Thursday, April 29, 2010

Minister Balakrishnan scolds Al Jazeera and bloggers

"The government then made some checks and found a different story. The man in the video had made a tidy sum of over S$220,000 from the sale of three flats. Meanwhile, the woman still owns an HDB resale flat with her ex-husband. She was also getting financial help from the South West Community Development Council. Dr Balakrishnan said: "Despite these circumstances, the social workers and the FSC then offered sheltered housing for this couple. However, the couple rejected the offer and other services offered by MCYS. “This is a clear example where a foreign media has failed to ascertain the facts. Some irresponsible websites have also caused these falsehoods to circulate widely on the internet. Now that the facts are out, let us see whether those who have been propagating these falsehoods have the courage and the honesty to set the record straight. " - CNA, Govt takes Al Jazeera to task for misreporting on homelessness cases

Here is the 'misleading 'video:

You will note that in the video, Al Jazeera explained that they were refused an interview with the esteemed minister. But do watch the video and listen to the Al Jazeera report line by line. Can someone tell me which part is 'misleading'? All Al Jazeera reported was that there are people in Singapore with difficulty getting housing due to various rules and have resorted to camping at the beach.

Perhaps Minister Vivian is saying that Al Jazeera is misleading because it left out a few facts ...facts that only the govt can know about and Al Jazeera has no access to because the esteemed minister refused to be interviewed by them. But really lets look at the facts mentioned by Minister Balakrisnan:

1. "The man in the video has made a tidy sum of over S$220,000 from the sale of three flats". Al Jazeera could never have known that since they have no access to govt records. But is the minister saying because the man had once made money, he should be denied a rental flat? Actually I don't know whether he used the money for drinks, women, business, debts, gambling, medical bills or had it cheated from him. That is not the issue. The real issue is the HDB has a rule that prevents people who have sold a flat from joining the queue for rental flats within a certain period (6 months?) regardless of whether they sold it because their business failed or they had to do it to pay off loan sharks. I like what Ravi Philemon said in the video about giving 2nd chances to people. You can alway examine a person's life to explain how he end up in the state he is in and put the blame on him for his plight (why didn't he do this and that to escape poverty and so on) just like what Minister Balakrisnan did to pull out records to show that the man once had money but giving help is about giving 2nd chances to people so they can better their lives...

2, "The woman still owns an HDB resale flat with her ex-husband". Isn't it obvious this woman has fallen through a crack in the rules? You cannot get a rental flat when you are a co-owner. The logic being that you can stay in the flat you co-own. However, this woman co-owns a flat with her ex-husband and it is obvious that it is impractical for her to stay in the flat although she co-owns it.

It was also mentioned that the couple rejected help for 'sheltered housing' this was to only alternative left for them? ..govt shelters. That only proves Al Jazeera's point that these people can't get homes!!!! Hmm....I wonder what is the reason for them wanting to camp rather than stay in the govt shelters? But what the couple wanted was a home....a shelter is not a home.

We see very few homeless people in Singapore not because everyone can afford a home or can rent one - the rental queue is several years long. Have you ever wonder how is it possible that Singapore has the most costly public housing in the world, the biggest income inequality in the developed world and insufficient rental flats yet you don't see many homeless people. So why are there so few homeless people in Singapore? Because it is illegal to be homeless. If you're found camping without permit, you can get jailed[Link] or forcibly evacuated and taken to a shelter so that the problem can be hidden the homeless cannot afford to be visible out of fear of being caught. There is nothing misleading about the Al Jazeera report. The only thing misleading about the whole situation is the false impression created for visitors that everyone in Singapore has a home and that poverty does not exist here.

Govt takes Al Jazeera to task for misreporting on homelessness cases

By S Ramesh Posted: 27 April 2010 1552 hrs

Govt takes Al Jazeera to task for misreporting on homelessness cases

SINGAPORE: International news agency, Al Jazeera, has been taken to task for not checking its facts in its report on the homeless in Singapore. Speaking in Parliament on Tuesday, Community Development, Youth and Sports Minister Vivian Balakrishnan stressed that homelessness is a complex problem and that the government will continue to enable people to be self-reliant. A video titled "Government Policies Force Some Onto The Streets" was produced by Al Jazeera. It featured a couple camping on the beach, claiming that they had been homeless for nearly two years as a result of divorce proceedings.

The government then made some checks and found a different story. The man in the video had made a tidy sum of over S$220,000 from the sale of three flats. Meanwhile, the woman still owns an HDB resale flat with her ex-husband. She was also getting financial help from the South West Community Development Council. Dr Balakrishnan said: "Despite these circumstances, the social workers and the FSC then offered sheltered housing for this couple. However, the couple rejected the offer and other services offered by MCYS. “This is a clear example where a foreign media has failed to ascertain the facts. Some irresponsible websites have also caused these falsehoods to circulate widely on the internet. Now that the facts are out, let us see whether those who have been propagating these falsehoods have the courage and the honesty to set the record straight. "Homelessness or potential homelessness is a universal threat all over the world.

The question is how best to fix this. “In Singapore, we have given housing, cheap affordable rental housing as well as heavily-subsidised first-time entry into home ownership. “The people we have who insist on staying in beaches and parks are not first timers and not people who have bought their first flat or first rental flat. These are people who have almost always sold their second flat or a third flat, have unfortunately dissipated the subsidies and cashed them and now have run into problems. “Members would have faced this problem which almost become emotional blackmail." Meanwhile, Al Jazeera has ceased to operate its channel on mio TV. This prompted Nominated MP Viswa Sadasivan to ask about the talk that this is linked to the report on the homeless. Acting Minister for Information, Communication and the Arts, Lui Tuck Yew, said: “On the speculation that recent critical or negative reports by Al Jazeera were the reason why the channel was taken off mio TV service, this is unfounded. In a report by TODAY, Al Jazeera itself was quoted as saying that "it was a 'mutual' decision between Al Jazeera and SingTel for the broadcaster to drop out of the latter's pay TV service." Mr Lui noted that Al Jazeera's contract with SingTel was coming to an end and was looking into other distribution avenues in view of its low subscriber households. - CNA/vm

Wednesday, April 28, 2010

Market in panic and the real dangers ahead.....

UPDATE 29 April 2010 6:08AM: I will get back to writing about Singapore politics in my next posting after I quickly go over a selected number of observations to explain who our bourse is about to have the next leg up over the next 2 weeks. The DOW Jones Index rose 53 points yesterday despite the fears surrounding the European sovereign debt crisis. Not only that, during the trading session a third European country, Spain, was downgraded but that didn't cause the DOW to move down - the triumph of liquidity over fear?. The US Fed also gave assurance in its latest statement that its easy money policy is here to stay. In addition, if you look at yield curves, they are shaped such that US banks will be able to generate good profits going ahead so they are likely to rebound after they were sold off due to Goldman's fraud charges and regulatory changes. In Asia, Chinese stocks hit a 6 month low due to continuous and heavy handed govt actions. This pulled down the Hong Kong HSI (Hang Seng Index) for the last 2 weeks - if I'm not wrong, the HSI should recover as soon as today given the tremendous pressures it faced over the past 2 weeks has been dissipated and I believe that will further add to favorable factors that will move our markets up. Remember... after fear, comes euphoria and after euphoria comes the hang over....we will be seeing some euphoria in the coming days after the fear of the last few days/weeks following that perhaps a hangover.

UPDATE 28 April 2010 5:06PM: I took a quick look and saw that the European STOXX 50 has fallen at this point in time by another 2.6% that is in addition to the 3% fall yesterday. Terrifying isn't it? Will the market rebound quickly within 1-2 days like I predicted or is this the start of something sinister? We will know very soon.

