make such a painful sacrifice for so long. Since there is no minimum wages for low income workers why should there be a maximum wage of our top elites, the ministers.

2. GST hike to 7%. GST hike is to help the poor. The poor who pay no income taxes feel left out -unable to contribute to the govt coffers so that it can do great things like buying stakes in UBS & Merrill Lynch. The GST hike is to help the poor contribute more to the govt so they don't have feel left out of their grand achievements.

3. Price hikes on everything. Yes, the govt was very concern that the slight pay increment you got at the beginning of 2007 might undermine your work ethics and they know you were very troubled by that extra money which you don't know what to do with. You don't have to worry any more - through a series of price hikes, that extra money has disappeared. In fact, the inflation rate which is at a 16 yr high probably ate up more than your increment. Now you have to work harder to make up for the inflation. You should be happy you haven't lost your work ethics this year.

4. People & more people. This is the year of population expansion. Singaporeans refuse to have more babies as cost of living rises but that is no problem for the PAP govt. They can always import. ...and import they did. Our population has been pushed to 4.68M. I guess they PAP has more than enough capacity to serve Singaporeans. Although our hospitals, roads, housing and buses have become more crowded, it is a simple matter of raising prices to bring down the demand. That is why ERP, bus fares and taxi fares have to be increased to reduce the congestion and overcrowding. As I understand it, PAP govt feels that it still has alot more capacity left to serve so more people will be brought in.

5. Annuities. Yes I know many of you are eagerly waiting for details of the scheme. I have no doubt the PAP govt will implement it. Singaporeans living beyond 80 yrs will be an unacceptable economic burden for the PAP govt in the coming years. While it has money to risk in troubled foreign banks, giving govt aid to 80 yr olds to keep them alive is an unthinkable idea. Singaporeans have to learn to pay for the trouble they cause by living too long - it is too much for them to expect the PAP govt to do something for them when they are too old to even walk. The PAP has figured out better use for its money like putting them in troubled American banks and telcos in neighboring countries.

2007 shows the PAP at its best. Singaporeans are lucky to have such a capable govt and can look forward to many more good years ahead....

Saturday, December 22, 2007

New Video : Face Green Green!

For those who don't speak Hokkien the phrase "Bin Che Che" ("Face Green Green") is use to depict someone struggling under stress (duress). Does your face 'turn green' as your wages fail to keep up with cost increases? There are English subtiles in the video for those who don't understand Hokkien:

Krugman@Google and my take on the markets....

Yes, Krugman again. After a great indepth analysis, he tells us he doesn't know what is going to happen. Gee, what you get from America's foremost economist is "I don't know". I think I get a more confident answer talking to my taxi driver. After you listen to Krugman, I'll give my take on what is happening in the markets.

A US Slowdown is Certain

The chart above shows the stock performance of companies selling consumer staples (necessities) vs consumer discretionaries. When the US economy is expected to grow, the stocks move in tandem. You see a divergence in Jul 2007 and it grows as we get to Dec 2007. What is happening is companies like Starbucks are not doing too well because consumers are spending less on things they don't need.

Why DOW Jones Index is holding up

Why hasn't the US stock market fallen more than it has in anticipation of the slowdown/recession?

1. US corporation except financials will go into this slowdown with the best balance sheet ever. M&A activities are set to continue as we go into 2008.

2. The US expansion was not accompanied by a stock bubble. Stocks were conservatively valued throught the expansion. investors became very wary of stock bubbles.

3. Stock buybacks have reduced the equity float and corporations have the cash to continue this buybacks through 2008.[Link]

The Uncertainty going ahead

What I fear usually doesn't happen. But things to look out for include runaway inflation which will limit the Fed ability to cut rates and get the economy going. The CPI figures around the world shows the fastest rise in inflation in many years. This was caused primarily by the price of crude oil which threaten to head for the US$100 per barrel mark in Nov 2007. Hopefully, the price of crude cools off and remove the inflation risk.

As Krugman mentioned in his talk, there is an insolvency risk among the banks that can lead to systematic failure. This risk still exists but has abated as banks get infusions from sovereign funds to shore up their capital and there is growing clarity about the losses as banks come forward to write off most of their losses.

The last thing I fear is a longer than expected slowdown. The markets have discounted a 4-6 month slowdown after which the US economy should get its act together. A protracted slowdown can be quite painful for everyone not just investors.

What I've done & Plan to do

In mid-Aug 07, I took the opportunity to purchase a widely diversified basket of Chinese stocks (S-Shares) a segment of the market that I was underweight. They have not performed too badly despite the recent selldown and I anticipate some positive news as the Chinese govt has approved the QDII for Chinese money (savings) to be invested overseas. This money is expected to go into Chinese stocks listed in overseas exchanges (e.g. S-Shares in Singapore). Part of that money should start flowing in as early as Jan 2008.

As the market rebound from its Aug 2007 lows, I also took the chance to cash out of some of the stocks I didn't want to hold. I decided to keep some cash should bargains appear when the US economy slows - so far the US financials look attractive Citibank, Bank of America etc. However, I hate buying at the wrong time so I've a plan to buy at a regular schedule. The other group are the homebuilders - they remind me of our own property developers in 1997-98 when our own property market had a meltdown, whoever survives will go on to thrive as demand returns...the recovery in the US housing market is a long way away but stocks of developers will hit bottom before that. I'm keep a watch on these stocks, while they have fallen 80-90%, I'll probably take my time to get into them.

When one of America's best economists tells you that the future cannot be predicted with any certainty, you better believe it is uncertain. What changes are the views of stock market players who can go from total pessimism to euphoria in a matter of weeks. Investors are put through a rollercoaster ride ...and the recent one was as exciting as the Cyclone at Six Flags. Always go into uncertain times, with a firm plan complete with contingencies.,,,,plan and stick to the plan.

Friday, December 21, 2007

BREAKING NEWS : Temasek to put US$5B into Merrill Lynch!

"They can write big checks and these banks appreciate that.'' -David Cohen on Temasek.
First the GIC pumped cash into UBS, now Temasek is pumping money into Merill. In Singapore the govt has long believed that giving the poor enough assistance for basic living creates a dangerous moral hazard and incentivise their subprime economic performance. Merrill Lynch is cash-strapped due to bad investments in mortgage backed securities. Helping Merrill to recapitalise will get them out of the mess. I guess when there is a chance to make some good money Temasek is able to overcome the hurdle of moral hazard.

Merrill May Get $5 Billion Investment From Temasek, WSJ Says
By Kelly Riddell and Jean Chua

Dec. 21 (Bloomberg) -- Merrill Lynch & Co., reeling from the biggest loss in its 93-year history, may receive a cash infusion of as much as $5 billion from Singapore's state-owned Temasek Holdings Pte., the Wall Street Journal reported.
Temasek's board has given preliminary approval for the investment, the report said, citing people it didn't identify. Merrill Chief Executive John Thain, who took over Dec. 1, would join Citigroup Inc., Morgan Stanley and UBS AG in tapping a sovereign wealth fund to shore up capital.
Government funds ``are making use of the crisis to buy some of these banks on the cheap,'' said Nicholas Yeo, who helps manage more than $40 billion in Asian equities at Aberdeen Asset Management in Hong Kong. ``Whether they're buying cheaply enough is hard to say.''
Merrill on Oct. 24 announced $8.4 billion of writedowns on mortgage-related investments and corporate loans. The firm, which ousted Stan O'Neal as CEO in October, may report an additional $8.6 billion writedown for the fourth quarter, according to David Trone, an analyst at Fox-Pitt Kelton Cochrane Caronia Waller.
Governments in the Middle East and Asia have agreed to invest about $25 billion in Wall Street firms since banks began to disclose subprime losses. Merrill's shares slumped 42 percent in New York this year, cutting its market value to $46.7 billion. The firm reported a $2.2 billion loss for the third quarter.
Rob Stewart, a Hong Kong-based spokesman for Merrill, declined to comment. Temasek, the biggest shareholder of Standard Chartered Plc and DBS Group Holdings Ltd., also declined to comment.
Citi, Morgan Stanley
Citigroup Inc., the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi would invest $7.5 billion in the New York-based company. State-controlled China Investment Corp. is buying an almost 10 percent stake in Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss of $9.4 billion from mortgage-related holdings on Dec. 19.
UBS, the biggest Swiss bank, made an agreement this month to replenish its capital with 13 billion Swiss francs ($11.2 billion) from the Government of Singapore Investment Corp. and an unidentified Middle Eastern investor.
Temasek is in advanced talks with Merrill about the investment, although pricing, timing and regulatory issues need to be negotiated, the Wall Street Journal reported. The fund manages more than $100 billion of assets, including controlling stakes in seven of Singapore's 10 biggest companies by market value.
They ``may feel there are bargains out there,'' said David Cohen, an economist at Action Economics in Singapore. ``They can write big checks and these banks appreciate that.''
To contact the reporter on this story: Kelly Riddell in Washington at .

