Sunday, February 15, 2009

What Tharman said in Jan 2008...


"Yes, they were good long term investments with risks thoroughly assessed"
- Minister Tharman, Jan 2008 on Singapore investments in banks.
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How can good long term investments whose risks are thoroughly assessed plunge by 50-80% within 8 months?
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I remember reading the article below more than one year ago. I searched for it to find the names of those who dared to speak up and question the govt vigorously on the bank investments and what was said in response. Looking back 1.5 years there were numerous warnings by Buffett, Soros, Jim Rogers, Meredith Whitney and countless others...all one needed to do was to listen. I found some interest comments in my blog right about the same period[link]. It was like the whole world can see what our GIC & Temasek could not. At the minimum, even for those who were optimistic these were extremely risky investments....but in actual fact they were really bad investments. The report also said in many cases, the banks approached GIC or Temasek for cash. They must have approach numerous other sources for aid who turned them down, but the GIC & Temasek fell for it.
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I would like to take you back even further to a small incident in Aug 2005. A group of 4 people stood silently outside a govt building asking for accountability and transparency in various govt entities. As they stood there, Singaporeans passed by amused as if thinking to themselves "this is Singapore what do these jokers think they are doing....". Some Singaporeans might have laughed at what these group of people were doing but imagine if there were more like them with the courage to do more than talk. Because we were all sitting on our hands, 3 years later billions taxpayers money were wiped out in careless investments. Before we laugh off the methods and what seems to be foolhardy enthusiasm of a small group of Singaporeans, we have to ask ourself if doing nothing for Singapore and Singaporeans is the best course of action for the rest of us.


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Jan 2008
Billions invested “ are they safe?
MPs Tharman: Yes, they're 'good, long-term investments' with risks thoroughly assessed.
TEMASEK Holdings' multi-billion investment in British bank Barclays about half a year back hogged the headlines. But now that the value of the US$3-billion ($4.3-billion) investment has about halved, the wisdom of recent moves by the Singapore investment agency as well as the Government of Singapore Investment Corp (GIC), to inject further billions into Western banks in distress, were questioned by Members of Parliament (MPs) yesterday. Asked the MPs: Were not some of these financial institutions in dire straits? And what if things got worse once the full effect of the United States sub-prime mortgage woes came to roost?Top of the jitters: Will Singapore's state assets be decimated by the very institutions charged with their growth?Nominated MP Siew Kum Hong summed up these concerns when he asked what due diligence measures the GIC had conducted in its latest venture — a US$6.9-billion investment into Citigroup last week, a deal closed within just eight days.To this, Finance Minister Tharman Shanmugaratnam said deals had been closed in an even shorter time, citing GIC group chief investment officer Ng Kok Song's interview that was first published in a Swiss financial magazine last week.Mr Tharman said: "They (GIC) have a team of people who are watching these institutions continuously, studying the financials, doing counter-simulations, interacting with the senior management of the institutions, asking them probing questions."Therefore, GIC and Temasek, who are "not newcomers in this field", usually "come in ready", as they were when they were approached by the cash-strapped banks” UBS, Merrill Lynch and Citigroup” for capital infusions amid large write-downs of their assets.Mr Tharman said the GIC and Temasek made investment decisions that were independent of each other and of the Government, and in a context where the Government was"completely hands off". With GIC "which manages Singapore's foreign reserves” the Government sets the risk tolerance level. And in the case of Temasek ” which is owned by the Ministry of Finance (MOF) ” the investment firm consults with the Government on "the expected return that we should hope to derive over the long term", he said.Was there not a possibility of a significant amount of the nation's assets being "wiped out" by investing billions in just the banking sector, asked Ang Mo Kio GRC MP Inderjit Singh.Mr Tharman gave the assurance that they were "good long-term investments", stressing that the risks of these transactions were "thoroughly, rigorously and regularly" assessed."Both the GIC and Temasek considered the banks as having a strong business franchise and good long-term growth potential across multiple businesses and multiple locations," he said.Mr Singh also asked whether there were broad guidelines set by the MOF on how Singapore's sovereign wealth funds should operate.Temasek and GIC, which each manages assets of more than US$100 billion, are among the world's largest sovereign wealth funds. GIC invested 11 billion Swiss francs ($14 billion) in UBS in December. Later that month, Temasek announced plans to inject at least US$4.4 billion and up to US$5 billion in Merrill.Mr Tharman acknowledged there will be some downside risks. It is up to GIC and Temasek to assess this risk and decide if it is acceptable. Their responsibility is to accept prudent risks in order to earn good returns on their overall portfolios, he said. "We … are scrupulous in avoiding comment, not just publicly, but internally as well, so as not to
influence decisions by Temasek or GIC. And I think that is the right balance." Source: http://www.todayonline.com/articles/233442.asp

28 comments:

Anonymous said...