When I woke up early this morning, I turned on the TV and saw the DOW Jones Index has dropped 213 points due to the problems with the debt of european countries. While the market has been wary of these problems, the Standard & Poor ratings agency cut the debt of Greece to junk causing a panic in the markets. These ratings agencies have a way of creating self-fulfilling prophesies - this downgrade has badly affected Greece's ability to service its debt as it causes borrowing costs to escalate. While Greece is just a small economy with 11M people, other countries in PIGS (Portugal, Ireland, Greece & Spain) have similar problems with their sovereign debt and Greece threatens to be the start of another major financial contagion. Before I discuss Greece further and the near term direction of the markets, I want to talk about a few other problems in the global economy.

In a posting in March 2010[Link], I wrote about the global economic problems being masked by the efforts of central banks around the world that pumped money into the system to stimulate it and low interest rate that has inflated assets around the world. The heart of the problem is too much debt and that problem has not disappeared. Greece is just one facet of the real problem. Many companies around the world are highly leveraged but stayed afloat because it became easy to borrow again after the easing by the Fed. The low interest rates also drove many Singaporeans to take on debt to purchase private property. To see the effects of liquidity and credit withdrawn, we only need to look to China which as in recent weeks imposed curbs on bank lending for property and a whole host of anti-speculative measures. The red hot property market there corrected sharply overnight.

In another post in March 2010[Link], I said I believe the market which is driven by liquidity will peaked when liquidity wanes regardless of the economic recovery. You just have to look at the Chinese market that peaked in July 2009 to understand why this is the case - that was when the liquidity peaked and the Chinese started to withdraw their stimulus so while the global economy picked up and Chinese GDP growth and exports recovered, the Chinese stock market never gained traction.

So where are the markets headed? My earlier post talked about a peak in May 2010 (best estimate 12 May 2010) based a number of models I use to track liquidity. The Greek problems was the focus of markets in Feb 2010 causing a correction. Because the system is flush with liquidity the market snapped back and we saw the DOW hitting new highs. The question is what we are going to see in the days ahead.

Before I go ahead to describe what I think will happen, I have to remind everyone that I'm not a professional in the financial industry so take what I say with a pinch of salt. The situation is clearly a very dangerous one with non-negligible possibility of a serious contagion so you can expect investors to reduce their exposure which might turn out to be the best thing to do given markets are not too far from their recent highs.

I will stick my neck out again to peek into the future and for sure, one day I'll get it wrong and my neck will get chopped but my job don't depend on this and it is all for fun...and like I said in my previous posting, markets are unpredicatable most of the time but we are not in 'normal' times .We can discuss how it is done later:

1. Despite the shock and panic in the markets at the downgrading of Greece, there were earlier expectations that it will downgraded as part of the unfolding saga of events surrounding its massive sovereign debt (US$300B). Recall we already had a correction in Feb 2010, do you remember what it was about? It was about Greece and fears that it might default....Greece's immediate problem is US$16B of debt that it needs to restructure in 19 May 2010. As markets rose in March 2010, the Greek problem fell into the background as Greece negotiated with IMF and EU partners for a rescue...along the way there were protesst in Greece, standoff between govt and unions and so on...messy.

2. Many investors and fund managers keeping an eye on Europe probably stayed out of the market since Feb 2010 fearing events like the downgrade of Greek debt.

3. The downgrade of Greece takes the problem from 10 to 100 on the minds of investors. There is little doubt that Asian markets will open down. ADRs and ETFs indicate they will drop between 2% to 3%.

4. Note that Greece's problem was massive all along (US$300B) and could never have been solved without external help. So did it matter if it was downgraded? Greece clearly wasn't going to hold up its original debt grading of BBB+. Because the Euro fell sharply in reaction to the downgrade, EU countries will act with greater urgency to get this resolved.

5. While the market panic is intense, markets will find the bottom quickly. There is enough liquidity for this market will rebound within days (or even after 1 day of drop). My belief is this one is different from what happened in Feb 2010 when the market fell and stayed down over several weeks. Because this is the 2nd round, market participants are wary and have already understood the Greek debt issue ...this will not drag on for weeks by uncertainty.

6. Going through my models and all the data I have, my prediction is the market will rebound very quickly (next day?) despite the heavy selling that we will see today. If it drags on for more than 3-4 days and the DOW goes down another 2-3%, I'm probably wrong this time and we are headed for something more sinister and painful.

7. If all goes according to (6), we should see a peak in May 2010.

Sunday, April 25, 2010

What the next General Election is about....

There is plenty of speculation on the date of the coming GE. The next GE has to be held by Feb 2012 but the govt usually times it such that it is held earlier when 'the ground is sweet'. It is likely to be within the next 9 months and the 1st possible window is in Sept 2010 after the YOG. While the PAP leaders probably already have the date and backup dates in mind, the opposition parties are left with the disadvantage of having to allocate limited resources without knowing when actual date is. Many have started their walkabouts in areas where they expect the most heated election battles to be fought. Based on various accounts, the membership in opposition parties has increased and this will be the most widely contested election in recent years.

Unlike other countries, our media does not conduct opinion polls to track the support level for the govt so the electorate is an uncertainty. One thing I'm quite certain about is the support for the PAP among the younger voters has declined considerably compared with 4 years ago when the last election was held. 4 years ago, if you sit with a group of young people, you may sense some dissatisfaction among them but they were still willing to give the govt some time to bring about positive changes and 'remake' Singapore. These days, it is hard to miss the frustration and anger among this group of voters. The anger and frustration come from very real problems such as rising cost of housing, overcrowding, increased competition from foreigners and work stress. It is not the problems alone that cause this frustration but the PAP govt denials and refusal to solve them add to rising anger. When HDB prices escalated, Minister Mah's approach was to deny they are expensive insisting that they are affordable instead of fixing the problem. The PAP denied any negative impact of massive foreign influx asking Singaporeans not to be 'small minded' and blamed Singaporeans for not being able to integrate well with foreigners[Link]. It is very clear that if the PAP govt is voted in without significant opposition representation, it will be more of the same - the much need changes that many Singaporeans look forward to will not come.

The PAP and the Singapore media are very good at portraying the alternative views and opposition parties as something from the fringe. The PAP is mainstream and all else are ill considered wild ideas that are unworkable . After years of conditioning many Singaporeans find it hard to think outside the framework the PAP cleverly uses to make its ideologically driven ideas acceptable to Singaporeans. It is actually the PAP that is non-mainstream and extreme in its policy making - constantly passing the risk and financial burdens to ordinary Singaporeans to create an environment favorable for govt-linked businesses. Its policies created the highest income gap in the developed world and a growing underclass struggling within our society. I'll go through one or two examples to illustrate this and later discuss why the need for change has become urgent.

2 decades ago, Singaporeans were told there was a need to bring in foreign expertise lacking in our workforce. That was the start of the Foreign Talent policy which morphed into a totally different animal today. In the past few years, the PAP govt opened the floodgates to cheaper foreign workers mainly from China and India for all types of jobs to pander to the demand of businesses here. The large number eventually stretch our infrastructure and caused our housing market to overheat. In terms of numbers per capita no other govt in the world even come remotely close to what the PAP allowed into Singapore in the past 5 years- the only countries with such huge influx are middle eastern states where the indigenous population sits comfortably on top of imported labor not compete against them for a living. It is not enough for the PAP pursue this policy that makes life tough for Singaporeans, they have to invent justifications that put the blame on Singaporeans for large influx - Singaporeans are too fussy to take up the jobs, fertility rate is too low and so on. Most of these are bogus, for example the low fertility rate of Singaporeans today has nothing to do with the need to import adult workers today because our current workforce was born 20-40 years ago when the fertility rate was much higher. The low fertility rate today can only be fixed by importing babies or workers 20 years from now. The real reason, I believe, for the huge influx is the PAP has run out of ideas to keep our GDP growing and resorted to opening the flood gates to cheap workers as a brute force approach to growth through population expansion. Many ordinary Singaporeans are made to suffer the consequences of depressed wages and greater competition. Our already large income gap got worse and we are seeing a rising underclass among the bottom 30% of our population.