Wednesday, December 19, 2007

Citizen Grateful for Civil Service Pay Hike!!

Thousands of letters are sent to the Straits Times forum, but only the best are chosen for publication.

The letter below is one of the best I have ever read. The writer gave such compelling reasons for the civil service pay hike:

1. We need to increase civil servants' pay to have them serve with fervour and fight for our cause. Yes, and we know how hard they have been fighting for us - relieve congested roads by increasing ERP, working out the details of the annuities plan and find ways to make us work longer and harder so we don't become lazy.

2. Now that Singaporeans are faced with more problems of soaring costs and 'can barely stay afloat' we need our elite civil servants even more so we have to pay them more. So the more problems we have, the more pay our civil servants deserve to be paid.

3. Our senior civil servants who have been in the civil service the longest deserve the largest % pay hike because having been in the civil service so long, they are most likely to jump to the private sector for a new experience. Wow our senior civil servants are so good, the private sector is all out to grab them with higher pay.

This must be one of the best letters ever published by the Straits Times. Now you know why Straits Times is considered by our govt has one of the best newspapers in the world.

Pay rise for top civil servants timely

I READ with great relief the article about ministers and top civil servants getting a 4-21 per cent pay rise next month (ST, Dec 14). We can now be assured that only the most competent people will serve the country. With the rise in their remuneration, we have secured their steadfast service, as well as their continued fervour and dedication to fight for our cause. It could not be more timely. When inflation is soaring and some Singaporeans 'can barely stay afloat' (The Sunday Times, Dec 2), we need, more than ever, the best possible team of civil servants to lead us through the difficulties. We cannot afford to lose them to the private sector, and have to retain them at all costs. This is especially so as these senior civil servants have been in the public sector for so long that they are likely to seek fresh experience in the private sector. With the festive season coming, I hope that they will not forget to share the joy of receiving with the less fortunate. Therefore, I appeal to them to follow Prime Minister Lee Hsien Loong's lead in giving to the poor and spreading the blessings.

Agung Santoso Ongko

Monday, December 17, 2007

The ISA - Ensuring the Security of Singapore.

The above is today's Straits Times headlines. Given the sensitivities, I won't comment much on Malaysia's use of the ISA. Its leaders believe Malaysia is now more secure and it is a reminder for us to keep the ISA to ensure our own continued security.
Should mass protests occur, it doesn't really matter what they are about, the ISA can always be used to arrest its organisers saying they undermined the security of the nation, scare away investors & tourists and harm the country. I can't imagine a mass protest that does not justify the use of ISA - I guess that is why there are no mass protests in Singapore.

Why do western countries + S. Korea + Taiwan + Hong Kong + Macau + ..Phillipines + Thailand + Indonesia not have an ISA to quickly quell protests when they occur? The govt there actually have to address the concerns of the protesters instead of calling them threats to the nation's security to simply put a stop to their nonsense. Just look at the recent protests in Macau over rising inequality & prices, the govt there actually caved in and promised the protesters they will look into their plight in the coming months - wouldn't it be easier and faster to just activate the ISA if they had one?
In the 1960s, the USA had civil rights movement led by Martin Luther King Jr. If they had the equivalent of an ISA , they could have arrested him early lock him up for a few decades and put an early end to the civil rights movement. There will be no Martin Luther King Holiday and if they had a newspaper as good as the Straits Times, it would have been very easy to show that he was out to cause trouble and undermine the security of USA.
Many people believe that the ISA is still needed to take care of terrorist threats. Please don't water down the ISA okay - if it is meant for terrorist threats, they would have renamed it Anti-terrorist Act or something like that. It is a powerful instrument to take care of the security of Singapore. Yes, any gathering of more than 4 people not for the purpose of BBQs or birthday parties will definitely undermine the security of Singapore. The securiy of Singapore is undermined when investors & tourists are scared away. Although most of our tourists and investors (from USA, S. Korea, etc) come from countries that allow protests, they will be so scared when they see one in Singapore, they will flee immediately - when people come to Singapore, they expect more security than they do in their home countries. While the protesters in Macau did not cause billions to stop pouring into their little island, somehow for unknown reasons, Singapore tends to attract investors who are more jittery.

I think the biggest problem caused by protests and the absence of ISA is the acceleration of change in a country. The civil rights movement brought about greater equality in the USA, the recent protests in Macau brought about policy changes in their govt to address income inequality by considering better labour laws. In Phillipines, it brought about greater democracy. Our political system is far more advanced than elsewhere in addressing the needs of the people so there is no need for protests. Just look at our income gap, it has been ballooning for years and with recent price increases, the poor just got poorer - our govt has put in plenty of effort to solve this - they are spending years and years studying this carefully to come out with the correct policy response - good policies take alot of time for such a complex problem, that is why so little is done. Allowing protests might cause policy missteps like giving more aid to the poor, having a minimum wage and better working conditions.

Having the ISA and banning protests say alot about the superiority of our sociopolitical system in Singapore. We are confident our system best address the needs of the citizens so there is no need for protests of more than 4 people. We have a system that is far superior to those of Western societies to combat injustice and social inequality. No govt in the world deserve to be better paid for doing that and few govts have been more careful and taken more time than the PAP to address the issue of inequality, injustice, lack of freedom & democratic rights of its people. If you think about it a little harder, it becomes clear that the security of Singapore enforced by the ISA has alot to do with the securing the position of our esteemed leaders for without them, Singapore will sink.

Thursday, December 13, 2007

Ministers, Elite civil servants get pay hike

While you were struggling with all the fee hikes and price increases, the time has come for our ministers to enjoy a 2nd round of pay rise. We cannot expect our elites to make a painful sacrifice. While the 70 yr old cleaner now has to pay more for her bus journey & 20% more for herwhile bread, our ministers are all set for their 20% pay hike. With such deserving men at the helm to safeguard our interests, our lives can only get better....

Ministers, top civil servants to get 4% to 21% in 2nd pay rise

Starting grade ministers to take home $1.94m next year - up 21% from this year's $1.6m. -ST --
Lynn Lee
Thu, Dec 13, 2007The Straits Times


SINGAPORE ministers and top civil servants will start the New Year with a second round of pay increase, ranging from 4 per cent to 21 per cent.
Under the revised salary package announced by the Public Service Division (PSD) on Thursday, ministers at the starting grade will take home $1.94 million next year - an increase of 21 per cent over this year's $1.6 million.
MPs and administrative officers - the elite of the civil service - will see their salaries going up by around 4 per cent.

