Tuesday, May 19, 2009

Temasek : Time for Reform........

First more questions.....
Letter from ST Forum [Link]
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SALE OF BoA STAKE
Temasek must set example on transparency
I REFER to last Saturday's column, 'Temasek should clear the air', on the massive loss arising from Temasek Holdings' sale of its stake in Bank of America (BoA).
Temasek is neither a private equity fund nor a hedge fund, but it handles billions of dollars which belong to Singaporeans.
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BoA's share price ranged between US$2.53 and US$14.81 during the period Jan 2 to March 31, when the sale is believed to have been made. This makes it well-nigh impossible to guess the size of the loss, except that it must be in billions of dollars.
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After being told that the investments were for the long term - when the markets in the United States crashed after Temasek had invested heavily in US financial stocks - Singaporeans expect Temasek to explain the timing of the sale and the reasons for it. Do the reasons relate specifically to BoA or generally to the US stock market? Surely it cannot be due to diversifying the geographical distribution of future investments.
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Temasek must give the lead and be transparent if other listed companies on the Singapore Exchange are expected to do so.
Denis Distant
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Actually, I think there are more questions related to the purchase of Merrill stock than the sale of BoA stock. There were many "voices of reason" warning about the toxic assets in these finance companies yet Temasek ignored the warning signs and went in to lose all that tax payers' money. John Thain whom they said they had "great confidence" [Link] in turned out to be one of the greedy executives who paid himself handsomely as the company sank. He is now one of the poster boys for greed and incompetence[Link]. I'm less disageeable with Temasek's sale of BoA stock as I think BoA is crappy given its toxic assets but Temasek's timing was so unfortunate....BoA stock rose about 50-70% after Temask sold its entire stake.
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Watching this sorry saga unfold has prompted many Singaporeans to demand greater transparency from Temasek. The commonly given excuses by the govt for Temasek to remain secretive are that they are afraid that their fantastic investments decisions will be copied by other lesser investors or that hedge funds with find ways to attack Singapore financially if they know how our reserves are managed. ...come on... don't insult our intelligence. If our reserves are managed in a way that makes us vulnerable to hedge fund attacks, all the more we should change the way our money is invested.
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Beyond the issues surrounding the massive losses in American banks is the way Temasek invests our money. Instead of hiring hundreds of people to invest our money in piecemeal fashion - negotiating an 'exciting' deal here and there - shouldn't taxpayer's money be more efficiently managed? They should release all those talents in Temasek to boost our fund management sector and start a few green shoots in our economy. These top elites, the former generals, former civil servants, top scholars if they are as talented as they claim will be snapped up by the private sector to give a boost to our economy.
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Temasek can do with fewer people. Buffett manages his funds with fewer people than 10 people. Lets put it this way, they hundreds of great minds in Temask didn't stop it from making those disastrous investments in Western banks. One way for Temasek to invest is to allocate its funds to broad asset classes, say, commodities, stocks, bonds, foreign currency etc. Have a small but outstanding team assigned to each. Now take the example for stocks, Temasek can be a lot more efficient by investing in country indices....buy the S&P index rather than individual stocks....instead of buying Shin Corp which they claimed was a good investment because of the rising middle class in Thailand, they could have purchased a diversified portforlio of Thai blue chips. Instead of taking huge stakes in ABC Learning, they could have bought S&P ASX Index. Hiring hundreds of people and taking huge stakes in various companies in high profile deals is an inefficient to invest our money and that was how Temasek got into so much trouble in Shin Corp, Merrill, Citigroup, Global Crossing etc. Such large stakes in individual companies are hard to unload in times of crisis ....and buffer for crisis is the PAP govt's main reason for having such huge reserves in the first place.

33 comments:

Anonymous said...

What to do? It happens. Let's move on.

From Cannot-make-it Lee Hsien Loong.

Anonymous said...

it is alright to make mistakes, but the size and the bad timings ie buy high, sell lowest strategy are indeed awesome.

in faber's video, i think he mentioned that the losses were unprecedented in a certain sort of way, which makes me wonder about the ACTUAL investment experience of the key personnels involved in the now famous deals.

to elaborate, an eloquent and bright person cannot be transformed into a heart surgeon (as an example), overnight no matter how high his IQ. one must be in the trenches doing the ACTUAL stuffs a long time, there are no short cuts or fast tracks in place of experience.

Anonymous said...

Mr Tan,

I read your posts regularly becuase it is balance and containt much well thought of views.

For the sake of Singapore and Singaporeans, please continue to do so. Please continue to provide us with what we could not find in our media and our intellectuals.

Your sincere fellow Singaporean..

rookielim said...

"The commonly given excuse by the govt for Temasek to remain secretive is that they are afraid that their fantastic investments decisions will be copied by other lesser investor or that hedge funds with find ways to attack Singapore financially if they know how our reserves are managed."

HA HA HA!!! This is SO FUNNY!