The PAP approach to transport, healthcare and education is to keep its own expediture low and get Singaporeans to shoulder as much financial burden as possible. If the income gap in Singapore in is low, the approach may actually work. However, we with our income gap, it means that much of these resources/services, say healthcare, are allocated to those who are able to pay while those need it most from the low middleclass and below have to suffer very high financial strain. The COE system means that a car ownership may be given to a multi-millionaire's son for dating while a lower middleclass father of 3 with a disabled parent cannot afford to own one. The approach to make each Singaporean shoulder his own healthcare cost might work (although not well) if the income disparity is narrower however with the huge income gap, the top 5% can drive up cost by demanding the best most exclusive care while the middleclass are finding it harder catch up with the rising cost. This cost spiral is worsened by the PAP govt's aim to increase profits of the healthcare sector by bringing in rich overseas patients - if you go to a govt restructured hospitals such as Changi[Link to advertisement to market to foreign patients], you can find international health services offering healthcare to foreigners while there are insufficient beds for Singaporeans[Link] and the high cost of treatment has forced some Singaporeans to seek treatment in poorer developing countries such as Malaysia[Link]. The same minister responsible for this situation once suggested that Singaporeans send their aged parents to nursing homes in Malaysia because the cost of nursing homes in Singapore has escalated beyond what many can afford[Link] due to the scarcity of land....yet no PAP leader has ever suggested converting golf courses that occupy close to 1400ha of land, the equivalent of 2200 football pitches[Link] to hospitals for the sick, public housing for the poor and nursing homes for the old because our elites enjoy hitting a ball into a hole.

We cannot continue with the current policy directions of the PAP govt because the income gap grown to the point that makes many of the PAP policies unworkable i.e. a large segment of the populace will be worse off. We cannot expect any change from the PAP to bring about more balanced policies because their interests are diversified beyond that of ordinary Singaporeans to a complex network of business interests linked to the power-elites in govt. Balance in policy making will come only when the interests of ordinary Singaporeans are more strongly represented in parliament. The opposition parties offering alternative ideas are not taking us to the fringe but towards the center from the fringe where we are now located.

15 years ago, Singaporeans accepted the semi-authoritarian govt because other asian countries were either under strongman leadership (dictators) or military rule. Singapore was ahead in terms of political progress. However, after the Asian crisis, countries like South Korea and Indonesia became full blown democracies almost overnight and Singapore's authoritarianism start to look more out of place. The PAP made very weak attempts to address this by 'opening up slowly' (read very slowly, at a pace that ensures PAP's hegemony). In the previous elections 33.3% of those who had the chance to cast their votes, voted against the govt but the GRC system resulted in this group of people being under represented in parliament. My belief is this 33.3% has probably grown to 40% given more people have felt effects of various policies first hand in recent years. The PAP will resort to its usual undemocratic pork barrel politics promising expensive estate upgrading to those who vote for them. They know that Singaporeans work for decades to pay for their homes and estate upgrading which pushes HDB prices up in upgraded estates will attract votes despite the implementation of policies unbeneficial to ordinary Singaporeans. Singaporeans have to look beyond upgrading as a carrot and understand the long term consequences of current policies to make the right choice.

Tuesday, April 20, 2010

Dylan Ratigan explains the moral bankruptcy at Goldman Sachs

Last Friday, Goldman released a statement[Link] to defend itself after the SEC announced that it was pursuing fraud charges against Goldman. Among other things, Goldman said that it lost money on the deal and made full disclosure to the buyer. Really? Remember the near collapse of AIG? After AIG was bailed out, Goldman Sachs received US$13B[Link], the largest chunk of the money to bailout AIG. What was this money for? Goldman had taken bets on wide ranging number of securities by buying CDOs from AIG[Link] and stood to gain if the complex securities (CDO, MBS etc) it sold to clients failed i.e. Goldman made massive net gains from the losses of its clients.

Dylan Ratigan is one of Goldman Sach's harshest critic and he explains what Goldman did with great clarity in this video:

It is about time for the Americans to pass the bill to regulate the financial institutions so that such conflicts of interests made possible by the investment banks 'playing all sides' is no longer possible.

Sunday, April 18, 2010

Understanding the Singaporean Dream.....

"Well, as I said, because so many more are getting higher education, the scarcity value of a degree is less. Furthermore, the overall inequality in the society is much less than when 3 or 5 % were getting degrees and they were in great demand. If you had a degree, you could easily buy a house or a car, and it was no problem because that was your pulling power. Now, with 20% getting degrees and more tertiary educated, they are earning more than those who didn't go to university. But university graduates are not as few as before and, therefore, make less."
- PM Lee Hsien Loong, Harvard Interview[Link]
The Singapore Dream was once defined as 5Cs - Cars, Cash, Condo, Club Membership, Credit Card. These days they market credit cards to anyone with a heartbeat so you can drop that... overspending on your credit card can easily result in a nightmare. Club membership and cash are quite ill-defined - you can take club membership to be at one of the exclusive country clubs with golf not your NTUC Fairprice membership and cash to be something like $1-$2M in today's dollars. The Cs are still relevant today at least for a large segment of our population whose values have been shaped by materialistic orientation of today's society. I'll get back to the 5Cs but first I would like to share something from my childhood...
One of the fondest memories from my childhood is that of my dad driving the whole family to a drive-in cinema somewhere in Jurong. I can't remember what movie was screened but that day, my sister and I got to sit on the bonnet and roof of the car to watch the movie. In those days, I lived in a kampung but my dad owned a car so we get to go places. Family weekends were spent fishing at Bedok Jetty, the beautiful beaches, rustic Sentosa, movies etc. Children did not get much homework in those days. I was an undisciplined student who did not submit 90% of his homework even when required. Those days the teachers did not bother, my father did not bother as long as I passed and I had this thinking that if I understood the stuff they were teaching, homework wasn't important. PSLE was a pass/fail thing i.e. no marks involved. You can take it that I had a childhood - a happy one. My dad worked as a technician all his life after he earned his 'O' level attending night school. Degrees were rare in the 60s when a large part of the population was uneducated. My dad's story is one of spectacular social mobility. We left the kampung in the late 70s when my dad bought a HDB flat. It was fully paid in a few years and my dad was debt free. In the late 80s there was nasty recession and housing prices plummeted. My dad bought a terrace house and serviced his loan with his technician pay. My parents still stay in the terrace house today. Our neighbors have moved and sold their properties. The house on the left was sold to a rich lawyer and the one on the right was sold to a rich specialist doctor. You may be asking : what is so spectacular about that? Many people were able to do that in those days. See my dad had one of the worst starting point possible. He was an orphan and had to support himself working when he was still a child. Owning a landed property and putting all this children through university exceeded his wildest dreams....and he did it working as a technician. Two years ago, my dad asked me to buy the neighbor's house. Our neighbor's son got into some financial trouble and he had to sell the house to help his son out. I couldn't match the price offered by the rich lawyer and was priced out....actually I didn't come that close to being able to buy it because I realised later when I got to know the lawyer better that he is, to put it bluntly, 'filthy rich' and would have offered a much higher price because he liked the location. I was priced out 2 years ago and at today's prices, I'm completely priced out. But that is just a small disappointment not being able to own the same type of housing as my dad. The challenges for our younger generation is much bigger than mine - life is tough even for an Ivy Leaguer like Scott Huang (see previous post).
There is one C that describes our society so well - that C is COMPETITION. Intense competition that one cannot avoid. If you look at attaining the 5 Cs as a form of success, then a high rate of failure is built into the system - number of cars is dictated by a quota so most people will not own one and only 20% of the population will live in private property as land is scarce. Working hard alone will not do. You have to make more money than the other 80%. As if it is not intense enough, the PAP govt make sure the spurs are in your hide by importing people at a high rate at all levels. Today 80% of the 1st class honours in engineering are foreigners because the govt goes overseas through Contact Singapore and other means to hand out scholarships to bring in foreign students in large numbers. Among the 2 billion people in China & India, you can always find a large number of smart people willing to come here for a fully paid education. Don't be so simplistic to think that the local guys are not good enough to do well. When you have a quota and you have to grade people, people get knocked off simply due to the quota i.e the differentiation can be inaccurate and artificial. You can this extend to the rest of society. People make a mistake when they think that this intense competition and our meritocracy goes hand in hand ...but this idea of doing better when you work smarter and harder is only true up to a certain level of competition. When competition becomes too intense and working hard alone is not enough to attain your dreams and people will resort to excessive risk taking, unethnical, unfair, unhealthy & immoral ways to get what they want. What emerges out of this intense competition is not a better, stronger and cohesive society that can take on world but a selfish, unhappy one that is bogged down by the numerous failures it creates internally. Our FT policy went from one to import only the best carefully selected people to elevate Singaporeans to one that brought in so many people that it can only depress Singaporeans. PAP policies has caused the dreams of Singaporeans to become less attainable and the intense competition is now a source of great unhappiness in our society....and there is now plenty of unhappinessness with the PAP.
While many Singaporeans still dream of the 5Cs, a growing number dream about having more freedom, democracy, equality and justice in our society. The 2 dreams are ultimately linked and whatever stands in the way of one is also standing the way of the other. A growing number of Singaporeans do not want to wait any longer - they are leaving. The other day, there was great dismay in my company when we found out that an employee from one of our associates had applied to emigrate to New Zealand. My company had invested a large sum to have him trained for something very high tech and uncommon. I was asked to find out what was going on. He told me that our investment is safe because he has no plans to leave in the next 5 years. He was getting a head start because such applications can take a very long time. I asked him why he wanted to leave when he is actually doing quite well for himself in Singapore. He told me that looking ahead there is great uncertainty for his children - they are average students and may not have the same capabilities as him.....there is great uncertainty how well they will do given the extremely intense competition here. I asked him, "why New Zealand?". He told me that any place where an average person can lead a high quality of life would be okay....and that is probably what it takes to keep good people in Singapore. It is not just about attaining our own dreams but also a system that will give our children a good chance to do well in life.