With the revision, Prime Minister Lee Hsien Loong's pay of $3.1 million this year will go up to about $3.7 million.
President SR Nathan will get about $3.8 million - up from the $3.2 million he's getting this year.
As for Members of Parliament, they will get an allowance of $225,000 a year - a 4 per cent jump.
The changes come after the first round of pay hikes in April, when the Government also announced that civil service salaries would be adjusted over time to keep pace with private sector benchmarks.
Minister-in-charge of the Civil Service Teo Chee Hean said on Thursday that the move was in keeping with April's announcement.
'Public sector salaries move up and down with the market. In this tight labour market, private sector salaries have moved up significantly, as the benchmark figures show. The service needs to follow promptly in order to attract and retain good people,' said Mr Teo, who is also the Defence Minister.
But he noted that actual pay would still be tied to performance. This includes individual performance and how the economy does.
'We are careful to link rewards closely to performance. We have increased the proportion of annual salary that is variable. At the senior levels as much as 50 per cent of the annual salary is now performance-based,' he said.
This change is good news for political, judicial and statutory appointment-holders, as well as the 230-strong elite Administrative service.
Their pay increases will come in the form of a higher monthly salary and a fatter performance bonus.
For instance, Ministers at the entry grade of MR4 will get an average of nine months performance bonus, on top of the GDP bonus, which can fall between three and eight months, depending on econommic growth.
In a statement, the PSD said that this round of changes would bring MR4 salaries to 77 per cent of the private sector benchmarks, to which it is pegged.
The April revisions had brought it to 73 per cent of th benchmark.
The benchmark is set at two-thirds of the median pay of the top eight earners in banking, law, engineering adn accountancy, as well as employees of multinational corporations and local manufacturers. It was $2.2 million this year.

Wednesday, December 12, 2007

Goodbye Taxi Hello MRT+BUS.....

I have a confession to make. I've been watching History Channel every night until 1am and can't get up in time for work. As a result, I have been taking taxi to work for the past few months contributing to the high demand for cabs during the morning peak hour. ...and burning a hole in my own pocket.
Thanks to Comfort Cab's new fares, I feel so motivated to sleep early and wake up earlier in time to take the bus/MRT. Yes, I would like to free up the taxis for my fellow Singaporeans. I'm sure many of them will whine alot but will still be taking the taxis on Monday when the new fares are implemented.

I would like to thank MP Seng Han Thong for urging taxi companies to increase I have to adopt a healthier lifestyle and sleep early.... our MPs care so much about us. Of course, smelling armpits on our crowded MRTs may not be a good way to start the day but it is a small price to pay. For those of you who have decided to continue taking taxis, I just want to say that you're helping to contribute to one of our corporations with your effort.

ComfortDelgro Profits
2006 - S$244.6 million
2005 - S$201.9 milion
2004 - S$200.6 million
2003 - S$134.0 million

Sometimes you wonder why taxi drivers cannot be given taxi licenses directly but are made to rent taxis from a middleman like Comfort that just sits there to collect from the labor of thousands of taxi drivers. Why MP Seng who represents the citizens does not help taxi drivers and commuters by demanding that taxi companies lower taxi rentals so that fares can be lowered? The answer is clear. If taxi drivers are allowed to own their taxis, their work ethics will be undermined, they can cover their cost by driving fewer hours, it will make them lazy. ..this is definitely not good for them. Taxi companies that profitting is desirable..... remember Singapore is Singapore Inc, more profits is always better than less profits.

Here are the new taxi rates for your appreciation:
Current Rate.................................. New Rate
City Area Surcharge $1 peak hour ------------------- $3.00 (5pm till midnight, Mon to Sat)
Late Night Charge staggered 10% to 50% ----- 50% of metered fare (12am till 5:59am)
Peak Period Surcharge $2.00 -------------------35% of metered fare (7am till 9:30am, 5pm till 8pm)
Flagged Down Fare $2.50 for first km ----------$2.80 for first km
Waiting time $0.10 every 25s -- ---------------- $0.20 every 45s Distance Rate (<=10km)

$0.10 every 210 m --------------------------------$0.20 every 385m from 2nd km till 10km
Distance Rate (>10km) $0.10 every 175 m ---$0.20 every 330m above 10km
Call Booking (prime time) $4.00 ----------------$3.50 (7am to 9:30am, 5pm to 11pm , weekdays)
Call Booking (other time) $2.50 -----------------$2.50

Monday, December 10, 2007

Breaking News : GIC buys stake in UBS!!!!!

While you were so small minded and whining about that 2 cent increase in bus fare, that $2 increase in polyclinic fees and the extra few dollars you have to fork out per day as you go through the ERP..........our GIC has has purchased a 9% stake in UBS for a whopping US$11.5B!!!!
See how useful your CPF money is. I'm so glad that my CPF money is used to help prop up the world's banking system. It looks like this subprime crisis is going to get defused by sovereign funds recapitalising banks by buying significant stakes in them. Of course those Abu Dhabi fellers who bought a piece of Citibank had it easy, they got most of it (the money) by allowing Chevron, Exxon etc to drill holes in their country. Our CPF money involves alot more sweat & labor.

Don't worry too much about it. You will get your 3.5% return as your money is used to purchase a stake in Europe's biggest bank. I was looking to buy UBS or Citibank with my 13th month pay. I think I'll settle for Citibank since GIC already owns a piece of UBS.

Looking through the numbers in the most pessimistic case, many US brokerages/banks might lose their entire book value if their level 3 assets are revalued. Level 3 are illiquid assets which accountants cannot really value properly. I comb through alot of data and decided that the whole situation is going to be very risky and potentially rewarding. Citibank of course is not going to collapse but by the time all the mess is sorted out it is uncertain if its stock will double or halved. I figured that if I were to play it safe, I should split my money into 3-5 instalments and buy gradually as the saga unfold averaging across a 9 month period. This is what I decided to do with the money to minimise the risk as I have worked hard for the money I intend to invest.
....GIC is going to put US$11.5B at one go, that is 10% of our reserves. They are doing something I wouldn't do with my 13th month got to hand it to the guys in GIC, they certainly treat Singaporeans' money as carefully as they would treat their own.

UBS to Sell Stakes After $10 Billion in Writedowns (Update2)
By Elena Logutenkova

Dec. 10 (Bloomberg) -- UBS AG will write down U.S. subprime mortgage investments by $10 billion, the biggest such loss by any European bank, and replenish capital by selling stakes to investors in Singapore and the Middle East.
Europe's largest bank by assets plans to raise 13 billion francs ($11.5 billion) selling bonds convertible into shares to Government of Singapore Investment Corporation Pte. and an unidentified Middle Eastern investor, Zurich-based UBS said in a statement today.
UBS scrapped a forecast for a fourth-quarter profit and may post a full-year loss, the company said. The collapse of the U.S. subprime mortgage market has led to about $76 billion of losses and markdowns at securities firms and banks this year. UBS follows Citigroup Inc., the largest U.S. bank, in taking on strategic investors to bolster capital.
``UBS was quite clever this time to couple some extremely bad news with some good news,'' said Dieter Winet, who helps manage about $50 billion including UBS shares at Swisscanto Asset Management. ``It's positive that capital is placed in firm hands. This will help restore trust in private banking and asset management and help UBS write new business.''
UBS shares fell as much as 3.4 percent, and were down 1.2 francs, or 2.1 percent, to 56 francs by 9:04 a.m. in Zurich trading. The shares have fallen 23 percent over the past 12 months, erasing more than 25 billion francs of the bank's market capitalization.
Citigroup, Fortis
Singapore's GIC, which oversees the island nation's foreign reserves, will invest 11 billion francs in UBS for a 9 percent stake. The Middle East investor will put in 2 billion francs.
New York-based Citigroup announced last month a $7.5 billion cash infusion from Abu Dhabi after record mortgage losses wiped out almost half its market value. Ping An Insurance (Group) Co., China's second-largest insurer, bought a 4.18 percent stake in Fortis for 1.81 billion euros ($2.7 billion).
``Because there's a lot of liquidity in those countries and those sovereign wealth funds, they'll be looking for investment opportunities,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Japan Co., whose parent company holds $1.1 trillion in assets. ``The valuations have come down a lot.''
UBS also plans to sell 36.4 million treasury shares that it previously intended to cancel, raising about 2 billion francs, and proposed replacing the 2007 cash dividend with stock, boosting capital by 4.4 billion francs. The convertible bond sale and dividend replacement must be approved by an extraordinary shareholders meeting in mid-February, the bank said.
`More Aggressive'
UBS said it plans to raise a total of 19.4 billion francs through all the measures, which will improve its so-called Tier 1 ratio to more than 12 percent from 10.6 percent on Sept. 30.
The bank posted its first loss in almost five years in the third quarter after the subprime contagion led to about $4.66 billion in markdowns on fixed-income securities and leveraged loans.
``The industry has been moving to more aggressive markdown rates'' on subprime-related assets, Kinner Lakhani, a London- based analyst at ABN Amro Holding NV with a ``hold'' rating on UBS shares, said before today's release. UBS's previous writedowns had been ``well below industry benchmarks.''
The bank's losses already cost the jobs of Chief Executive Officer Peter Wuffli, his finance chief Clive Standish and investment-banking head Huw Jenkins.
``We believe that we have made sufficient value adjustments now,'' Chairman Marcel Ospel told Swiss radio DRS. ``I find it very difficult to imagine even worse consequences.''
`Maximum Clarity'
Ospel said neither he nor the board of directors considered his resignation. The bank has completed most of the 1,500 job cuts announced earlier this year at the securities unit and will finish the rest by the end of the year, he said.
Marcel Rohner, who was named CEO in July, CFO Marco Suter and Chief Risk Officer Joseph Scoby are scheduled to give analysts and investors a business update in London tomorrow.
``In the last several quarters, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting,'' Rohner said in the statement. ``These writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation.''
The bank was expected to write down about 2.6 billion francs in the fourth quarter, according to the average estimate of five analysts who published forecasts over the past month.
Credit-default swaps tied to the Zurich-based bank's debt rose 1 basis point to 57 basis points, according to Deutsche Bank AG. The cost of credit-default swaps, used to speculate on the ability of companies to pay their debts, rise as perceptions of credit quality worsen.
UBS said on Oct. 30 that it had $16.8 billion invested directly in residential mortgage-backed securities at the end of the quarter. It also had $1.8 billion of collateralized debt obligations, bonds created by repackaging other debt securities, as well as $20.2 billion of so-called super senior securities, or AAA-rated structured debt that gets paid back ahead of other similarly rated bonds in case of a default.
To contact the reporter on this story: Elena Logutenkova in Frankfurt at Last Updated: December 10, 2007 03:22 EST

