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.