Saturday, April 17, 2010

Singapore Dream : The Scott Huang Story....

I will write about what has happened to the Singapore Dream later but first read about Scott Huang....and various views of what the Singapore Dream is and how it has evolved. If it is tough for Scott Huang, an Ivy League graduate, ever wonder what it is like for the ordinary Singaporean? What is their Singaporean Dream?

The Great (unreachable?) S'pore Dream (Straits Times, Insight, 17 April 2010).

IF YOU are compiling a handbook on how to succeed in Singapore, you might be tempted to just cut and paste Mr Scott Huang's story into it.

He studied hard in school, received a prestigious scholarship, attended an American Ivy League university, earned a master's in electrical engineering, and went on to a mid-level job in a large maritime company.

What is supposed to happen next - so goes the Singapore Dream - is that he gets married, owns a car, moves into a condominium, joins a golf club, and settles into a comfortable middle-class life happily ever after.

Yet, as the 30-year-old will testify readily, this age-old formula isn't working like he thought it would.

He intends to marry his fiancee, who works in the media industry, by the end of the year, but that's just about where the wheels start to come off the wagon.

Spiralling prices mean the choice piece of private property he hankers for hangs in the balance. Driving a car of his own has been relegated far down the priority list.

He has now drafted a B-dream just in case the A-dream turns out to be beyond his reach.

'I now have what I call a minimum goal and an ideal goal,' he says. 'The minimum goal is an HDB flat; the ideal goal is a condominium apartment and a car.'

Achieving his ideal goal - which includes an overseas education for his future children - is beginning to sound like an impossible dream.

'It will require major changes in lifestyle. I cannot go out so much and cannot have holidays every year. But I'm trying to stay hopeful,' he says.

Mr Huang's tale of the struggle to achieve the Singapore Dream is one familiar to many young Singaporeans of his cohort: in their mid-20s to mid-30s, tertiary-educated, about to settle down or newly married, on the cusp of life.

An increasingly competitive environment and news of rising car and home prices have led to a feeling that the good life they aspire to is slowly slipping out of reach.

But is that really the case?

After all, the country has encountered such bumps several times in its history and every time, young Singaporeans seem to have emerged with their dreams more or less intact.

In 1996, an impassioned debate took place in Parliament over concerns that the Singapore Dream was dying. Eventually, a basket of measures was uncovered to keep the dream alive, including building executive condominiums to provide affordable condo-style living.

The question now is whether another round of initiatives may be forthcoming to keep the young from losing hope. Or is the current situation just a fleeting feeling of helplessness, a phase, a product of economic cycles?

More pertinently, do the young Singaporeans of today dream the same dream as their parents and grandparents?

Or have they scaled the hierarchy of needs and gone beyond such dreams? Or, given a matured economy with slower growth, should Mr Huang and company scale down their expectations instead?

What is the dream?

ONE early articulation of the Singapore Dream in a 1981 Sunday Times article defined it as: 'A salary of a few thousand dollars a month; enough extra cash to decorate the home with the latest equipment and branded fabrics and furniture; holidays abroad; two children and a promise for the future.'

Sometime in the 1990s, this definition was refined to specify the five Cs - a car, condominium, credit cards, cash, and a country club membership.

Are these dreams still relevant, considering that the country has undergone a complete transformation in the past three decades?

Insight posed this question to a dozen young Singaporeans like Mr Huang, and the answer has largely been, 'Yes'.

Although many responded initially with answers like 'happiness' or 'a good life', the achievement of these goals is predicated on the acquisition of material goods.

Only two stress that the happiness they seek has nothing to do with money.

Mr Colin Lim, who works in the finance industry, feels that it is completely natural for people who have grown up watching their parents get rich to want the same things.

Says the 29-year-old: 'I think any society that is going through a period of economic development would end up dreaming the same things and aspiring to the same material things.'

Indeed, no matter how you attempt to classify it, the Singapore Dream is invariably shoved into a money-lined pigeon hole.

National University of Singapore sociologist Tan Ern Ser is someone who knows a thing or two about the Singapore Dream, having set out to study it in the early 1980s when he did his master's thesis.

He concludes that the Singapore Dream is in many ways similar to its American equivalent in the sense that both have to do with social mobility.

'Essentially, it involves crossing a symbolic public-private divide,' he says, referring to things like housing and transport.

He adds that the Singapore version has not changed much over the years because the Singapore project has not changed either.

'Apart from the project of building a nation populated by people with a strong sense of national identity, the Singapore project aims to create a middle-class society. These two components are best seen as works-in-progress, and likely to remain so for a long time to come,' he says.

Political observer Eugene Tan, a law lecturer at the Singapore Management University, links it to the Government's emphasis on the economy.

'The five Cs are still very much regarded as the benchmark of success, and government policy entrenches the mindset that expanding economic opportunity is critical to the nation, the family and the individual's well-being.'

He adds: 'Societal conditioning and political socialisation mean that the Dream has a powerful effect on Singaporeans' value systems, attitudes, aspirations, and ambitions.'

Many also point to the sort of role models society and the media tend to present here.

Singaporeans invited to schools to give talks tend to be financially successful people in the mainstream, not a stay-at-home mum or an avant-garde artist living in a Little India walk-up.

Of course, it cannot be generalised that young Singaporeans care only about things related to money. Probe further and many list more intangible things, like raising good children or having a good work-life balance, as close seconds on the dream hierarchy.

Says Ms Jamie Lim, 27, who works as a consultant in an accounting firm: 'Raising good children is definitely part of the big picture, but of course, when people think of children, they also have to think of money.'