Sunday, December 09, 2007

MAS Essay Writing Competition.

The topic of this year's MAS essay writing competition is "Singapore’s Growing Income Disparities: Causes, Consequences and Policy Options”. Isn't it reassuring that the MAS is really interested in finding out the real cause of income inequality in Singapore? We managed to attained the biggest income gap as measured by the GINI Index among all developed countries. I wanted to give all the credit for this marvelous accomplishment to the PAP govt for its great policies : "Welfare is a dirty word", "GST is to help the poor", "Minimum wages will cause companies to flee", FT & more FT, corporate tax cuts etc etc. ...however, the MAS being the organiser probably doesn't want to be seen taking too much credit for this great accomplishment.
I thought about it for a while and decided that my chances will be far better if I wrote an essay along the following lines:

1. The income gap is cause primarily by globalisation.
2. The PAP has done every thing it can to close the gap.
3. The import of hundreds of thousands of foreign workers does not suppress wages of low income (just found out that the coffeeshop downstairs has fired its 50 yr old coffeeshop helper has been fired and a young china guy [efficient, courteous, energetic] has replaced him. I guess the helper is now freed up for retraining and get a higher paying job later).
4. GST helps the poor and the entire regressive tax regime of recent years is meant to help the poor.
5. Given that income gap has ballooned, the blame can be put squarely on the low income workers couldn;t get themselves upgraded in time for the numerous jobs the PAP the PAP has no choice but to bring in even more foreign workers to fill those jobs.

I think I stand a good chance of winning...what do you think?
While looking for material, I found this speech by Paul Krugman on the creation and destruction of the middleclass & income gap. Krugman suggests that the middleclass is created quickly by the minimum wage, formation of labor unions, progressive taxation on corporate profits, social security etc. It is now being destroyed by a reversal of those policies - the process started in the Regean years. Wonder why Krugman has never been invited to Singapore to speak about our economy.

There is one part of the speech that Krugman didn't get right - he said that the huge disparity in income distribution is unique to America. Oh come on Krugman, you never heard of Singapore? A place with the highest per capita growth in the number of US$ millionaires and rapid deterioration of wages the lowest income group. By all measures, we beat America flat .....

Friday, December 07, 2007

Finally Relief for Taxi Commuters....

There have been numerous complaints by taxi commuters who have found it difficult to catch a taxi during peak hours. Many commuters complain that the waiting time has gone up to more than half an hour during peak hours and rogue taxi drivers refuse to pick up passengers by the street because they can make an extra $4 waiting from call bookings. After much talk, a solution is in the works.....
Looks like Singaporeans are getting too rich. Too many of you can afford to take taxis ...this means the taxi fares are too low so taxi fares have to be increased. Too many Singaporeans can afford to take buses too, causing our buses to be packed like sardines so the bus fares have to be raised. As for the congestion on our roads, it is caused by too many drivers being able to pay for ERP so ERP charges have to be increased to reduce the congestion. Too many people can afford HDB flats and there is now a long queue and a backlog of demand so you can guess what the solution is.
Some of you might think that the sudden surge in the number of people on this tiny island has something to do with all this- in the past 10 years the population in Singapore has surged by 53%, faster than any preceding decade in our history. Rest assured, our great govt has the capacity to serve everyone. Of course there is this problem with the allocation of scarce resources like taxis, roads, housing, water, electricity, healthcare etc This can be solved by raising prices to bring down the demand. Don't worry we are not even near the targeted population of 6.5M (now 4.68M) and the PAP govt is ready to bring more people - as usual, anyone complaining about the population surge will be called small minded xenophobics. Strangely, the population surge is also causing the earlier batch of foreigners to complain about the high cost of living and overcrowding.
We should all welcome the population surge because the idea is very simple - more input = more output. Our economic miracle as measured by GDP is being sustained by opening the floodgates. We all know how important GDP is - our beloved PAP govt practically measures its own performance for the purpose of ministerial pay hikes by looking at the GDP (Remember : "S$56 million for a cabinet to run a GDP of S$210bil is cheap. You can’t get that anywhere in the world." - Minister Lee Yi Shyan). Our $220B economy can be turned into a $300B economy if we bring in another 500,000 people. Then it would be very clear that our ministers again become underpaid and their salaries have to be hiked again. The rest of you whose salaries has been eroded by rising cost, please see the bigger picture, don't be so small minded - you cannot let your own inabililty to cope with rising cost hold back the great achievements of our elite leaders.

Saturday, December 01, 2007

Another lawyer 'run road'.....

