Saturday, January 26, 2008

Mr. Market gets Manic! this is what a Golden Period looks like!
Last week was a time when investors wondered what they have gotten themselves into. They thought they were invested in good sound businesses not casino chips (you every wonder why DBS bank is called a "blue chip" company?) but the recent wild fluctuation on the market makes a rollercoaster ride at Magic Mountain look like a walk in the park.
Strangely just when investors thought the stock market was about to collapse on Tuesday, it staged a sharp rebound after the Fed decided to cut rates by 0.75%. Markets panic, Federal Reserve panic....oh my is the global economy as we know it coming to an end.
It was explained in the media that the recent turmoil is due to investors' worry about a US recession. However, if you have been reading the financial news you will know that the US recession is one of the most talked about recession - there was talk about a US slowdown since the end-2006 and in early 2007 Greenspan warned of a recession...and so on. Also, my own monitoring of US fund managers have been doing show they have been preparing for a consumer slowdown by moving to defensive stocks such consumer staples and away from discretionaries. Home builders and banks whose earnings are expected to fall have been sold down. Why would markets panic about an event that is well anticipated?
The market might be higher or lower by the end of the year depending on the length and depth of the US slowdown/recession and its effect on the global economy. The jury is still out and the markets are suppose to adjust as more economic data comes out. My belief is the instability in the market is actually built-in - there were several such sharp selloffs in the past when the economic outlook was alot better - end 2006, Feb/March 2007, Aug 2007 ...and the market recovered from each of them with or without intervention from the Fed.

What is the source of inherent instability in the market?

1. Derivatives. Futures, options, etc. These were supposed to be used for hedging your equity positions but only a small % of the contracts are used for this purpose. These products allow hot (and fast) money to make big bets on the direction of the markets. The notional amount that is traded in derivatives is U$510 trillion. This is the equivalent of millions of dollars betting on the earnings of a lemonade stall. One example of how the derivatives market can add to volatility of the underlying assets goes like this : issuers of Hang Seng put warrants were forced to short the futures contract after the Hang Seng took a sharp plunge to limited their losses - that cause the Hang Seng to fall further. On the rebound, call warrant issuers are forced to limit their losses by buying HSI futures causing the HSI to rise further.

2, Leverage. An important source of liquidity that fuel the rise in almost all markets - commodities, oil, gold, stocks ...etc is the Yen. The Yen can be borrowed cheaply and used to speculate on the markets. Whenever the Yen rises, it forces the speculators to selloff assets to pay back their Yen denominated loans. The other form of leverage is margin trading which is now more widespread than before due to aggressive promotion by brokerages. When the underlying assets fall, traders are forced to sell to meet margin calls...On Tuesday the Bombay stock exchange shut down after plunging 10% at the open because brokerages were dumping stocks due to margin calls, in Australia margin calls reached a record high on other words, there is a whole lot of selling that has nothing to do with the US recession, traders were selling because they were forced to do it.
The recent market panic caused the Fed to panic and cut rates by a huge 0.75%. The market is again "threatening convulsion" if the Fed does not cut by 0.5% in its coming meeting. The problem with these "emergency" rate cuts to calm the market is they will add to instability later on. The Fed is suppose to act on the best evidence about the economy is now forced to react to the market. Too many rate cuts and we might get another bubble, more instability and so on. We are definitely in for more volatility, more hair raising who is in charge of this place?...I'm afraid nobody...

Saturday, January 19, 2008

GIC money for Citibank....

Citibank is lucky to have MM Lee as its special advisor since 2006:

See any organisation that has the benefit of great leadership and wisdom of our MM Lee has a good chance to soar to new heights. Unfortunately for Citibank, they probably didn't follow his advice too well - created too many SIVs, CDOs and MBSs.....three-letter-words that have been the bane of American banks. Citibank announced US$18B in writedown last quarter and new capital of US$14.5B from various investors ...of which US$7B is from Singapore's GIC:

"To a question by opposition MP Low Thia Khiang (Hougang) on whether the Government of Singapore Investment Corporation (GIC) uses funds from the CPF funds to invest,
Dr Ng said: "The answer is no."
"Later he rose to add: "The relationship is not so simple".
Singaporeans can be proud that they now own about 4% of Citibank. Although Citibank faces challenges such as rising default in credit card debts and auto loans, it will be able to get the best advice from our MM to overcome its problems. ...
Singaporeans should continue to work hard and buy annuities because our govt cannot help you when you reach your is not prudent for them to take care of old folks when there are so many great banks to buy.

Saturday, January 12, 2008

MM Lee : Retirement means DEATH!!!