Then there are some who dance to a different drum beat. Like Miss Li Hanyi, 28, an art director in an advertising agency, who says simply that the thought of being tied to a house, kids and money is 'everything I don't want in life'.

She dreams of a more open society: 'I want the vibrancy of New York but with all the things I like about Singapore.'

Mr Eugene Tan thinks that such dreams will creep slowly into the Singaporean's consciousness but that it will be some time before materialism is usurped: 'The Dream has evolved but the innate vulnerability of our society continues to persist and that heightens the drive towards continuous striving as a hedge against being irrelevant. Being poor carries a heavy social stigma.'
IT MAY not be the most unbiased view, but nearly every young Singaporean interviewed is convinced he is facing a harder struggle and a steeper climb than the preceding generation.

Teacher Ross Nasir, 24, is certainly feeling the strain. She is hopeful that she will one day match the executive maisonette her businessman father bought when he was in his 40s, but it just seems very bleak to her right now. 'Everything seems to be getting inaccessible. It's like striking Toto,' she sighed.

This exaggerated sense of hopelessness is common, even if not completely valid as each generation has to slog to achieve its dreams.

It is true to say, however, that earlier generations generally enjoyed greater social mobility than later ones.

Professor Tan Ern Ser calls the late 1970s and early 1980s the 'golden age of the Singapore Dream'. Since then, he says, the playing field has become more crowded, with more higher-educated middle-class families all jostling to get ahead in the 'mobility game'.

Mr Eugene Tan puts it this way: 'A degree earned a generation or two ago was a passport to a good life but a degree today is no guarantee.'

Indeed, the sort of asset appreciation the older 'lucky generation' enjoyed is mind-boggling to the young professionals of today.

In 1965, half the labour force earned less than $150 per month. By 1985, this had shot up to between $600 and $1,500, an increase by up to 10 times.

An average young professional starting a job today with a $2,000 salary would not dare dream that it will turn into $20,000, no matter how long he works.

The same goes for property. Those who bought HDB flats in the 1960s and 1970s for $10,000 or less would have been able to cash out today at up to $500,000.

Much of this perceived luck can be attributed to the rapid growth Singapore went through in that period. With a mature economy comes slower, productivity-related growth.

For today's young, that simply means good wage increases and asset appreciation cannot be taken for granted.

Says Prof Tan: 'The journey is perceived as becoming somewhat more hazardous, competitive, insecure, and uncertain, brought about by globalisation and economic competition and fluctuations.

'Moreover, even as Singaporeans seek to enhance their assets, those in the sandwiched generation may find themselves having to handle various big-ticket items, such as parents' health-care costs and children's education costs, notwithstanding government subsidies for these items.'

But older Singaporeans point out that this hopelessness is just another phase of life. Everyone, baby boomers included, started out fretting that they would never be able to reach their dreams.

Parents of twenty-somethings speak of how their early days were spent in modest rented flats, slowly saving up to bigger and better things.

And even if the comparisons with baby boomers are cast aside, it may not be all bad news.

Yes, car and home prices may be high now, but this is not the first time they have hit these heights. Just like the economy, the affordability of the Singapore Dream follows the fluctuations of the market.

As Prof Ivan Png, professor of information systems and economics at NUS, puts it: 'Affordability is cyclical. So, yes, one strategy would be to wait until affordability improves. The challenge is to predict the cycle.'

Also, if the experience of the elders are anything to go by, there is always hope.

Keeping the dream alive

IF THE Government's action in 1996 is any guide, it is clearly concerned about keeping the Singapore Dream alive for the young. This is why it is monitoring the public housing market very closely and making sure that prices remain affordable.

Explaining why this is very much an important political issue for the Government, Mr Eugene Tan says: 'Having substantial buy-in of the Singapore Dream is fundamental to the Government's legitimacy, popularity and power. Being able to mould the Dream gives the Government considerable leverage and influence over the lives of the average Singaporean.

'If the Dream loses its standing, then the way of life promoted by the Government will lose its efficacy and effectiveness.'

Dr Gillian Koh of the Institute of Policy Studies, in turn, notes that part of the Government's commitment to help innovation and entrepreneurship flourish is driven by the recognition that those are the only vehicles that can provide the exponential wage increases Singaporeans want.

She says the Government's approach to the dream problem is to make sure that it provides a certain minimum, such as good, affordable housing and health care for the masses.

'It has to draw a line in providing some of the basics as its social compact, a line established at where a relatively large portion of the population can benefit, that is fair, and will not bankrupt the system,' she says.

Ultimately, she stresses, everyone's destiny lies in his or her own hands: 'Even if the public makes the Government promise more, I am sure most people do eventually want to go well beyond that and set higher targets for themselves - to do things where their passions lie and let that pay for itself - today the bus, tomorrow a Ferrari?'

Goldman charged with fraud by SEC

US regulators, the SEC, has sued Goldman Sachs for fraud. The details of the case can be found in the Reuters article I attached below. The case relate to a deal known as ABACUS in which Goldman sold CDOs to European banks. The SEC has evidence that the Goldman vice-president, Fabrice Tourre, who arranged the deal knew that the structured product marketed was toxic [Link]. Also, the selection of securities for the product was done by hedge fund manager, John Paulson who structured the product so that he can take a huge billion dollar bet that the product will fail - this was not revealed to buyers of the product . If SEC can prove its case, at the minimum, this is a really bad case of conflict of interest and poor disclosure. Technically, the buyers 'knew' the actual securities they bought which was detailed in the contract so it will be a challenge for SEC to prove fraud - maybe misrepresentation or mis-selling is more appropriate.

This case reminds me of the minibond saga in Singapore in which many Singapore investors lost money in structured products. This is the advertising for Pinnacle Notes:

Click on the picture to see when the product was sold to Singaporeans - 29 October 2007. The ABACUS deal in the SEC case against Goldman was sealed in Jan 2007. One piece of evidence SEC has is an email by Fabrice Tourre showing that he knew the securities in ABACUS deal were toxic because the US housing market was about to collapse[Link to article about that email]. By Oct 2007, it is likely that it was common knowledge among American investment bankers that these products were highly toxic. That was when many of these products such as Pinnacle Notes were launched and sold in Singapore to ordinary Singaporeans who were unsophisticated investors by local financial institutions. The question is whether American investment banks sold these products in Asia knowing they were toxic. If that is the case, they probably came to Asia to be out of the clutches of the SEC and other American regulators. If they were caught in America like Goldman, it is almost certain they will be made to pay restitution to investors.

The selling ban for many local banks for structured products has just ended[Link]. I don't think many Singaporeans will start buying these products given the sad memories of Lehman minibonds are still quite fresh in their minds. But 5 or 10 years from today, the lessons will likely be forgotten by investors and new products will make their way here. After the minibond saga, most of the changes to the system came in the form of measures to ensure relationship managers are adequately trained and improvements to sale process of these products[Link].

This recent crisis shows the need for a strong proactive regulator with the expertise to detect and prevent dubious schemes and bad products from entering our market and harming our citizens. Even after the Lehman saga, the MAS still takes a hands-off approach leaving it to the banks to improve their internal selling process. If something goes wrong in the future, you can bet MAS will recite its "buyer beware" mantra - it is the 'do-nothing' approach passing the responsibility to ordinary Singaporeans who are most vulnerable. Proper regulation and better regulators are actually required for our financial hub to thrive because investors like to know before they put their money down, the products are regulated and when something goes wrong, the perpertrators will be caught and prosecuted.