This time with $6M of clients' conveyance money.
The surprise is not that it happened again but how little is done about it....
There is somthing I need to get off my chest....
About 9 years ago I was persuaded to buy a property. I had little interest in property investments but after much persuasion and groundwork the others did, I relented and went along with it. After signing the papers (purchase agreement) at the developer's office, I was told that I needed to look for a bank for a loan and a lawyer. Lawyer? Why do I need a lawyer for a transaction with a developer I can trust..? For conveyance was what I was told by the sales guy at the developer's office. I didn't want to show my ignorance so I went home to check what 'conveyance' means.
Here's what is done during conveyance:
  • Check the sale and purchase agreement before you sign to make sure it is fair and sensible.
    Search the property title and confirm its ownership. This shows mortgages on the property and any other restrictions that may apply. (Read through the S&P agreement something I could do myself)
  • Check with the relevant government authorities to ensure that the property is not affected by any government notices or projects, e.g. road widening, construction of MRT lines, etc. (There's probably a govt database for planned public works)
  • Check that the owner is not a bankrupt (No need to check since the developer is a listed company)
  • Check the mortgage document is in order, if you are buying, or that it has been discharged if you are selling.(Yes, check the address & names to make sure it is correct)
  • Prepare and send out legal documents such as the transfer of ownership. (Take from a standard template and change the name & address)
  • Prepare an account for you and advise you on the amount you have to pay to complete your purchase.
I figured it will probably cost me $200-$300 because the the paper looks simple enough to be done in half a day by a law clerk. I called a few law firms and to my dismay they wanted somewhere between $2000 and $3000! I found out later they cannot charge less than $1800 as this was recommended by the Law Society. In a country where aged cleaners work an entire month for less than $1000, lawyers are charging $2000 for paperwork. There is no powerful body to recommend that our cleaners be paid no less than $1800 but there is one that recommends how much our rich lawyers driving BMWs get paid for doing conveyance.
It took me a few days to get over the cost of conveyance and decide on a law firm to do the conveyance. I met up with the lawyer to sign a number of documents. After that, the lawyer told me to prepare a number of cheques made out to law firm. What??? ...I'm buying the property from the developer but had to make payment to the law firm instead of the developer directly. At that time there were cases of lawyers running away with their client's money......I was very hesitant but was told there was no other way to do this. Luckily, the lawyer was honest and everything went through smoothly.
It is almost a decade since I bought that property. When it comes to conveyance, little has changed - property buyers are still asked to write cheques in favor of the law firms doing conveyance and rogue lawyers are still running away with the money.
Can someone tell me:
1. Why can't buyers purchase cashier orders for the payments. They cost only $5 and completely eliminate the risk for 'run road' lawyers. The other way is for banks to offer escrow accounts for such transactions from with money can only flow to the seller under the instruction of the lawyer. Simple methods to ensure that money can only go from buyer to seller will save us from more dramatic stories of runaway lawyers.
2. Why can't we have licensed conveyancers to do this type of routine work? Our govt believes in meritocracy and that everyone should be paid their economic worth. Our highly intelligent lawyers should be freed up to make more money doing complex work instead of being burdened with such mundane work. Cleaners, factory workers and IT professionals compete (with each other & FTs) , I'm sure lawyers do not want an exclusive monopoly that protect their fees because they are capable of competing like everyone else.
3. Where do 'run road' lawyers go? These lawyers seem to be able to vanish ...
Really appreciate some answers for the above questions. I've been asking them for many years and nobody seems to be able to give me an answer.

Friday, November 30, 2007

SDP wants the same rights as snake oil peddlers!

You see them often at the night markets. These snake oil peddlers who give such convincing presentations for their magic elixirs that can cure almost any ailment humans can get. ...for just $10 per bottle you get a cure for any kind of skin problem and if you have stomach upset, you just need drink a spoonful and save that trip to the doctor. They have been around for decades speaking publicly to large crowds about their non-FDA approved miracle cures. With healthcare cost escalating, I notice their sales have increased as people seek alternatives to rising cost of conventional healthcare....the crowds attending their public outdoor presentations are huge.
I'm so shock the SDP demanding the right to speak in public without a permit. Who do these useless members of our society think they are? They certainly don't deserve this right because they will use it to poison our minds. It is dangerous...there is no guarantee that reading the Straits Times diligently for 20 days will fix the damage. They certainly don't deserve the same rights as credit card peddlers, floor cleaner salesmen and snake oil peddlers. I'm so glad the police has acted so objectively for the public good to haul them to court for speaking in public. I'm sure there will be great harm inflicted on our society if they are allowed to do this without prosecution. If you drink that magic non-FDA approved potion from the snake oil peddler you will save the trip to the clinic, that is why he is allowed to peddle his medicine for so many years - he is a trusted useful member of our society. These SDP guys they are here to peddle poison - demanding greater transparency from our esteemed govt, demanding greater freedom of speech & democracy, urging citizen to stand up for their rights...all the useless ideas they imported from overseas - we just cannot have that.
SDP pair again contest charges of speaking in public without a permit
By Teo Xuanwei, TODAY Posted: 28 November 2007 1127 hrs

1 of 1
> ">Chee Soon Juan (C)

SINGAPORE: Answering charges of speaking in public without a permit for the third time, Singapore Democratic Party (SDP) chief Chee Soon Juan and party supporter Yap Keng Ho on Tuesday accused the police of "selective enforcement". The duo, who represented themselves in court, claimed that they and about nine other SDP members did not flout the rules by promoting their party newspaper in front of Causeway Point on April 8 last year. Comparing themselves to hawkers who peddle their wares in public without permits but are not prosecuted, they questioned if the action against them was "politically motivated". Cross-examining the first witness, Mr Loh Zhen Hong, a former police officer who had reported the incident, Yap tried to show there was "unfairness in enforcing the law between the ruling party and the opposition". He used examples of banks holding roadshows to promote their credit cards and people who sell their products with loudhailers to argue that the party's activities on that day were "nothing out of the ordinary". Yap also grilled Mr Loh, who was off-duty when he spotted the SDP's activities, on whether he would have gone to the police if he had seen members of the People's Action Party or Minister Mentor Lee Kuan Yew making speeches. Mr Loh said that he would have done the same thing in those instances. District Judge Jasvender Kaur cut off Yap several times to remind him that his cross-examination should focus on proving that Mr Loh "had ill motivations to report to the police". After the court was shown the video clip of the SDP's activities that day, Yap contended that the police, by filming the proceedings, had already assumed the party had committed an offence. The court also allowed the footage to be released to the duo to help them prepare their defence. The hearing continues Wednesday and is scheduled to last till next Monday. If convicted, the pair face a maximum fine of S$10,000 each. - TODAY/ym

Monday, November 26, 2007

Deepest Sorrows.....

There are no strangers among Singaporeans.
You will always know the person or someone who knows the person.
Five young Singaporeans whose lives ended far too soon, left us in deep sadness.....

Saturday, November 24, 2007

October CPI 3.6% ...16 year high!!!

S'pore's Economy is not overheating
- PM Lee 10 Oct 2007 [link]

I see the Singapore economy is not overheating, it is just very hot.
Food is rising at 4.2% so I decided to check out what kind of food can be kept for 20 years so that I won't starve when I retire. At 4.2%, it means that your CPF minimum sum which returns 3.5% a year is probably enough for one meal a day when you retire.
Guess which component of CPI rose the fastest? Healthcare which is zooming up at a whopping 6.2%. I guess the govt want to discourage you from getting sick so they have to make sure there is a big and rising financial disincentive for getting sick. See how kind and caring the PAP govt is they want to enjoy a long healthy life so they keep healthcare cost high to deter you from getting sick. The Transport and Communication cost has risen by 4.3% due mainly to the increase in public transport fares, they want to walk alittle more as part of a healthy lifestyle instead of pampering yourself taking the public transport....all these cost increases are the wise decisions of our caring govt.
When you got that pay small increase in the beginning of the year, I'm sure you were very burdened.... not knowing what to do with the extra money. Our beloved PAP govt heard about your plight and has decide to give you some help with your money. Now you don't have to worry about what to do with that little extra amount because it is now gone! ...Eaten away by inflation.

Friday, November 23, 2007

Jim Jubak on the Market...

I couldn't have explained the wild market swings better myself....

The Disappearing Subsidy....

Yes, the GST hike is to help the poor.

Yes, means testing is to help the poor.

Charity shows also help the poor.....

Why are there so many poor people in the richest nation in the region?...

Given Singapore is now so affluent, one would expect more subsidies for the poor. There are many people impoverished by rising cost as their incomes remain relatively unchanged. My relative who is a technician is one of them. Having a family to support, he gets by by pinching on everything. ..every dollar counts. ...with the recent bout of increases there was even greater pressure to cut down. Unfortunately his daughter got sick on Saturday and was sent to A&E. The doctor wanted to admit her for observation. Mindful of the need to save, he asked for class "C". He was told by the admissions clerk that it was not available. When the govt tells us subsidised care exists, it does not mean it is available for those who need it. You want subsidised dental care? Go arrange it at the polyclinic where you have to wait for months. Has the availability of subsidised care has been reduced as the cost of medical care rose? Many poor Singaporeans don't even go seek emergency medical treatment at the A&E when they need it because one of the first thing the hospital does before they treat you is to collect $75.

As Singapore aspires to be a medical hub, it expands its capacity to treat the private foreign patients which include millionaires from Indonesia, Middle East and the occasional junta leader who is not denied medical care for humanitarian reasons.