Temasek must certainly keep their investment decisions secret. The rule of thumb now for any smart investor is... whatever Temasek buy, SELL! Whatever Temasek sell, BUY!!!

Anonymous said...

Losses has to be seen in perspective. Can make billions over the years, can also lose billions too. Most important is there is still some left. Like billionaire investors, they make billions, they also lose billions. But they still have billions left.

Of course, ordinary folks cannot afford to lose even 20% of their money. But multi-billionaires can afford to lose even 50%.

As for sovereign funds, most important is the country is still peaceful and normal even with huge losses. Life goes on.

Anonymous said...

"As for sovereign funds, most important is the country is still peaceful and normal even with huge losses. Life goes on."

What peaceful? With practically everything is outlawed by the law in Singapore of course it is peaceful. If Singapore law mirror those of France, you probably get more SHT case reported in MSM everyday.

Anonymous said...

Lucky

You worry too much!
We will just have to inject more assets into Temasek at market prices.

Maybe Istana @$1?
I am sure Chip can do flip it for a decent profit.

Let's face it. We, as a nation failed. We, as a nation, turned a blind eye to injustice in Burma, Zimbawe, etc. We have no conscience. We allowed the "move on" laws. We gave away our rights. And therefore we deserve shit.

Anonymous said...

The govt is not going to take public comments on Temasek seriously. We're just going to get canned answers - Temasek invests in the long term, we look at a whole economic cycle, over the last 30 (pick and choose the period) donkey period we outperformed etc.

In fact, comparison with any benchmark is inappropriate. By default, this assumes 100% asset allocation into equities so you then compare with a stock index benchmark. But is 100% allocation to equity as a benchmark even appropriate for a sovereign fund?

In any case, my main point is this :

For years, Singapore has operated on a "We Know Best" philosophy. This still applies today and will continue to apply as long as you-know-who is still around.

"We Know Best" means that the Govt believes how Temasek operates is best left to the Govt to decide. The public is incapable of understanding all the details. Hence, there's no need to give even a semblance of an intelligent reply. You cannot understand it and besides, we've never needed to do so for the last few decades and see what an economic miracle we've achieved in Singapore.

So, please shut up and sit down!!

Anonymous said...

As Singaporeans, we all have the right to be upset with the losses incurred, and demand for more transparency.

However, i think many of us got carried away with the bashing, and mixed up the roles of Temasek and GIC.

Temasek acts like a private VC with a one-time given seed money from the Singapore Government. It takes up more risks and aim for higher returns.

GIC manages the existing funds and reserves, and is meant to take low risk investments.

Do correct me if my understanding is incorrect.

In view of that, let's not quote LKY out of context, as he was referring to GIC when he talked about "long term investment".

My opinion is that we should focus on the government's frequent assertions about paying top dollar for top talents, and ask the government what led the top talents to make such huge mistakes?

LuckySingaporean said...

anon 12:37,

Temasek operates neither like a VC nor a SWF. It explained that it is not an SWF when it appeared before the US congress to explain that it has to sell assets to raise cash for acquisitions unlike SWFs.

A large number of govt assets were parked in Temasek - e.g. DBS, SingTel etc. But Temasek does not invest like a VC - which is investing in small enterprises and growing them with high risk and a high failure rate. Should Temasek even attempt to be a VC???? The decision to invest in Shin Corp & Merrill certainly are not VC decisions. What type of investment was Global Crossing?

Temasek today has 350 staff which is ridiculous - are they going to keep growing and for what purpose?! Is it desirable for the govt of Singapore via Temasek to keep growing and owning business and stake in businesses? This is not the role of govt...and what do Singaporeans gain from all this? How is the interest of the citizens served? It is clear the elites want these assets for the high paying jobs just look at the people in Temasek's management. By using these expanding assets the way Temasek has been doing does not benefit the ordinary citizens of Singapore - it does create job openings for the elites.

I've not misunderstood the role of Temasek. Like the title of the post I want Temasek to be reformed so that the interest of the people is served. ...and that the benefits for the ordinary citizens maximised.

Anonymous said...

PAP - you say top dollar for top talent. SO what is this talent you are talking about now that you lost billions of our tax payers money ?? Please pay us back !!!!

Taishan said...

Bad suggestion, Lucky :-)

Just release the "talents" from Temasek into the sea like the sludge they are.

Anonymous said...

Well, Temasick is obviously not paying enough and therefore does not attract the top talent. They should pay more.

Anonymous said...

Temasek does have a conventional asset management subsidiary called Fullerton Asset Management. As far as I know, it employs no FT and produces average returns like its counterparts...often just mimicking the indices with a tiny alpa. At the main company, it employs apart from retired BGs, MP wannabes, etc quite a number of FTs, most with investment banking or MNC corporate experience. I think it fancies itself as a kind of super hedge fund working on big ticket investment deals. Despite all the spin, it really takes on high risk for high returns. It is able to do so because it has the buffer of cheap injection of state assets in the past. This has been the prop of its stellar past returns record. Unfortunately, the recent hires have not done much to add to this "double digit CAR. What I am aghast is that the supervisory BOD appears to have abdicated its responsibility. If they do not have the gumption to question inappropriate investment decisions, they should have resigned and not continued to be on the BOD.