In 2006 & 2007, the SGX courted Chinese companies to list in Singapore to boost trading volume - brokerages and SGX were main beneficiaries. A sizable number of these companies engaged in accounting fraud causing investors hundreds of millions. While accounting fraud cannot be completely prevented, the number of fraud cases among these Chinese companies known as s-chips was very high. When they occur, all that the authorities can do was to blacklist the perpertrators (read article: SGX names 'em and shames 'em) because we have no legal jurisdiction over these companies. Our authorities must be the only ones who think they can prevent fraud by 'naming and shaming' the fraudsters. These guys are probably enjoying their millions in posh KTVs and mansions somewhere in the middle kingdom while Singaporean investors are left holding the empty bag.....buyer beware?....Investors should be aware that nobody looks after your interests but yourself - hidden conflicts of interests possible in our systems, the lack of a proactive watchdog and lack of protection for investors. At the end of the day, many Singaporeans play it safe by over-simplifying their investments sticking to fixed deposits, insurance and property. Not that this is a bad thing for individuals but it does show a lack of trust for anything slightly more complex - if it goes wrong, you don't only lose your money, you may not even get justice...the idea of someone enjoying his life with money stolen from you is just too painful. Where are those Chinese crooks who sold Singaporeans those flaky s-chips with accounting problems?

------------------ ------

Factbox: How Goldman's ABACUS deal worked[Link to Reuters]
Fri Apr 16, 2010 4:30pm EDT
NEW YORK (Reuters) - The U.S. Securities and Exchange Commission is accusing Goldman Sachs Group Inc of committing fraud in a complicated transaction involving securities known as collateralized debt obligations.

The particular deal that Goldman entered into with Paulson and others was called ABACUS 2007-AC1.

The particular deal that Goldman entered into with Paulson and others was called ABACUS 2007-AC1.

Here's how the deal worked, according to the SEC's complaint:

1) Hedge fund manager John Paulson tells Goldman Sachs in late 2006 he wants to bet against risky subprime mortgages using derivatives. The risky mortgage bonds that Paulson wanted to short were essentially subprime home loans that had been repackaged into bonds. The bonds were rated "BBB," meaning that as the home loans defaulted, these bonds would be among the first to feel the pain.

2) Goldman Sachs knows that German bank IKB would potentially buy the exposure that Paulson was looking to short. But IKB would only do so if the mortgage securities were selected by an outsider.

3) Goldman Sachs knows that not every asset manager would be willing to work with Paulson, according to the complaint. In January 2007, Goldman approaches ACA Management LLC, a unit of a bond insurer.

ACA agrees to be the manager in a deal, and to help select the securities for the deal with Paulson. In January and February 2007, Paulson and ACA work on the portfolio, coming to an agreement in late February.

Goldman never tells ACA or other investors that Paulson is shorting the securities, and ACA believes that Paulson in fact wanted to own some of the riskiest parts of the securities, according to the complaint.

4) Goldman puts together a deal known as a "synthetic collateralized debt obligation" designed to help IKB and Paulson get the exposure they want. IKB takes $150 million of the risk from subprime mortgage bonds in late April 2007. ABN Amro takes some $909 million of exposure as well, and buys protection on its exposure from ACA Management affiliate ACA Financial Guaranty Corp in May 2007.

Goldman's marketing materials for the deal never mention Paulson's having shorted more than $1 billion of securities. Goldman receives about $15 million in fees.

5) Months later, IKB loses almost all of its $150 million investment. In late 2007, ABN is acquired by a consortium of banks including Royal Bank of Scotland. In August 2008, RBS unwinds ABN's position in ABACUS by paying Goldman $840.1 million. Most of that money goes to Paulson, who made about $1 billion total.
(Reporting by Dan Wilchins and Karen Brettell; Editing by Richard Chang)

After reading this article, people also read:
Goldman Sachs charged with fraud by SEC

Thursday, April 15, 2010

Transport woes in Singapore.....

Without the recent spike in COE prices, the cost of car ownership and usage in Singapore was already the highest in the world. Given the sharp reduction in number of COEs and recent stock market surge (which I discussed here) , the recent hike in COE is probably just the beginning of further increases. The temporary solution for those who need a car is to go to the 2nd hand market to get one - this market will tighten up and prices here will also rise as more people hang on to their cars for longer periods instead of switching to new cars. As the COE rises, it will start pricing out more and more people who really need cars. The COE creates unhappiness by allocating car ownship to those who are wealthy enough to pay for it instead of the people who need it most. The problem is further compounded by Singapore having the most unequal distribution of wealth among developed countries and a for-profit 'public' transport system. The primary goal of the public transport is to generate profits to pay dividends for its shareholders while meeting 'standards' laid out by the PTC. There is no incentive for public transport operators to make quantum leaps in service quality because they have shareholders to please and shareholders want higher profits which translate to more dividends.

In a recent report, the PTC says it sees greater improvements in QoS (Quality of Service) in its latest report for June to November last year[Link]. This is measured by the number of non-compliance to a set of service standards laid out by the PTC. I think very few people who have to endure the sardine packed buses and armpit smelling experience will agree with the findings. Besides, real personal experience, it is hard for commuters like myself to dispute the PTC - but note that the PTC only looks for compliance to standards not measurement of comfort i.e crowding on the buses and MRT. Few or none on the PTC depend on public transport system to get to work. In June 2008, I switched from taxis to buses/MRT when the last taxi fare hike resulted in my taxi fares to work (and back) to surge to roughly $55 per day [my blogpost on the taxi hike here]. Before the switch, I took taxis to work everyday for 7 years so my 1st experience taking the bus/MRT after I switched in 2008, I could see the accumulated changes in service quality over a 7 year period. The first time I got back onto the bus/MRT, I was simply overwhelmed by how crowded they had become. Many people taking public transport may not be aware because the squeeze on our buses and MRT occurred incrementally over months and years....many Singaporeans also experienced greater stresses at the workplace, and rising cost of living may have switch their minds off to the other deteriorating aspects of our quality of life. Goh Meng Seng showed a few months ago that the service capacity fell far short of the expansion in population[Link]. You can go through is numbers to see the problem.

For those with longer memories, I would like to show you something else.

Remember these? These are bus tickets from the 1980s. In those days, you don't have to bring your EZLink or exact change when you board the buses. Besides the driver, there was another person working on the bus - the bus conductor. After you got on the bus and sat down, the bus conductor would come to you to collect the bus fare - if you had a $5 note, no problem, you would get change. He would then punch a hole in the ticket to indicate which stop you got on and hand it to you. What has these tickets to do with our public transport system today? If you're old enough, dig hard for some old memories. See the truth is the bus conductor could never do his job if the buses were packed like sardines - he had to issue a ticket to everyone before the next 1 or 2 bus stops otherwise the passenger would get a free ride. While the buses in those days did not have air-cons like the modern ones, they were rarely as packed as today's buses during rush hour. It was only possible to pack buses like sardine cans only after automatic ticketing was introduced in the 90s and bus conductors were relieved of their jobs. These bus tickets remind me how much the pace and quality of life has worsened in Singapore over the past few decades.

Wednesday, April 14, 2010

PAP Govt gets really ridiculous!

Talk about denial mentality in the PAP. This one really takes the cake.....

After the LTA announced that the COEs quotas will be reduced using a new formula for calculating the number of replacement COEs, the price of COE surged by 30% in anticipation of the reduction in the next round of bidding[Link]. When the number of COEs was actually cut, COE prices surged by another 30-40%[Link].

Here is a report of what Minister Lim Hwee Hua said in One Motoring:

"THE spike in certificate of entitlement (COE) premiums and car prices this week was not caused by changes to a formula to determine the number of replacement COEs, Second Transport Minister Lim Hwee Hua said yesterday.
Instead, there are a host of reasons for the spike in the COE prices, including market forces and economic conditions
" - COE spike not due to change in formula

We are expected to believe that a 30% reduction in the number of COEs has nothing to do with the spike in COE prices. In the past few years, ordinary Singaporeans have to suffer from non-stop rapid increase in cost of living. Many lower middle income families that are already financially squeezed and need cars are now have to endure more financial pain to own one - the cost of car ownship and usage in Singapore is the highest in the world. The minister now insults ordinary Singaporeans by treating them like idiots when she gives such a incredulous and illogical explanation just to deny responsibility for spike in COE. I believe Singaporeans deserve better.