If you are very poor and need medical care, what do you do? Some have no choice but to appeal to the public during the NKF shows or the Cancer Charity Show. The money donated goes to a charity that is regulated by the "light touch" of our govt, hopefully you get some of it for your medical treatment. Singaporeans are compassionate people, they feel alot better after donating to charity.
By Leong Sze Hian

After watching the Cancer Charity Show, my friend’s sister, a 50 plus housewife, was so depressed, that she jumped from the 10th floor of her HDB flat, the day after the show. As I watched elderly sick Singaporeans pleading during the show, that they have no money for medical treatment, medicine, and one lady who said that she did not even have 10 cents, the first thought that came into my mind, was isn’t there Medifund to help those who cannot pay for medical fees and Comcare to help the poor ? Since the reason given for raising the GST, was to help the poor, and the hike has already been implemented on 1 July, why do we keep hearing of pleas for help from the sick and the needy ? I would like to suggest that a detailed breakdown be given of what and how the estimated $ 1.5 billion from the GST hike will be used to help the poor. Too much resources for fund raising? According to a ChannelNewsAsia report: “Fifteen groups sharing different religious faiths came together as one on Sunday to raise funds in a big way for community projects in Aljunied GRC. At the community bonding carnival in Hougang, each of the groups, including the Singapore Buddhist Lodge and Jamiyah Singapore, set up a stall either selling food or organising games for residents. A maximum of S$350,000 in tickets was sold and the proceeds will go towards new facilities for the GRC’s Bedok Reservoir-Punggol division. The carnival is the first in a series of fund-raisers involving the religious groups in the constituency. Beneficiaries include the 19-year-old Punggol Community Club – expected to cost millions to refurbish - a Dragon Boat House at Bedok Reservoir Park and a kidney dialysis centre.” Are we directing too much resouces in our fund raisng activities for “new facilities for the GRC”, refurbishing a Community Club, Dragon Boat House, etc, at the expense of funds for the needy? All of the above manifestations may be attributed to the root cause of the problem, which is the widening income gap. The ever-widening income gap In this connection, I refer to the article “Bigger but unequal pay gains seen for ‘08” (BT, Nov 19). It states that “Manual workers, again at the bottom of the payout scale, are likely to get a merit raise of 3.7 per cent in 2008, compared to 3 per cent in 2007”. With increasing inflation expected to hit 4.5 per cent by 2008, the median wage increase for manual workers may in effect be a negative increase in wages in real items. This may further contribute to the widening income gap, which was one of three major challenges facing Singapore as highlighted by Senior Minister Goh Chok Tong recently. In this connection, according to the Reuters news report “Singapore’s economic boom widens income gap” of 9 November, “the proportion of Singapore residents earning less than S$1,000 (US$690) a month rose to 18 percent last year, from 16 percent in 2002, central bank data released late last month show… and Singapore’s Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, and is now in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7), data from Singapore’s Household Survey and the World Bank show”. I refer also to media reports that Taiwan is becoming an M-shaped society because of the widening income gap, and that the number of Singapore millionaires could soar to 29,000 by 2011. Last year, the top 20 per cent of Taiwanese households earned six times more than the bottom 20 per cent. In contrast, using data from the Department of Statistics’ Key Household Income Trends 2006, the top 20 per cent of households in Singapore, earned about 12 times more than the bottom 20 per cent, based on the “Average Monthly Income from Work Per Household Member Among Employed Households by Decile”. Does the above mean that the income gap is about 6 times more than the Taiwanese ? In Taiwan, the average household at the top earned $ 82,300 (NT $ 1.82 million), whereas it was $ 13,700 (NT $ 304,000) for the average household at the bottom. In comparison, Singapore’s top decile by average monthly per household member was $ 83,880, versus $ 3,600 for the bottom decile. From the above, if we assume three members per household, the top earned $ 251,640 and the bottom $ 10,800. So does it mean that we earn about 205 per cent more at the top, and about 21 per cent less at the bottom, when compared to the Taiwanese, on this basis ? (Note : As the household income data is not given in decile format, I have used the per capita household income data in the above analysis. This analysis has been quite difficult because of the selective availability of data for different time periods.) Helping the poor? In Taiwan, some $ 11.3 billion (NT $ 250 billion) was handed out to the poor in assistance schemes that included monthly subsidies of up to $ 270 (NT $ 6,000) for the elderly. In Singapore, about 3,000 destitutes get $ 290 a month in welfare. How much do the elderly poor in Singapore get a month ? Since the reason given for raising GST was to help the poor, how much was spent last year helping the poor, and how much will be spent this year following the GST increase ? As a point of comparison, Singapore’s per capita Gross National Income was $ 45,353 in 2006, compared to Taiwan’s, estimated to be about $ 42,000. The poor in Taiwan pay $ 18 (NT $ 400) a month for a 36-sq-m rental flat. In Singapore, a 1-room HDB rental flat starts at $ 44.50 ($ 26 rental plus $ 18.50 Service and Conservancy Charges) for households earning not more that $ 800 a month. Those earning more pay higher rentals. In view of the above comparative statistics, I would like to suggest that we review some of our policies like the extra 1 per cent interest on the first $ 60,000 of CPF, because the poor may stand to gain less relative to the rich, as they may have lower CPF balances. The $ 700 million that the extra 1 per cent will cost, may be better directed to the poor instead.

Wednesday, November 21, 2007

Stock Market Carnage & the Efficient Market Hypothesis....

There is a joke about 2 economists walking along the road and one saw a dollar note on the floor and told the other economist...the economist replied "That is not possible, if there is a dollar note on the floor someone would have picked it up already....".

I like this hypothesis in economics that state that markets are efficient especially stock markets. If you buy something on the stock market, it is correctly priced and your return is depends on the risk you're taking. Economists believe that stock prices follow a random walk with an upside bias and investors cannot predict the movement of stock prices. The hypothesis states that stock movement today is independent of its movement yesterday. The stock market prices are supposed to reflect all known information and only new information will move markets.......

Given the market turmoil of the past 2 weeks, I think most investors will ask the economists to "go fly a kite" with that hypothesis. It is very clear to them that markets are more likely to move down than up. The risk of inflation, subprime mortgages and a rising possibility US recession continuously pressure stocks to move down. It is crazy not to get out of such a market because "the sky is falling". Market commentators believe the stock market have more downside and "the worst is yet to come". As I type this, the US market looks set for an awful start today and futures indicate that it has a triple digit loss....the US$ looks weak, tomorrow Asian stock markets will sell off and that leads to more selling in US markets etc.....looks very predictable to me. So how does one reconcile the Efficient Market Hypothesis (EMH) with the behavior of our markets in recent times?....are the economists wrong?

[....I've to go out now. I'll be back to write what I think is going on in the markets. Please if you have any views on the recent market turmoil or the EMH, please leave a comment... ]

Went to sleep, woke up to check the DOW and saw it has plunge 211 pts. Now if that is not going to cause a panic tomorrow, I'll be surprised. Then there will be selloffs in Nikkei, STI, Hang Seng and so on. ...its like a pattern. Last week's selloff I believe is due in part to the unwinding of the Yen carry trade more than fears of a US slowdown. As the Yen strengthens, hedge funds that borrowed the Yen heavily to purchase higher yielding assets around the world are forced out of their position. You can tell how much unwinding takes place by the "across the board selling" that takes place - you see commodities, stocks, Aussie$, NZ$ etc selling off at the same time. In the past 2 days, while stock markets around the world fell, oil and commodities rose and emerging market currencies fell - the unwinding has abated what is happening now is hedge funds are pulling out their money from risky emerging markets. Remember these hedge funds were responsible to our index rising from 2800 to 3800. The selling has been indiscriminate - it doesn't matter if the stock had good earnings and growth potential, they are just sold off with everything else. It is the falling stock prices that induce alot of fear in investors not the deterioration of the economic fundamentals....

"The stock market anticipated 7 of the last 4 recessions", George Soros (I think).

