Friday, February 13, 2009

Our long term investments.....

"When we invest, we are investing for 10, 15, 20 years. You may look as if you are making a big loss today, but you have not borrowed money to invest. You will ride the storm, the company recovers, your shares go up." - MM Lee


The large part of reserve money invested in banks and lost is probably gone forever. In every suggested solution from the one by US Treasury Secretary Giethner[Link] to the more drastic one suggested by Professor Roubini[Link] shareholders including preference shareholders will be badly diluted or wiped out completely. Any solution the US govt put in place, it will aim to recover its own money first before bond holders and shareholders are the last to get anything. We'll probably not get our money back not in 100 years. One can understand that money is invested can be lost...although Singapore lost far more money than any other SWF, the issue goes beyond these losses.

SM Goh told us recently that the reserves are meant "to ward off catastrophe or prevent irreparable damage to the economy." i.e. it is meant to save us during crisis[Link]. Why then are reserves invested in such risky assets that are so badly hit in a crisis? ...even before we dipped into the reserves for $4.9B to handle this crisis $58B was already wiped out before the crisis hit the real economy and affected the citizens badly. If you're living in a hurricane area and want to prepare for the occasional disaster, you would store your reserve food supply in a safe area, you shouldn't be putting it where it is exposed to the hurricane.

Temasek Holdings should be reformed and the way we building reserves relooked into. What is the correct size of reserves? ...What is the correct risk level they should take? So far they have build these reserves in a "more the merrier" manner. Remember the reserves are the build up from the blood and sweat of Singaporeans...more reserves doesn't mean better because it comes from Singaporeans. Other funds are managed by smaller teams and are fully transparent e.g. Calpers and Norwegian pension funds. It should be managed by experienced professionals not people whose expertise are in other areas (how many funds did Ho Ching manage before joining Temasek, how many funds did the former CDF Ng Yat Chong manage before joining Temasek?). Yes, these are brilliant elites whose brain power lesser mortals cannot begin to appreciate but shouldn't Temasek be hiring experienced fund managers with track records? We continued to be told incomplete truths about our reserves such as revelation that Temasek Holdings performed better than benchmark stock indices (31% vs 44%). The fact is not all of Temasek's Holdings are in the form of equities e.g real estate and other assets which are not traded on the markets and accounted by book value so the benchmark wasn't an apples to apples comparison.....this fact was not missed by netizens[Link] [Link]

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MM Lee explains Singapore's long-term investment horizon
By Valarie Tan, Channel NewsAsia Posted: 06 February 2009 2325 hrsSINGAPORE : Singapore's Minister Mentor Lee Kuan Yew has said the country has over S$100 billion in reserves today, unlike the 1960s when the country first gained independence.But the Republic has not relied on borrowing to fund its investments.Mr Lee said: "Within three to four years, the economy must recover."The minister mentor gave his forecast on the economy to 1,500 of his Tanjong Pagar constituents at a Lunar New Year dinner on Friday.He said that the Singapore government turned many of its stocks and shares into cash early last year before prices went down. That was why the country was able to invest in the American banks.Mr Lee explained: "When we invest, we are investing for 10, 15, 20 years. You may look as if you are making a big loss today, but you have not borrowed money to invest. You will ride the storm, the company recovers, your shares go up."But he said that Singapore is not a master of its own economy.He said: "Of all the economies in the world, we have the highest percentage of external trade - three and a quarter times our GDP. No other country has got that size of external trade. So when the external trade shrinks, remember it is going to hurt us."Still, Mr Lee is confident Singapore will recover from the current downturn, due to various reasons like good labour relations and pro-investment climate in the country. But he said that giving handouts will not help boost spending and the economy."So those MPs who say, 'Give S$300 to every citizen and we will boost the retailers', they just do not understand the bigger picture. You give S$300 like that and it is gone in a shot, and all the things that they will buy, three-quarters of it are imported," he said.Mr Lee added that, with luck, America's economy may recover by the end of this year or early 2010. He said the outcome of President Barack Obama's economic plans is expected in nine months. And by then, the Singapore government may have to update its record S$20.6 billion national budget. - CNA/ms

23 comments:

Anonymous said...

Khaw's "Putting our old folks in Johor" rekindles KY's suggestions that we should merge with Malaysia when we still have bargaining power.

Is this it, the KY's family lost all our reserves? Do we have to kowtow to Malaysia now? Do we have to exchange S$2 for every Ringgit?

A senior politician once said, you pay peanuts you get monkey, since we pay Millions we lose Billions.

Looking at it, we rather have monkeys!!

Anonymous said...

Before the old man conks off, this investment catastrophe should serve as a wake up call for him that in the want of checks and balances, no matter how cunning one is, one cannot escape dire self-deception and hence utter stupidity when put in a such position of power.

It is not just that Temasek or for that matter GIC should be reformed but rather a government should never go into business in the first place.

Leave business to the corporate world where there tends to be more market checks and balances and open competition to sharpen corporate edge. Not so with SWFs where failures and losses can be made up of and covered up by a one-party govt as PAP.