Monday, April 12, 2010

Mah Bow Tan : We don't fudge the numbers Part 3.

'So I ask, what are you questioning? Am I telling lies or fudging the figures? Which part is wrong? Point it out to me,' Mr Mah says. [Straits Times Article : Link]

Page 2 of today's Straits Times (see article below) mentioned Hazel Poa's findings and urged Minister Mah to address the concerns of ordinary citizens. If you're with the PAP and the Straits Times is not on your side, you have really gone off-course and better wake up soon or find your hot seat getting hotter.

"Reform Party member Hazel Poa, a former government scholarship holder, has an interesting blog post in which she points out that such statistics may not show the full picture. Change the base year, and the results could be different. Using 2000, 2001 or 2006 as alternative base years, she calculated that resale flat prices have grown faster than household incomes. If her calculations are correct, some policy recalibration is required to ensure that housing does not become a bigger financial burden on Singaporeans, as that will lead to Singaporeans having insufficient funds for their retirement.”

- Su-Ann Chia, Straits Times, 12 April 2010.

Minister Mah is losing a lot of credibility trying to talk his way out. The very basic fact is HDB supplied only 11,000 new flats from 2006-2008 while the resident population in Singapore increased by 438,000 people[Link]:
From 2006 to 2009, the price of HDB flats rose 46% while household income rose by only 21%[Link].

Support for the PAP rose in the 70s because people moved from kampungs to highly affordable HDB flats in large numbers experiencing a significant improvement in living conditions. Today affordability has declined and that will translate to a loss of support for the PAP. It doesn't help that Minister Mah continues to deny the problems with housing creating the expectation that he will not be doing anything significant to improve the current situation.
'I just want to remind Singaporeans it was not that long ago that we were at that situation (where people were still living in kampungs). We had to work hard for what we have. Life doesn't hand things to us on a silver platter, and I think that has not changed.' - Minister Mah

Well it is not a question of working hard but many ordinary Singaporeans have to work harder and harder for less compared with the past - make no mistake things have changed...for the worse. I've shown in my previous posting on this topic that housing cost increase has outstripped household income growth by a large factor over a 2 decade period. Many netizens have also pointed out the pitfalls of using household income - it could have risen because more people in the same house are working or large number of PRs(foreigners) account for the increase. Others pointed out that the RPI (resale price index) is not a good index because it include homes of different sizes over the period. Whatever it is, the situation is probably worse than what the numbers tells us. The govt now asks ordinary Singaporeans to lower their expectations. Most of us already have - we know that the Swiss standard of living is just a pipe dream. Most ordinary Singaporeans will never own a car, most will have to service housing debts over multiple decades, most will never live in private property, many will not be able to retire comfortably, and many will have to travel to Johor for affordable medical treatment. For ordinary Singaporeans, what is the selling point of the PAP system? We suffer from the 2nd highest stress levels in the world[Link] living in this unequal, undemocratic, elitist system that squeezes the ordinary citizens to create favorable outcomes for the power-elites and their network of business interests. Unless there is change, the future for ordinary Singaporeans can only get bleaker.


Tweak fundamentals of housing policy

By Sue-Ann Chia

PRIME Minister Lee Hsien Loong’s recent remarks about the emergence of fake online campaigns to pressure the Government were intriguing.

Referring to recent e-mail messages calling on the Government to cool the property market, failing which the writers threatened to withdraw support from the ruling party, he described the phenomenon as ‘astroturfing’.

The term, derived from a brand of fake grass, comes from the United States where it refers to a fake grassroots movement which manufactures support or opposition to certain policies or issues.

Why fake? Because a number of the purported e-mail writers were found to be non-existent. The conclusion is that one, or at most a handful of people, could be behind the deluge of e-mail messages sent.

Mr Lee’s comments have led some to wonder if the Government is concluding that, because some writers are fake, the concern on the ground over property prices is likewise not as strong as made out to be in the e-mail messages.

I hope not. Whether the e-mail messages were sent by real or fake people, there is real unhappiness on the ground over soaring housing prices. That unhappiness should not be discounted.

To be sure, there is no hard data on exactly how many people are unhappy. Some may argue that those who are unhappy are but a small group, only very vocal.

Anecdotally, a number of those who are angry are young, upwardly-mobile professionals earning incomes in the mid-levels. They desire strongly to buy a dream home – but find their dream fading as prices have escalated in recent months.

Middle-class families who have been saving up to upgrade to a bigger home in a better location could be experiencing similar unhappiness, as higher property prices force them to rethink the move.

Add the recent surge in the number of foreigners in Singapore, and the result is even greater resentment as foreigners are blamed for driving up demand and prices.

What exactly is the root cause of the unhappiness? Is it affordability of housing, unrealistic expectations, or a growing disenchantment as the Singapore Dream slips away?

Many Singaporeans have latched on to the first reason, blaming the Government for letting home prices become too high.

The Government, on its part, has countered by arguing that complainants are being unrealistic.

It points out that it has taken steps to cool the property market, such as by curbing the deferred payment scheme for private property and increasing the minimum occupation period for HDB flats.

It has also explained repeatedly that most flats are not priced beyond reach, and that those who want one should be able to get a flat if they are less fastidious about location.

National Development Minister Mah Bow Tan, in a recent interview with The Straits Times, cited people’s unrealistic expectations as a cause of the angst.

People want a nice flat, in a nice location, with a nice view and at a nice price, but that is just not possible, he said.

Making a case that affordability is not an issue, he also gave statistics to show that the prices of resale flats have not outpaced household incomes in the 10 years from 1999 to last year.

Are Singaporeans convinced? It remains to be seen.

Reform Party member Hazel Poa, a former government scholarship holder, has an interesting blog post in which she points out that such statistics may not show the full picture. Change the base year, and the results could be different. Using 2000, 2001 or 2006 as alternative base years, she calculated that resale flat prices have grown faster than household incomes.

If her calculations are correct, some policy recalibration is required to ensure that housing does not become a bigger financial burden on Singaporeans, as that will lead to Singaporeans having insufficient funds for their retirement.

But coming back to Mr Mah’s point about unrealistic expectations: The question is why this is so.

Has the Government oversold its housing policy? For decades now, it has encouraged citizens to own their homes, believing this gives them a stake in the country and increases their sense of belonging. The result is that owning a home is what almost every Singaporean now aspires to. Some have even come to expect it as an entitlement.

Meeting this aspiration was perhaps easier in the past than it is now. People had fewer wants; many were happy to move from kampungs or cramped quarters to new flats. However small and in whatever location, a home with a flush toilet was sufficient to make many happy.

Today, however, we have a new generation of Singaporeans who want more, due to growing affluence and a mentality that they should be able to buy the home they want as long as they get good jobs and work hard.

They want a flat that is big enough, in a location close to town, next to an MRT station, near good schools, and at a price that suits them. Are they unrealistic? Perhaps.

But rather than just putting the blame on home buyers, it could be time for the Government to relook a number of the political messages it has been sending to citizens over the years. To manage their expectations better, some fundamentals need to be relooked.

First, the promise of home ownership. This should now come with caveats. A home for everyone – but not exactly at the place and price that you want.

Second, home ownership should not be pushed as the goal to aim for from the start. There is the option of renting first, if funds are tight.

Third, should home ownership continue to be touted as an asset enhancement tool? Such a message may be at odds with the commitment to provide affordable public housing. The Government will be hard put to ensure prices that are comfortably affordable, if prices are pegged to a property market that is constantly rising while incomes do not rise as fast in tandem.

These are complex questions, but the Government should put serious effort into finding good, sustainable answers.

People’s expectations can have very real impact on the ground, regardless of whether that ground is paved with real grass or astroturf.

Source : Straits Times – 12 Apr 2010

Sunday, April 11, 2010

Secondary School Teacher turns property speculator.