Don't worry the govt has not decided to impose the death penalty for those who lost their work ethics and try to retire. MM Lee was just expressing his opinion that retirement can result in early death due to a sedatary lifestyle. Now you know why the PAP govt keeps telling you to work harder and longer ...they are trying to prevent you from dying early. See how kind they are...they are very concerned about your longevity.

Now all the policies related to postponing your CPF withdrawal age, locking your CPF minimum sum up at a low (negative if adjusted for inflation) return of 3.5%, elimination of pension schemes for civil servants (but not ministers/MPs), etc are there to make sure that you won't be able to retire early and die prematurely. See how caring the PAP govt is? Although the huge reserves they accumulated over the years from Singaporeans can be returned to elderly citizens to help them cope with old age, they won't do it...its for your own good that you work harder and retire later to avoid early death.

Compressed Air Car?

When someone told me about it, I thought it was an early April Fool joke. But a few checks on the web shows that it is not only true, it will be in production soon. The car runs on compressed air cost about $2-$3 to "topup" for hundreds of kilometers. Pollution free and free us from dependency on oil. Amazing isn't it? .... this has the potential to save the world...and the US economy :-)!!!!.....and the Indians are the ones manufacturing it.....

Friday, January 11, 2008

Means Testing - The means to pay for what?

You wake up one day with a pain somewhere and go to see your doctor. The doctor refers you to the hospital for a check up. You're means tested : "How much you earn? What type of housing do you stay in?". Base on this criteria, they decide whether you can afford to pay for your medical bills.
But how can they decide whether you have the means to pay for your bill without knowing what the bill is? A person living in a executive flat can afford a 3-month stay in ICU with surgery amounting to $200K?...A person living in a 3-room flat cannot afford a $200 scan?

What is the meaning of the word "affordable"? HDB flats are affordable, last week City View units were sold at prices up to $700K. Affordable means you can pay the monthly instalments after you get into debt?

Singapore is a medical hub and up to 410,000 medical tourists come here for treatment in 2006. The PAP govt actively promotes Singapore as a medical hub it now says that it is worried there is not enough resources for subsidized "C" wards for the poor.
Insurance ....get as much of it as possible to cover yourself. How high can insurance cost get? When the govt is no longer obligde to provide subsidised care to a large part of the population, there will be less incentive for them to keep cost under control. The problem of medical insurance include:

1. The introduction of a middle man whose primary motive is to maximise profits. Why did the govt privatise insurance? Now there is someone there to introduce complex products with various fine prints ....remember how Aviva used pre-existing condition to deny claims.

2. There is a tendency for a system that relies alot on insurance to see cost spirals . You may think that the amount you pay now is affordable....that was what the Americans thought now 40M of them are uninsured because of the high cost of insurance.

3. There are many people who cannot get medical insurance now due to illness or congenital problems. They may fail means testing and be exposed to very high medical costs through no fault of their own.

What is the problem the govt says it is fixing anyway? ....According to the headlines news on Monday - the govt spends $1.5B a year on subsidies. 9% of "C" is occupied by people of the top 20% bracket. The amount of subsidy "abused" by high income earners is $135M. Even if you're a "high income" earner, you get seriously ill you may want to conserve some money for your family. A subsidy that people have to get sick to "abuse" isn't really that easy to "abuse". How much did our govt pump into sick American and European banks last year? $20+B amount more than 100 times that means testing is trying to fix.

Giving middle class Singaporeans a financial break when they are sick and most desperate is a no-no for our govt.

Thursday, January 10, 2008

ABC's 20/20 : Singapore's Secret to Satisfaction...

ABC has found out that Singapore holds the secret to satisfaction - we are the happiest country in Asia according to 20/20. The secret is our advanced system of govt something that these Westerners will take several generations to catch up with. Watch this video:
Frankly speaking I thought that the N. Koreans are happier than us but I guess these American reporters were not allowed there to interview its citizens.

Happiness is all in the mind. Singaporeans are so lucky to have newspapers like the Straits Times explain to them why the GST hike is good for them, why the electricity tariff hikes are reasonable and that higher bus fares will result in better service and high pay for ministers will secure our future and make them work for our interests. We are a systematic country anything our govt does is systematically explained to us so that we realise it is all done for our own good.