Another grave problem is that when questioned in Parliament by PAP MP Inderjit Singh some time back about the performance of Temasek, Minister Tharman retorted that it was not his problem. NOT HIS PROBLEM!?

You mean the Finance Minister who is in charge of our national reserves and CPF monies is not responsible for looking after them?

You mean MAS/MOF just loaned the money to Temasek and GIC and does not even want to comment let alone review how they are performing?

The whole concept of the government trying to be a global investor has thus proved unfeasible.

But some old fool wants to continue deluding himself his brainchild is still working and no one in Parliament dares to challenge that given his viciousness to destroy friends and foes.

The faster he conks out the better for everyone. I dont say it from an evil heart to wish bad thing for him but rather for the greater good of millions of citizens and not forgetting also countless Malaysian workers who have their $billions of CPF savings locked up till 60 or more.

Anonymous said...

'You may look as if you are making a big loss today, but you have not borrowed money to invest'

A loss is a loss and what difference does it make if it is your own money or borrowed from the banks.

Lost Citizen

Anonymous said...

Personal relationship works very well at the top posts. Another example, the formal president of a highest learning organization has no track records to manage a world class organization. What sort of mass he has created and been covered up. Just like the way to the death, we can normally know the good side of this guy which is getting millions. Very soon, everyone forgot what the hell this person has done. It is happening in all organizations. Look back on history, one will understand that people do not learn from history and history repeats itself - his are sign of a dynasty falling apart.

Anonymous said...

Anon 11.27 AM.
Minister Tharman has no choice but to speak the truth. Who is having the real power in a dynasty? Tharman is only a highly paid worker for the dynasty. He has not control on those SWF stuff even he has the position. If he behaves the way of our formal president Ong, he will be out of that job and he cannot even contribute anything to the nation. The problem lays in the political system.

Anonymous said...

The old fart is basically praying hard that Obama's economic stimulus works.

And Obama, if held by our local standards, won't be qualified enough to be a Prez.

Are we in deep sh!t?

taishan said...

The lack of diversity of thoughts is astounding.
The lack of accountability we are all too aware.
The ingrained feudalism is simply untenable.

Anonymous said...

"You may look as if you are making a big loss today, but you have not borrowed money to invest"


This one line sums up how inept and clueless he is about investing. No wonder gets conned by Thaksin and now the western bankers.

Onlooker said...

KY jelly have confidence but people got no more confidence in KY jelly.
So how?
As for The "Long" term investments, how many belly up liao?
Even if it is really for ah "Long" term,Why no accountability until now?
It's our CPF money that is on the line here, can start to be accountable now or not?
Continue to exploit us and there will not even be a "Yi zy" term.
People have the right to ask because there is people's money in CPF that people contributed.
It's not someone's monopoly play money.

Anonymous said...

The next question is:
How much loss has GIC incurred ????

Silence is not an answer.

Anonymous said...

Try to find practical ways to get your CPF savings out especially if you have been working for decades and saved a few hundred of thousands or even millions $. Can you seriously trust PAP with your money now?

One way is to consider emigration if you have the qualifications, job offer abroad & such like. Another less disruptive way is to invest your CPF savings in some approved funds - with care of course given the current climate. That way your money - short of the first $20K - is out of CPF Board so that in the event of hollowing out of the national coffer, you still have the money.

I mean no point knowing what is wrong, harping on it & hoping for political change within foreseeable range - through the opposition or internally - to correct the situation when the more practical option now is to explore what can be done on the individual level.

In fact, if more individuals can do this, this as a side-effect would exert significant political pressure on PAP resulting in iternal disputes and the urgent need to do something to correct the serious situation especially when they find that cash is hard to come by for withdrawals by depositors.

Under such circumstances, one thing PAP might attempt to do would be to raise the amount that cannot be used for investment. But if enough people can act and fast enough, the pressure would be so great as to cause a serious problem for PAP.

This was also how NKF old management collapsed when more than 20,000 donors withdrew their regular donations within a short time.

Talk no use, must act for oneself and family.

I did, for my whole family.

Kaffein said...

How can trust come before transparency? And they keep telling us to trust them without being transparent.

Up till now Marcos and Suharto's assets are still in investigations. How long more before we find the answer - 10, 20, 30 years?

Many of us did not vote wisely.

Kaffein

Anonymous said...

I'm really tired of the "long term investment" excuse. It's like taking people for complete retards. If I don't state my expected returns and my time horizon, then any investment that I make can be said to be a great investment, as long as the company that I have invested in does not go bankrupt! Like that I can also be a genious investor! Just throw money randomly and if shares go down 50%, all I have to say is that I'm looking at returns in 20 years time or more. If after 20 years I'm still losing money then all I have to say is that it will take longer but it will recover and my objectives are longer term. I don't even have to commit on how much I expect to make out of my investment!

Anonymous said...

Perhaps GIC may not reveal its losses.
With a chairman who is portrayed as "always right", how can GIC disclose the "mistakes" ?

Ghost said...

Obama is doing his best to work his way out of the mess he inherited but his economic stimulus is risky as there is a lot debt in it. I'm more interested in what Singapore’s leaders intend to do about Temasek investment in Merrill Lynch. It was used to pay their boss bonuses and that's a clear misused of funds

Anonymous said...