This is typical gambling psychology. I have lost half of my caital.. I know I should not have gambled... I know I should pack up and leave so that I would at least still have half of my capital with me....

But, if I left, I would have to admit the loss of 50% of my capital... This will be a big loss of face.... Meanwhile, I gave the excuses that this was for Long Term... to buy time....

So, against my own rational thinking... I placed the balance 50% of the gaming table... Hoping that my luck would help me and my face... Now that all my capital have been wiped out... my excuse is not... I HAVE NO REGRETS...

Now you know why they allow the Casinos hwere....

Anonymous said...

Our reserves are runned by politicians who had obtained straight As in their exams, sterling testimonials on their CCA achievements and numerous hours clocked on civic volunteerism causes.

If your student achievements were not as good as theirs, then perhaps you should shut the hell up.

We are in good hands.

Anonymous said...

Honestly, even a typical oldie with little financial acumen, could sense the trouble at those financial insitutions, just by gleaning the blogs of financial research writers in the US since early 2007.

So, what kind of thorough assessments could Tharman be referring to, apart from such financial research writings, when they made such decisions? Is it just because someone is sitting as special adviser to that financial institution, eg Citigroup? I won't be surprise if that was part of the reason.

Investing with one's own money may be excusable for not listening to market advice, but investing with public money needs more than just saying that they had assessed the risk thoroughly, when everybody else was warning it was not wise to invest in such banks.

Lost Citizen

Taishan said...

"GIC and Temasek made investment decisions that were independent of each other and of the Government"

And independent of commonsense, too.

rookielim said...

" Yesterday, Mrs Lim explained that GIC's investment in 'dangerous asset classes' was not a sudden move but a slowly evolving strategy.

She added: 'Income from reserves is crucial. We cannot have income growth if we just leave the money in fixed deposits.'

The key now is to make returns by putting reserves in good long-term positions, using a balanced portfolio to diversify risks, she said.

She reiterated that the two state-owned companies are long-term investors and the Government is confident they will continue to deliver good long-term returns.

She said both have also weathered similar downturn cycles and come out strong."

Singapore's strength is in its adaptable, honest, competent and hard-working people, she said, adding: 'We're better equipped than anyone to cope with this downturn, so don't give up.'

The above is the answer given by our "straight As" minister. I am simply flabbergasted by such a useless and generic reply.

1. She actually admitted that the two state-owned companies invested 'dangerous asset classes'.

2. She also added that "Singapore's strength is in its adaptable, honest, competent, hard-working people. Can we ask the same adaptable, honest, competent, hard-working government to be open and transparent, stop beating around the bush and answer the many questions raised directly.

a. Were the genius that make the decision to invest in the dangerous assets paid BIG FAT bonuses then? Can we recover the bonuses paid to them?

b. Were the super talent that make the honest mistake taken to task?

c. Were we given false information that resulted in the investments in dangerous assets? If so, can we sue to get at least some of our money back?

d. Why we did not protect our money and allow the ML to issue 696 Millions of bonuses despite suffering such huge losses.

Onlooker said...

The gambling addiction ads are for the elite clueless gambling addicts.
We are the little girls holding the piggy bank and the PAPer are the uncles who makes empty promises.

Anonymous said...

Can some computer expert superimpose the gambling addict ads with Ho Ching and LKY's face and post it on youtube for the whole world to watch?

Anonymous said...

Forgive Mrs Lim, the Straight A student turned PAP Minister, her speeches is filtered to tell only the good things of LKY like the Mediacorp ads, LKY paid her millions from the Taxpayers money to shutup and cover her conscience.

Even our Mr Philip Yeo, blue-eye boy of the government civil servant corps was replaced for quarreling with Princess Lee Wei Ling over how to run ASTAR which does not concern her.

Whilst Mr Tharman the finance minister said, Temasek and GIC is not his concern when its our national reserves and CPF money which is his concern.

Up till this moment, nobody from the elected PAP government has puke what are the ratio of national reserves / cpf are being held by Temasek and GIC.

The taxpayers are paying millions to each minister who don't even know what their responsibilities are!!