Stock markets fell ahead of every recession and sometimes fell in anticipation of recessions that don't come. In George Soros' book he explained the idea of reflexity - selloffs in stock markets can actually trigger the recession it is anticipating - a form of sell-fulfilling prophesy. ...and George Soros probably triggered the collapsed of the Pound by shorting it heavily together with the speculators preying on counrties undergoing economic weakness. The Asian Crisis was precipitated by hedge funds attacking asian currencies and shorting the stock markets. This caused long term foreign investors who are normally resilient to lose confidence and pull out en masse causing the collapse of Asian economies. Shortly after the Asian Crisis, the US formed a committee to look at the emergence of hedge funds and to develop a govt response to these funds. There are persistent rumors that Hank Paulson is part of a mysterious Plunge Protection Team, whose job is to work with bankers in secret to stabilise the markets in the event of a hedge fund attack (I will come to this later and explain how it is related to the frequent mysterious selldowns we see on the US equities market in the last hour and how it is related to the discount rate cut in Aug 2007). Hedge funds today control several trillion $ and there is little doubt they can move markets.

Last week there was an article in The Edge explaining how the Indian govt can actually buy oil fields and extract oil at less than $50 per barrel and the Saudis complained about the persistent demand for them to pump more oil while they already have no more storage space and have to put them supertankers sailing around without a place to unload. So is there a real shortage of oil? You look at the moves in the oil market, it can go up (or down) by US$3 per barrel in a day, what does that say about real demand and supply? Why is oil rising if the US economy is suppose to be slowing down and US the biggest consumer of oil?

If you go back to Soros' book The Alchemy of Finance, there a few interesting diagrams inside explaining how markets are inter-related and intertwined with the economy. You can mount an attack by creating a vicious cycle. If you examine the attack on the Hong Kong US$ peg during the Asian crisis it goes like this short the HK dollar, this will result in the HKMA defending the peg by raising interest rates, higher interest rates cause the HK stock market to fall, investors fearful of further downside pulled their money out putting more downside pressure on the HK dollar ...and so on. The cycle was broken only when Donald Tsang as Finance Minister decided one day to use the reserves to buy up blue chips on the HK exchange. ...the move caused the market to have its largest one day gain in history and burnt speculators bad enough so they remember not to mess with the HK markets for a long time.

In the book Crisis of Capitalism, George Soros explained that the US economy is likely to face a crisis because of mounting debt. Not only are they running a huge deficit with the rest of the world, the US consumer has chalked up a record level of debt, the housing market is buried by bad debts and so on...all these problems can be traced back to the time the gold standard was abandoned and countries adopted a fiat money system.....since then it has been one crisis after another all related to currency - Mexican peso crisis, Asian crisis ....and the current crisis that is unfolding remember we started with a subprime problem (not a weak problem US$) but now it is transformed into a weak US$ problem.

Now what is happening is the creation of a vicious cycle centered around America's economic problems:

1. Pushing up of oil & commodity prices to manufacture inflation fears.
2. Shorting of US$ and US/global equities since rising oil prices
hurt consumer demand.
3. The weakening US$ can be used to argue for higher oil
prices. the meantime the Nikkei gets bashed because the Yen keeps rising. While the US has a real serious subprime problem it is trying to handle and prevent a contagion, the weak US$ & falling US stocks add to its problems. A recession will worsen the subprime problem and vice versa so this can really get nasty. History tells us that if markets are operate at this point without intervention we will see a shock or massive dislocation in the markets soon i.e. the worst is yet to come.

But do governments intervene in the markets? ....and does a Plunge Protection Team exist? ...and why does US market selldown in the last half hour?

.....Go back to 17 Aug 2007, the critical day is the meltdown 3 months ago. I was awake that night to watch the US market trade as fireworks was expected, it was options expiry day and market was very (DOW) suddenly broke and went into a free fall -100, -200, -300, -400....just when everyone was about to throw in the towel, the US market made a miraculous recovery to close +ve territory. That night the Fed announced a discount rate cut and the situation was diffused. If you go back to the trading of the past 2 weeks, the market will trade "normally" throughout the day and then a flood of sell orders would come at the last 20 minutes causing the market to close at the low of the day. ...strange why would sellers wait until the final 20 minutes to get out and at very bad prices when they have the whole day to do so. ....a last minute selloff gives no chance for the buyers to step for a better close. Whatever it is, confidence in the US markets is lost and that adds to the downward pressure on the US$ in Asian trade....

Nobody knows when the markets will turnaround. I usually buy when there is alot of fear but I've been selling to raise cash in anticipation of better opportunities to buy. Already I see the dividend yields reaching double digits with some of the REITs having DPUs of 12-15% or more ....a quick check on the various REITs show they are lock on to average leases of 5 years or more even in a deep recession, they should be able to pay at least half the dividends. I'm not a big fan of REITs but if the yield get high enough, I find it hard to resist. ....I'm not biting yet as better opportunities might arise.

When will the market turnaround? There seems to be no end in sight. If markets operate efficiently it should have discounted the subprime problem and US economic slowdown already, but there are probably other forces at work. My take is the currency markets probably hold the some point the Japanese central bank will have to intervene prop up the US$ as they have done so many times in the past ....... they are now on the verge of recession as their exporters are strained. One verbal warning was given last week by BOJ and typically they will act when the speculators least expect.

Up or down the markets are always very interesting as long as you are cautious and don't get burnt by the volatility. Within the volatile moves are opportunities that will be handed to you as investors throw the baby out with the bath water.

Sunday, November 18, 2007

No such thing as good opposition in Singapore!!!!

Although I've not seen my PAP MP for a long time, I know he is working very hard for me.

These useless, worthless, good-for-nothing, average, ordinary humans who call themselves the Opposition in Singapore are at it again. This time they are getting bashed for doing nothing....yes nothing! I guess the Straits Times is now done warning us about the numerous evil misdeeds of Chee & his sister so they have to turn to the other bad guys - the Worker's Party. I'm so glad the Straits Times is so thorough in carrying out its responsibility of educating Singaporeans, they simply cannot let the WP get away with their bad influence on Singaporeans - I see them sometimes at the hawker center selling the Hammer to spread their wrongful ideas and giving harmful speeches in parliament on why Singaporeans should be given easier retirement and asking what the PAP govt is doing with our CPF money. That Low guy is especially vicious towards our beloved govt and don't underestimate that NCMP woman she hides an evil intent to bring about change in Singapore.

Over time I've come to believe it is not possible to have good opposition in Singapore. Why? If members of the Singapore opposition do what their counterparts do in other countries like Malaysia & Hong Kong , they will turn into criminals. The PAP has made legal provisions to protect our society from the opposition. While the opposition in other countries can organise peaceful protests & standup aganst govt action & policies, there is little the opposition in Singapore can do without breaking the law. They can't even organise a cycling event for themselves without breaking the law...... they can't even walk (yes, walk) on Human Rights day without being accused of inciting violence. Any kind of film to explain their work is illegal and Straits Times is constantly helping us to understand how dangerous they are. So what is left for the opposition to do in Singapore that is not illegal? Not very much. If they need to organise anything, they often need permits. Even to carry out non-political activities like upgrading the lifts of residents, they can be stopped. The PAP govt has legislated away the possibility of an active opposition restricting from almost all the activities that the keep opposition in other countries busy.

Singaporeans are so lucky to have a govt that protects them from the opposition and a media that constantly warn them of bad opposition.

Friday, November 16, 2007

Ang Moh Tourists Apologise for Trishaw Incident...

Their story goes like this:

  1. They were a bit drunk and wanted to take a taxi.
  2. They wanted a "car taxi" but old man comes to them to offer trishaw ride.
  3. The old man was very slow and seeing that they are not going to get to where they are headed, they stop him and got down one quarter of the way.
  4. They eventually paid him in full but that was not captured on video.
  5. They are actually very nice blokes ...they apologise for their behavior.