Has Singapore Found the Secret to Satisfaction?
Citizens Willing to Trade Civil Liberties for a Cleaner, Safer, Efficient Society
SINGAPORE, Jan. 9, 2008 —
If you set out across the globe and talk to a few of the 6.5 billion people who live here, you will be amazed by the pockets of joy you'll find in the most unlikely places. You'll find happy mothers in the dusty villages of Africa, happy Tibetans toiling under Chinese oppression and happy families in the slums of Bombay. To understand this sort of hum
an contentment, Dan Buettner founded a global project called Blue Zones. He found that a liberal, tolerant, democratic society helps make Denmark the happiest country in the world.
But is there a similar level of contentment in a place with one political party, a censored press and nonjury trials? A place where drug users are executed? Welcome to Singapore, the happiest country in Asia.

"Ninety-five percent of the people around us say they're either somewhat happy or very happy," Buettner said of Singapore. "That's a very high proportion for Asia."
Watch the story Friday on "20/20" at 10 p.m. ET
Safety and Success
This high proportion of satisfied citizens wasn't the case 40 years ago, when a man named Lee Kwan Yew took power in Singapore, and laid down the law. He made the Chinese and Malaysian locals learn English, banned spitting, chewing gum and long hair, and even paid educated people to have children.
With his draconian laws he transformed Singapore from a smelly, chaotic seaport into one of the richest, cleanest, safest and most efficient big cities in the world. But woe unto those who break the rules and litter or forget to flush. "[Singapore] is based on the rules," one local said. "[With] rules and very systematic country."
There are fines for the smallest infractions, and more serious criminals are strapped to a rack and beaten with a bamboo cane.
We met one man in Singapore who has seen and felt Singaporean justice firsthand. After serving 15 years for gang-related crimes, Neville Tan is now a pastor with a prison ministry. He says he was caned many times and describes it as a "horrible, painful experience." But he doesn't mind it one bit. "We feel safe. If we don't break the law, we don't have to worry about the law."
Mark Zee is an actor who moved to Singapore from Apple Valley, Minn., and he says he had no problem giving up civil liberty in exchange for a clean, safe city. Singapore, he says, has some of the "highest paid civil servants in the world, and so you get some very smart people running the country, and that's something that, you can't say in all Western countries," said Zee. "Hint, hint."
So on a scale of one to 10 as the happiest, how do citizens rank themselves? "Probably an eight," one man said. Another responded to the question "What would make you happier?" with "more money."
Many people agree; some of the other pillars of Singapore society are built around wealth. They're known as the five C's: cash, credit cards, condominium, cars and country club.
Celina Lin, a self-made millionaire and one of the nation's best-known bachelorette socialites, can tell you all about the five C's. Despite her apartment full of art, her snazzy Porsche and 300 pairs of shoes, she was the least happy person we met.
"Sometimes I get unhappy if I compare," she said. "Of course someone & wealthier, having a more luxurious life, driving a bigger car, having a bigger house, having a wonderful husband who provides for her. And when I think of that, I feel, I mean honestly, I feel a tinge of jealousy."
Keeping up with the Joneses is an obsession in this culture.
In Singapore, kids spend their vacations participating in time management seminars. While this kind of competition is often the source of unhappiness, the drive to succeed is tempered by Confucian values the family ALWAYS comes first.
Striking a Balance
Jenny Chua, the former CEO of the famous Raffles Hotel, says she is often happiest when having breakfast with her grandchildren, and her contentment comes knowing that they will have a secure future. Douglas Foo, one of the most successful restaurateurs in Asia, says that his goal is to create a chain as big as Starbucks or McDonalds & as soon as he's done playing with his kids.
"All of us have one thing that's limited in supply, that's time," he said. "So we should do some planning, right? How much time do you want to spend with the family, your career, or some hobby? I think there's a balance."
But can you have both? "Well, I'm not going to do that single-handedly," said Foo. "There are a lot of things I want to do in my life; I want to make sure by the time I leave, when he calls up and says 'Now is the time to go,' I will leave smiling, and saying that I lived a very fulfilling, meaningful life."
But all this talk about happiness raises a question: Where is the happiest place in America? In his new book, "The Geography of Bliss," Eric Weiner also explored the happiest spots on the globe and using the lessons learned, set out to find the happiest place in America.
He settled on Asheville, N.C. "You've got mountains, beautiful mountains all around," he explained. "You have a tremendous, thriving, artistic community. You have cafes everywhere, every other shop is a coffee shop or a bookstore."
But more importantly, he said, "You have a really strong sense of community here. And if I've learned anything from researching this book, it's that other people matter. There's no such thing as personal happiness, your happiness is part and parcel of those around you."
Community that's the key. Community is why happiness can be found along with the high taxes in Denmark, the harsh rules in Singapore and the crushing poverty in India. One study found that the people living on the streets of Calcutta are happier that those in California. The homeless in Fresno may have more access to food and shelter, but what have the "houseless" in Bombay got? They have each other.