Anonymous said...

Actually hor, they got so much money, so after losing even 40 or 50%, still got a lot left what?

Suppose you are a billionaire worth $10 billion. After losing 50%,still got $5 billion what?

So you must understand the mentality of these people. Ordinary folks like us of course think differently. We cannot afford to lose even 5 or 10% because we don't have so much money to start off in the first place.

Anonymous said...

With the old man talking about hedge funds giving the best results, I believe I can safely assumed much much more is lost by GIC run by straight As students.

Anonymous said...

Actually,,, if KY is to admit, he would tell you, all of Singapore reserves were wipe out by Ho Ching and himself. KY is now talking of loan money or government bond to prop-up the economy. Holding our CPF through annuity or other scheme. Nothing left, except maybe 80% of our CPF money, don't be surprised our Singapore Dollars would be devalued 50% by the end of the year.

58 billions is 1/2 our reserves, what about loses at GIC and those they refused to disclose to Singaporeans. Seems information of our reserves are privilege information not available for Singaporeans including our Late President Ong Teng Cheong.

Information concerning our life and death is made available to Americans not Singaporeans, no wonder KY and gang held a stadium style prayers for 911 victims where not 1 Singaporean died but not 1 minister attended prayers in Taiwan for the victims of SQ006 where many Singaporeans died.

Since then KY had a puppet President paid $3 million/year of our money to ask nothing.

lazylizard said...

um. your todayonline link doesnt work!

http://www.channelnewsasia.com/stories/singaporelocalnews/view/323925/1/.html

"Is the minister not worried that if GIC and Temasek continue with this kind of multi-billion (dollar) investments all in one sector - in the banks, this could quickly wipe out a significant portion of our reserves?"

The minister replied, "We have to leave it to them - timing, decision as to whether to invest, how to protect yourself in each investment, which GIC and Temasek have indeed done in each of these large deals...

"We do have an understanding with both GIC and Temasek as to the government's overall risk tolerance, so this is not a situation where we are completely hands-off."

Anonymous said...

Is the president and his second key anywhere in this equation?

I am sure the children pf President Ong are proud of their dad when they hear his name on the blogs - what he tried to do before he passed on for our reserves.

I wonder what the children of Nathan will feel with the passing of time.

Ah - the legacy we leave behind.

Anonymous said...

what second key??

ltk already said it best:
it seems like when the pap key turns, the other key turns simultaneously.

Anonymous said...

This whole global financial crisis is rather mysterious. It does'nt make much sense when you come to think about it.

Huge banks like Lehman Brothers and Citibank with hundred of billions in capital, very established with a long history suddenly collapsed to nothingness or a shadow of their former selves. Yet during this period of turmoil which lasts not more than 2 years, the US dollar held it all up without losing its value.

SWFs from Singapore, Kuwait, Saudia Arabia and China had to chip in (pressured politically by the US I think) to prop up the faltering banks.

Given the collapse of the banking industry there, mortgages that these countries, especially China, have bought from the US banks with their huge annual trade surpluses must have also shrunk to a fraction of their former value - so in effect huge American debt considerably settled thereby?

One conspiracy theory has it that many $billions were moved out of Lehman Brothers just before its bankruptcy.

Would we see a comeback of the vanished funds through other avenues? Is the whole crisis orchestrated with the design to default on US astronomical trade surpluses?

Nah, crazy theory, you say. Just a moment, consider this:

During the 70's every US dollar was promised by the US govt to be worth its price in gold to which the US dollars was pegged.

The US had accumulated a huge debt owed to countries through US dollars spent overseas such as by American tourists. President Nixon settled that huge debt overnight by raising the price of gold many times its former value. How clever.

And the whole world had no choice by also to adopt the new gold benchmark.

There is more than meets the eye. Worth a ponder, whether we have been victimised by a very high level plot cleverly engineered by the money masters who had been in this capitalist game longer than others.

Anonymous said...

Sorry a aforesaid sentence should read:

"Is the whole crisis orchestrated with the design to default on US astronomical trade DEFICIT?

- Anon 7:52

Anonymous said...

Even if we buy the argument that the investments are made for the long term, the question is why the rush to buy in at the high prices when the subprime problem znc other consequential repercussion was so apparent to so many. Surely the experienced officers would know. Or do they not, which would raise further questions.

Anonymous said...

These 2 articles from NY Times and Bloomberg raise many questions about the Lehman Brothers:

NYT LINK
Bloomberg LINK

If you have lost a $100K or more in its mini bonds, don't take it lying down. Get your fellow victims together and pursue it all the way to the World Court, UN, whatever.

