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]
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
Friday, February 13, 2009
"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
Posting Time 9:58 AM
Posted by Lucky Tan