When I google for comments on this incident, I see many good Singaporeans expressing outrage at the behavior of those tourists. Yes, Singaporeans are respectful and kind towards our old folks unlike these hooligans. We are all very kind towards the elderly especially our govt who expresses so much concern for the old. Recently they been very busy with the re-employment of the elderly. I'm sure when I get to seventy my brain would have slowed so much, I won't be able to keep doing IT type jobs. I guess the next best thing is getting re-employed to clean tables or riding a trishaw. I wonder if I will be able carry 3 overweight tourist like that old uncle. I wonder why the old uncle cannot be given a motorised trishaw. I guess giving him a motorised trishaw would be considered welfare and in Singapore welfare is a dirty word. Besides, our govt departments may not be able to handle something different like a motorised trishaw the time he get his license, he will be eligible for annuity.
The New Paper did 3 articles on the trishaw incident and never once asked why an elderly Singaporean had to make a living ferrying overweight tourists on a trishaw. It seems like the numerous campaigns to promote work for the elderly is successful. With the govt pushing our DDA(draw down age) further and further into our golden years ...and keeping CPF returns at low single digits, they ensure we don't waste our golden years doing useless things like touring around, looking after grandchildren and walking around in the park. Singaporeans are so lucky to have a govt that cares so much about them to work out useful productive plan for them that extends well into their golden years.

Sunday, November 11, 2007

Another day another charity scandal.... Part 2

Part 1 is here.

Here we go again. This is like a neverending drama serial just when you think that it is over, a new story pops up. This time it is Ren Ci and its appears to be more serious than the NKF.

In Ren Ci money was loaned to various businesses(interest free) and the amount recorded in the books was smaller than what was loaned out effectively siphoning money from the charity.

In the 60s and 70s before MM Lee and his men cleaned up Singapore corruption was rife. You can purchase anything from certificates to driving licenses. One of the great achievements of the PAP govt was to clean up the corruption and they were pretty harsh...... zero tolerance for dishonesty. I heard that officers conducting driving tests were allowed to carry limited amounts of money in their wallet. If they were found with wads of cash, they would be sacked. Over the years, corruption declined and we forgot how bad it was. But are Singaporeans more honest that they were 40 years ago? I believe they are... not because we are born virtuous but because of this fear that they will be caught. It is the laws, regulations and effectiveness of enforcement that keep many people honest. I believe corruption tends to fester in areas where there is little regulation and people think they can get away with it. In the Citiraya case, the former CEO who was convicted for fraud managed to bribe storemen, clerks, accountants, executives to carry out his misdeeds. When there is money to be made and people think they won't be caught fraud occurs.

After the NKF scandal broke, public pressure resulted in the formation of an Inter-ministry Committee on Regulation of Charities & IPCs in early 2006. You can read about the new rules and guidelines here. Our govt believes in using a 'light-touch' approach when it comes to regulating our charities. They now have to follow a new Code of Governance to improve the way they are run. The code is not mandatory and charities (including churches/temples) can choose not comply with the guidelines if they are able to explain why. Given the 'light-touch' and millions of dollars collected by our charities...hmmm if you're a dishonest person, would you try to cheat a bank with all its safeguards or.....

The govt has decided to review mega-churches and temples which attract something like $10-$20M per year in collections. These entities have been in the news for snapping up properties worth hundreds of millions of dollars and a number of them also operate big businesses. Many welcome this move by the govt and donors expect them to be honestly run so any surprise here will be a mega-surprise for them.
Scandals have tarnished a large number of our charity organisations. It is not unexpected. Where there is alot of money and very little regulation & controls, it will attract crooks and conmen. This is not unique to Singapore:

Saturday, November 10, 2007

$6,000 broadband bill....

and the headlines on the New Paper is "Man gets $6000 phone bill because he went overboard". You might think that SingTel is has gone overboard for billing this customer but according to the New Paper this customer has gone overboard....not our friendly GLC.

When he signed up for SingTel's Broadband on Mobile service he was given a 10G limit for $22.42 per month. You might think that if you exceed this by 2-3G (G=gigabyte), you would be billed $60-$70 ...but no!!! The user exceeded the usage by 3G and was billed $12,000. SingTel gave him a discount of 50% for being such a good customer and his discounted bill came to $6,000.

The first thing I did when I signed up for my mobile line was to deactivated the GPRS packet services for web browsing. I had a friend with one of those Nokia phones that has a "quick button" to get to M1's homepage. Once every few times he pushed his phone into his pocket, he will accidentally press this button and download M1's homepage. He didn't realised how expensive until his bill came and he needed to pay for downloading M1's homepage a few hundred times that month.

Caution, broadband lust
Man gets $6,000 phone bill because he went overboard
By Celine Lim
November 06, 2007,4136,146904,00.html

DOWNLOADING fever can lead to raised temperatures.

Take Mr Zhou Yong Liang for example, who got hot under the collar when he saw he was first billed $12,000 for exceeding his data downloading limit.
He had signed up on 13 Sep for SingTel's Broadband on Mobile service, which has a 10GB-limit, for $22.42 a month.
Two days later, the service was activated.
Mr Zhou checked his email, surfed the internet and downloaded episodes of a TV drama series onto his phone.
On 17 Sep, he got a call from SingTel at 10.45am informing him that he had busted the 10GB data limit by 3GB. He was to pay the excess charges of about $12,000 at a bank.
Mr Zhou raised his case in the Lianhe Zaobao letters page last month.
He said he got a second call at 2.16pm that same day from SingTel.
This time, he was told that he would get a 50 per cent discount on the excess charges, bringing the bill down to about $6,000. His account was suspended at about 5pm the same day.
A SingTel spokesman said: 'We have contacted Mr Zhou to explain to him the charging scheme of SingTel's Broadband on Mobile service. We have since resolved his matter.'
He declined to say how, but added that the account user was happy with the resolution. He said that there have been a 'small handful' of customers who had similar complaints to Mr Zhou.
Excess data download costs $3.80 per Mb so 1000Mb, or 1GB, would cost $3,800.
That explains why Mr Zhou was charged about $12,000 at first for downloading the additional 3Gb.
But that payment scheme applies to those who 'pay-as-you-use' while subscribers with a monthly plan, like Mr Zhou, get a 50 per cent discount off the excess charges. In other words, around $6,000.
Singtel monthly subscribers pay 0.19 cents per kilobyte in 2KB blocks for excess data download.
The spokesman said that the 10GB download limit is sufficient for the average person's needs.
He explained that the service is meant for users to access the Internet 'while on the move' for about 15mins at a time.
They can check their email or surf the Internet using their 3.5G phones or devices, which can stream videos, receive TV signals and send large files.
But some people use up more gigabytes than others.
The spokesman explained that some use their Broadband on Mobile service in place of a modem to download files and videos to their handphone, transmitting the data to their laptops or computers via infrared communication.
For example,downloading a five-minute video file would take up about 100MB.
Downloading a 50-minute long drama serial would use up around 1GB of data.
So downloading about 8hrs of drama would already use up the 10GB download limit for the month.
The spokesman added that SingTel is currently working on a feature to alert users of their data usage when they reach 'a certain threshold', which has not been decided upon yet.
A similar-priced plan with M1 offers a free 5Gb download limit for a $22.42 monthly fee. Excess data download is charged at $4.28 per GB, up to a maximum of 50Gb.
Starhub charges pay-as-you-use customers 1.07cents per kb for excess download charges and 0.32 cents per kb for those on their $5.35 monthly plan.
The maximum data charges are capped at $94.16 for both types of customers

Nov 5, 2007

$1,064 shock SingTel bill: Why no warning trigger?
I RECEIVED a shock when I saw my daughter's latest SingTel mobile phone bill this month - a whopping $1,064.46 was charged to a single item called 'GPRS Data Usage Charges'.
There was no breakdown except an indication of '212892K bytes usage'.
I know I can't blame SingTel for the charges but what I would like to know as a parent and consumer are:
1. Why is the GPRS usage so expensive?
2. How does SingTel and other mobile operators inform their customers of the charges involved? For many, the indication of KB usage makes little sense. Do the operators alert the user after each session the amount that has been charged so that consumers (especially younger children) are aware of the implications of cost due to their actions?
3. How can a bill for a 'student account' run up to over $1,000 without even a warning triggered?
I am now waiting anxiously for my next bill, and I wonder how many parents are in the same predicament as me.
Chai Lee Fung (Ms)