Don't get cheated like that by the big boys who soak in luxury using your hard-earned money.

Fight them, sue DBS upwards to Lehman Brothers and even the US govt. Get legal help. I am sure there are high flying law firms that are willing to take up your case for a share of the compensation if they win.

Don't trust and depend on PAP's answers; there's too much intrigue behind the whole global financial crisis, far more sinister than a Bourne movie.

Got to fight for your own self when all the big boys in politics and financial circles are in cahoots willingly or by duress, being gagged insiders to this global plot.

Anonymous said...

Tell everyone you see the next time, see lah, vote for them good or not lah.

Most elderly people always say, wah, you young kid don't know how it was like when PAP wasn't there. etc.

My mum is one such person that I would like to re-educate. And there are many others as well, I hope everyone do their part and tell them that they're not the best government anymore, just like Nottingham Forrest if you know what I mean.

Anonymous said...

ask em what about our investments in ABC Learning???

long term? hahaha

maybe should be call free term? as in freehold?

Anonymous said...

Finance Minister and the Presidency are just puppet posts to make a show that the reserves are under proper management and also for PAP to find some scapegoats to share the blame in the event of an issue with it. And apparently there are not shortage of takers; after all it is super pay you are talking about.

The Presidency is not about a 2nd key to the reserves and any criticism based on this including that when PAP's key turns, so does the President's is far off the mark.

I mean as the opposition you still believe in all this PAP crap and thinks that gaining another few seats in Parliament will make a difference?

Come on, what you really need to do is come down from your "sikit atas" pedestal as ex-opposition candidate Jufri said rightly and unite with all the other opposition parties.

Because of the "sikit atas" of the Low & Chiam, now the only hope people have is an internal split in PAP.

Ho Ching stepping down might well be through such party pressure.

In the meantime don't blame the old people too much for being conservative. When they are 75, 80, and failing in their health does it even matter if the world is ending. Their main concern would be to at least maintain a semblance of environmental stability for them and their descendents, hence their attitude of not rocking the boat.

But then think of the young generation nicknamed by some as the "Bochup generation". How many care to know about politics? If the young who are educated are so apolitical, it is hard to blame the old and mostly uneducated, many of whom do not know how the Singapore map look like.

Political activists have to understand the psyches of these generations before they hope even to persuade these groups to become more concerned about national issues. Start with that rather than with politics proper like expecting them to go into the streets to protest.

Anonymous said...

@anonymous 7.52pm

US stopped using the gold standard in 1971

see http://www.econlib.org/library/Enc/GoldStandard.html

Anonymous said...

Very good article.

It states :"Under this further modification of the gold standard, most countries settled their international balances in U.S. dollars, but the U.S. government promised to redeem other central banks’ holdings of dollars for gold at a fixed rate of thirty-five dollars per ounce. Persistent U.S. balance-of-payments deficits steadily reduced U.S. gold reserves, however, reducing confidence in the ability of the United States to redeem its currency in gold. Finally, on August 15, 1971, President Richard M. Nixon announced that the United States would no longer redeem currency for gold. This was the final step in abandoning the gold standard."

After that the gold prices surge to sky high. Gold reserves held by the Fed thus had enough value to redeem US dollars abroad.

a kind of chicken said...

Hey guys, I have a stupid idea. Why use gold standard? What is the use of gold, u going to eat it? Why not we back our money with a labour standard. For 100 dollars, u can hire 1 unskilled labourer to work an eight hour day.

Now that is useful and might solve the link between monetary policy and employment. Implementation might need some work though. =)

pumpkin said...

What gold standard? I thought the gold standard was removed in 1971!

Anonymous said...

Precisely, abandoned by Nixon for the purpose of raising its price so that the US gold reserves would be sufficient to redeem US dollars held by the central banks in other countries.

It has already been answered in a comment above.

Anonymous said...

Just wonder whether there are still any substantial gold left in Fort Knox. Rumour has it that much of the gold is now in Israel. The Israelis control the whole economy of the US.

Lost Citizen

Parka said...

If I haven't see it before myself, I probably won't comment here.

Good long term investments plunging 50-80% doesn't mean that they are bad.

The plunging just reflect current market sentiments and doesn't reflect the strategy or progress the company has made the last few years.

Looking at share prices is only one perspective, one has to look at the people contributing to the share prices. Yes, I said people.