Copyright © 2008 ABC News Internet Ventures

Sunday, January 06, 2008

So who wanted the taxi fare increase?

Just after taxi companies claim taxi drivers will be making more income with the latest hikes we start to see taxi drivers offering discounts.
"I used to make $130 during peak hours. Then the customers are scared off and I couldn't even make $10" -Taxi driver in the picture.
I'm sure taxi companies are so disappointed with Singaporeans not being able to accept the recent hikes. Such behavior undermines their profit growth and is not very good for Singapore Inc. I think the choice has come to being able to send your child to the doctor when he is sick vs taking that taxi. There is only so much you can squeeze from Singaporeans. The plan of the taxi companies (or rather Comfort) appears to be hike the fares first let the taxi drivers have it good for a short while then enhance its own profits by hiking the rent and cutting the diesel subsidy.
Taxi drivers don't want the latest fare hikes although taxi companies say it is to help them improve their income. Of course, the best way to help taxi drivers is to cut the high rents they are paying for taxis but somehow the taxi companies can't think of that idea.

Saturday, January 05, 2008

Are you sure you want to take TAXI?!!!

I'm proud to say that I've been able to break my taxi taking habit by sleeping earlier and getting up earlier to take the MRT. Although they are packed like sardine cans, I found out that the back of the train is emptier so I don't have to smell someone else's armpits.
The taxi companies believe that within 2 months people like me will get withdrawal symptoms and go back to taking taxis. After that they will proceed with the usual rental increase & diesel subsidy reduction to give their bottomline a big boost. Right now there is a 31% reduction in peak hour business. Taxi drivers believe they have nothing to gain from this hike, all their gains will be eaten by the taxi companies.
You ever wondered why taxi drivers are not allowed own their own taxis? Why is there a middleman who live off the labor of the taxi driver that does all the work? Why not a "not-for-profit" cooperative that can better take care of the interest of taxi drivers & commuters in place of this middleman? There are many taxi cooperatives around the world and they work well.
This is again about profits. Just like Singapore Power which can raise tariffs to accumulate enough to invest in Australia while Singaporeans struggle to pay for their utlities. Taxi drivers in Singapore drive more than half a day just to make the rent they pay to the taxi companies.
To stop price increases is very simple - just don't accept them. See the taxi companies know the behavior pattern of Singaporeans very well, they whine alot about "all those unfair hikes" then they proceed to pay for them. However, the taxi fare hike which came after so many other hikes appear to be straw that broke the camel's back. The US economy is slowing sharply and already some parts of our economy have slowed to a crawl (just talk to the people in the electronics sector).
If I can break my 7-yr habit of taking taxi almost every morning to work, I'm sure the rest of the country can also do it and find somethng more worthwhile to do with their money.

Wednesday, January 02, 2008

Us and Them.....

This is a follow up to Blueheeler's blog entry on the new year message : here.

PM Lee is on overseas leave and couldn't talk about the plight of Singaporeans himself so they chose another elite to do it - Michael Palmer. I guess he is filled with empathy for the people he serves:

He said, “From the ground we are already hearing people talking about the cost of living going up, food especially, basic necessities like rice, milk, bread. These people feel the pinch everyday. PM mentions, in his message, about the shoppers at Orchard Road. That may not be totally representative about the way people are feeling. It may be year-end bonus but when you look at the year forward and the rising cost of living, they have to deal with their monthly salaries and less that their money can buy”.

Yes sir, "these people" are ordinary Singaporeans. I'm not surpirsed MP Palmer has just started to discover Singaporeans have difficulty coping with all the price hikes. I guess if he can't see it at his level, it is even harder for our top ministers to 'feel it'. That is why the ministers have been hiking everything from electricity, transport, healthcare, housing etc. You can't blame them, they don't know how hard it is for you.

As an ordinary Singaporean, I would like to apologise for not being able to cope with the ever rising cost of living and causing trouble for them. The PAP has been able to provide such high quality of service that people from other countries would be willing to pay for and are queuing up in large numbers to enjoy but they are stuck with ordinary Singaporeans like myself. My subprime economic performance means that I'm a burden to this great govt that cannot progress as fast as it wants because it is stuck with ordinary citizens like myself. That is why it gives out large number of scholarships to foreigners and invite them to join Singapore is just so unfair for Singaporeans to stand in the way of the progress of our elites. They deserve their high remuneration because they have to put up with these people ....these ordinary Singaporeans.