Anonymous said...

"As for sovereign funds, most important is the country is still peaceful and normal even with huge losses. Life goes on."

With goondoos like you, even idiots can get away with anything and everything. Life still goes on and why not.

Kaffein said...
This comment has been removed by the author.
Anonymous said...

6.37 pm

You scolding who? Aren't u one?

min said...

just wondering - how will temasek investment performance affect us? In times of profits - have we ever got a share? But i'm more concerned about losses - what will they do about it?

Anonymous said...

"Temasek can be a lot more efficient by investing in country indices....buy the S&P index rather than individual stocks...."

theoretically that is viable, but it is usually easier said than done. you can buy the index without causing it to spike only when you are a retailer or small hedge fund. for big VCs, SWFs, liquidity is an issue.

Clear eyed said...

To use Temasek as a welfare institution for retired soldiers, cronies, scholars and other favoured "elites", even FOREIGNERS, to earn obscene salaries while gambling with OUR money is simply outrageous! Even more outrageous is that they can LOSE billions of OUR money without having to explain or answer for it! They live the high life without having to worry about their rice bowl being broken while lesser mortals slog and toil and when they grow too old to do so, are packed off to Johore to die.

Anonymous said...

Just A Possible Scenario:

Suppose, just suppose, that I am a greedy and slimy person. I invest your money by buying high and selling low consistently and make big losses continuously, what will you think of my intention?

You would likely think that I am in collaboration with the other parties in a scam to cheat you, isn't it?

Anonymous said...

7:33 PM

Scolding you lah, who ever you are lah.

Anonymous said...

6.37 PM ; 9:34 AM

wow! your words and manners reflect what an outstanding personality you are.

Alan Wong said...

Is it not our mistake to allow for someone who is past 80 to be still in charge & running about in circus ?

Worst still we have allowed him to appoint his son & daughter-in-law to be overall in-charge ?

Who else can we blame ?

Anonymous said...

1:06 PM

Big deal. Some people's action is even worst than their patronising and cultured words which are only pleasing to the ears.

Are you one of the goodoos. When money is lost at that level, you do not need goodoos to tell you story how it is much better in other ways to divert the real issue.

Anonymous said...

Anon 1.50;

my adice is, to look at things from a brighter perspective, think big picture and look long term.

ask.. wud your life be better if you were to live in an attap hut, hunting scraps for a living and your sisters and relatives get to be maids in another country? why fix something that is not broken? what wud foreign investors do when another party comes to power?

i am sure you can arrive at your own conclusion.

Anonymous said...

dear anon 1.58 pm,


'The wise man knows he knows nothing, the fool thinks he knows it all.'

am quite sure jacky has you in mind when he quoted the chinese idiom. see, even kindergarden kids can talk and scream like you do.

Anonymous said...

4:06 PM

'The wise man knows he knows nothing, the fool thinks he knows it all.'

Does it make you a wise man just by quoting the above.

Even jacky cannot avoid the diatribes of others for some recent stupid remarks.

As for adults behaving like kids, you ain't see real grown-ups in fitful childish tantrums yet. Recent AWARE event will pale in comparison.

Send in the Clowns said...

Alan Wong asked, "Who else can we blame?"

Is it really our mistake?

When the "popular" Party in power castrated the populace with its gerrymandering, its OB markers, and its ungracious and merciless bullying and vicious hammering with the laws - which they made in the first place - of anyone who has anything to say, that only clowns, irrational, and convicted people are left to be the opposition, what options have we left?

Then the Party says, you have freedom, you have a choice, choose these clowns or us, and you have told us in no uncertain terms you prefer us.

So what can we do? Vote clowns, just for protest and not that you really want them to run the country anyway, and also knowing they will never win; or leave the country.

Is it our mistake?

Perhaps. Clowns could have done a better job.

Anonymous said...

4:47 PM

oh, nevermind..

Clear eyed said...

To Send in the Clowns at 4.53 pm

The clowns are the ones dressed all in white. The others are just painted to be so but in reality are not.

Anonymous said...

Lucky,

Thanks for clarifying the role of Temasek. Since its not acting like a VC, let's just classify it as a "investment firm" looking for big deals and betting on big returns.

My personal view on why the PAP government continued its grip on all major local companies and "talents" is due to the "Big Daddy" mentality. It does not believe that local entrepreneurs are capable of making things happen and compete with the rest of the world. So it rather take things into its own hands, hog the resources and "talents".

Personally i do not deny the practicality and merit of this approach. However my key complain is the lack of oversight and accountability. So far, the PAP government has proved its inability to self-regulate, self-reflect and show the public that "heads do roll" when huge mistakes are made.

Anon 12:37

Anonymous said...

my mom always said, some mistakes cannot be made. This is all sweat and blood money from this and previous generations.