That's why we need to call in the army should we have a "freak" election result. "Freak" because they are in denial and cannot accept the fact that the people have voted them out or they cannot accept the fact that all the engineering and gerrymandering has failed. When that happens the skeletons will be out and history has never failed to expose the dirt of great leaders cum dictators. So we will have to call the army, but would the soldiers and their families be part of the same group who voted them out. I guess it must the foriegn talent army

Anonymous said...

Sorry I know for one that the track record for KY 's economic views has not been good, just check what he says during the GULF war etc, he say it will last long etc.....forget it he is just like another talking head from CNN , the type that is forvever bullish.....buy, buy ,bye,bye to your money type. These are like locusts that comes and sucks you dry and then fly away when trouble comes... just watch....as for Obama....I don't htink he can do very much...before election he was talking about hope,change etc....but after the first day in office, he is talking about doom and gloom etc. Good luck !

Anonymous said...

Dictators always talk big when they are at the height of their power. They like to talk in terms on military might to control the mob or fight the enemy.

But the day they fall, it always comes in different ways than they expected.

In fact what they really fear or ought to fear are the other kinds of threats like economic (like Suharto), superpower play that makes victim of them (think Saddam), traditional power centres (think Thaksin).

Now for PAP, the horrific losses by Temasek and GIC will definitely have impact, hopefully not too drastic as to affect severely the people's welfare.

But nothing is free, losses must be made up for and when they are not, just like the once great US banks that are now only worth 10% to 25% of their value 1 year back, something must eventually give way -- no matter how huge, established and historical the institutions are.

Like LKY himself said: No free lunch. Eventually he must learn his saying applies just the same to him & party.

For the people, just be prepared for the worst while hoping for the best.

Anonymous said...

"Mr Lee said: "Within three to four years, the economy must recover."The minister mentor gave his forecast on the economy to 1,500 of his Tanjong Pagar constituents at a Lunar New Year dinner on Friday."

Please note MM said, "the economy MUST recover" and not "the economy May recover". You all may have seen gamblers saying that in desperation when they are going through a losing streak, "the next time my luck MUST change, how can I always lose?" He sounded pretty desperate to me. What they thought was a small hole and that they could make a tidy profit turned into something else that is even bigger than anyone realised, and that even out huge reserves pale in comparison.

I noticed the MSM's are doing their very best to encouraged Singaporeans to send our old folks to JB in support of the government. Might as well ask all of us to buy homes there and only come to Singapore to work. It appears our Health Minister just seems to notice that. We should build more bridges so travel between the two countries will be easier and faster. Besides cheaper petrol and other commodities will be a big plus to all lesser mortals. Why stop at just putting our unwanted old relatives there? Then we may not even need to dip into those precious Reserves which can be put to further use to bail out more banks.

Anonymous said...

damn, the cpf annuity will kick in by 2013. i wonder if those who give up their citizenship after that can still withdraw their money in total???

damn damn damn. that is how they are locking in all our money, especially after the billions of loss in their investment.

can we vote them out asap please and then remove this cpf annuity thing???

Anonymous said...

The way the old guy says it, as reported here by Lucky, many will be convinced everything is going to be okay, don't worry, be happy ... just like when DBS the govt bank sold Lehman Brothers' minibonds to the old folks, they also said "Oh dont worry, it is very safe". And then what happened?

So the many S'poreans that are being convinced by his talk about the govt losses had better think thrice.

Anyway here's a story of how convincing that old guy can be.

Old folks in his Tanjong Pagar constituency had voted against lift upgrading. The old man gave a talk to them warning that they might regret their decision. After that, its was 100% support for the program when they re-voted.

No doubt he has quite an ability to convince people but that does not mean his thinking is necessarily correct.

Many S'poreans including critics seems to actually trust PAP. They may complain but they still think this land is well governed, very well regulated. They believe the govt has control over every nook and corner including for instance checking every imported grocery for safety.

I mean if you care to listen that's how people talk without thinking deeply enough whether it makes sense that PAP has such omnipresent control over things.

This is why I think true democracy is a difficult thing to achieve because it requires knowledge of what is actually going on behind the scene, awareness of alternative choices or ways of doing things and this is something which PAP has obliterated.

So the reason the opposition is and feel weak is a reflection of a lack of desperate need among the people for opposition. It will take real pain on a wide scale (not that I wish for that) than the mini bond saga before real opposition will appear again on the scene like the early 60's.

Opposition spirit is just a reflection of the people's sentiments of the times.

Anonymous said...

Maybe the folks at GIC and Temasek should read this paper, if they decide to reform these two institution:

http://www.ssga.com/library/esps/Soverign_Wealth_Funds_Andre_Rozanov_4.27.07rev2CCRI1182371372.pdf

Lots of really tok kong ideas!

Tan Ah Kow

Anonymous said...

Oops the full URL is this:

http://www.ssga.com/library/esps/Soverign_Wealth_Funds_Andre_Rozanov_4.27.07rev2CCRI1182371372.pdf