Yesterday's Straits Times carried this story in the My Money section about how a secordary school teacher ended up with 3 investment properties (see story below). He sold his freehold terrace house (fully paid?) in April 2009 for $965K, used the money to buy a terrace house for $1.43M and a penthouse for $1.18M. In Jan this year, he bought another terrace house for $1.14M. His investments are sitting on nice capital gains and he's getting good rental yield. He did fact his gains in these investments have probably surpassed what he earned as a teacher for the past 15 years.

What the teacher did is no different from what hedge fund managers do, REITs do and shipping tycoons do. The basic strategy is to borrow cheaply to buy higher yielding but riskier assets for both capital gains and recurring income. A hedge fund manager may leverage what investors give him by borrowing cheaply in Japan or US where interest rates have hit the floor then put the money in emerging markets e.g. Brazilian stocks or real estate. Its a no-brainer but they get paid millions when they make double digit returns from this strategy. A REITs manager specialising in Indonesia commercial property that yield 12% can borrow money at 4% - so he goes out to borrow at 4% then use this money to buy Indonesian shopping centers and earns a net of 8%. See making money is not so difficult right? ....In fact it looks so easy it makes a morkery of hard work, instead of teaching his students maths and science, the teacher should be teaching Robert Kiyosaki's Guide to Financial Freedom.....why not?

In 2001, I was in California for a business trip. Unable to sleep due to jet lag, I decided to watch a bit of TV. Late night TV in Calfornia was mostly advertising - infomercials. A number of these infomercials were about financial freedom through real estate investing - buy the DVDs (for USD$100?) to learn about the secret of real estate investing and make millions. The secret strategy in those expensive DVDs is probably no different from what our secondary school teacher did in Singapore - borrow cheaply to buy then rent out.....become a millionaire when you sell later at a higher price. For the next 5 years (2001-2005), this strategy created hundreds of thousands of millionaires when the US had the biggest housing boom in its history. The problem with simple strategies is that almost everyone and anyone can do it ...when everyone does the same thing, that is when it goes wrong and the destructive force on the way down creates 10 times more paupers than the millionaires it created on the way up.

The surest way to make money....sell blue sky and hot air to the gullible:

Last year I wrote about investing during recessions[Link] - most of the time it pays to the contrarian and apply good strategies when nobody is interested in doing so. It is necessary and healthy to have some level of speculation in the markets. However, when everyone thinks they can become real estate tycoons, that is when it gets dangerous. Teachers should concentrate on teaching, engineers should concentrate on building new gadgets and doctors should concentrate on their patients. When we have these wild swings in asset prices, the people that get rewarded the most are the people who can speculate well...not the people who produce useful goods and services for our society.

There are many pitfalls with the "borrow cheap to invest strategy" - interest rates can surge within a short time, asset prices can fall sharply and catch you off-guard, rental yields can fall killing your cashflow and so on. Instead of financial freedom, you can end up shackled by debts and financial troubles that keep you awake at night.
[Full Story in the Straits Times : Link]
Q: What property do you own?
I got married in 1996 and bought my first home, a three-room HDB flat at Rochor Centre for $250,000. It made sense as it was very near my parents' flat and they helped to take care of my son.

I 'lost' $50,000 when I sold my flat in 2002 for $200,000. But I took the opportunity to upgrade and bought a one-storey, 2,000 sq ft freehold terrace house in Sembawang Hills estate at a low price of $820,000.

In April last year, I applied what I learnt about property investments and leveraging and sold my terrace house for $965,000 to free up cash.

I then bought three houses. One was a 21/2-storey, 2,900 sq ft corner terrace in Sembawang Hills estate, bought in April for $1.43 million. The current market value is about $2.2 million.
I bought, also last year, in September, a 2,662 sq ft penthouse unit at Nuovo in Yio Chu Kang for $1.18 million. It is being rented out at $4,600 monthly.

Finally, in January this year, I bought a three-storey, 3,200 sq ft terrace house at Century Woods in Marsiling for $1.14 million. It is next to the Singapore American School and should fetch a rental of at least $5,500 when construction is completed.

I made sure that my home loans are on fixed rates and my investment properties must be able to attract tenants easily, to generate a positive cash flow. This simply means that the rental income that I get is more than enough to pay the bank loan so there is sufficient buffer.

Thursday, April 08, 2010

Mah Bow Tan : We don't fudge the numbers Part 2

Here's the chart from the Straits Times to show that HDB price move in tandem with household income:

Hazel Poa[Link] showed that when the base year is changed to another year besides 1999 the household income falls behind the rise in property prices. But there is something more sinister that can be shown in these charts.

You wonder what the same chart looks like if we go back another 10 years to plot for a 20 year period with 1990 as the base year:
The blue line shows the Resale Price Index taken from HDB website[Link] and the red line shows the median household income(MHI) taken from wikipedia and combined with the table that appeared in Straits Times yesterday shown here:

Notice I skipped the years 1991-1994 & 1996 because wikipedia page on household income skip those years. I can update my charts if anyone can supply the data.

From the charts we can see:

1. From 1990 to 2009, RPI rose to 442 (442% of the base year) but household income rose only to 211 (211% of the base year) i.e. income rose at roughly half the rate property rose over a 20 year period. The RPI was only 34.1 in 1990, today it is 154 i.e. a HDB flat today is 4.5 times the price 20 years ago but household income is only 2.1 times.

2. You will notice the big jump from 1990 to 1995 when the RPI rose from 34.1 to 101.9. That jump occurred just after CPF was liberalised for housing in 1991. During that period household income only went up by 36% but HDB price almost tripled. CPF basically went from funding retirement to funding home purchases.

By Minister Mah's own methodology, there is no question that HDB flats were much more affordable in 1990 relative to household income than they are today. Singaporeans' inability to retire with enough funds is linked to the high cost of housing which far outstripped household income growth over the past 2 decade. The chart also tells us why life is so much tougher in Singapore today. It is not unrealistic expectations that cause this is very real financial burden that caused this unhappiness and much of it is due to PAP policies.

Mah Bow Tan : We don't fudge the numbers....

Yeah? But they are pretty good producing nice graphs.

In yesterday's Straits Times article about HDB flats being affordable, there was this chart:

It shows household income rising in tandem with HDB prices.

Credit goes to Hazel Poa[Link] for unveiling the trick here. Move the base year around and you get some other interesting graphs, here's one of the graphs generated by Hazel Poa:

Yes, not so "in tandem" if the base year was 2001. In fact only when you choose 1999 to be the base year instead of any other year in the last 10 years, you can show this "in tandem" movement.

Someone dropped a comment to the previous post on the topic to say that using household income is really inappropriate.

Definitions of household income[Wikipedia]

1. The residents of the household do not have to be related to the head of the household for their earnings to be considered part of the household's income

2.That the size of a household is not commonly taken into account in such measures may distort any analysis of fluctuations within or among the household income categories, and may render direct comparisons between quintiles difficult or even impossible.[3]

Using resident (which includes PRs) household income instead of Singaporeans household income takes us even further from the real situation for Singaporeans. The fact is HDB flats are expensive and put Singaporeans in debt for 30 years and that takes away their financial ability to retire properly.

Wednesday, April 07, 2010

COE shoots up further....

DPM Teo Chee Hean recently called the COE an innovation.

"The public housing programme, the Central Provident Fund system as well as the certificate of entitlement scheme for vehicle ownership are all examples of policy innovations,” - DPM Teo

I'm not too sure how many more policy innovations from the PAP govt that Singaporeans can survive but the COE is really something we can do without. No city in the world has fallen apart without the COE. The COE has resulted in Singapore having the highest cost of car ownship and usage in the world. The COE allocates an important resource based purely on a person's ability to pay - the rich man's teenage son can afford to own a car for dating while a middleclass father who needs to drive his children to school and parents to hospital may not be able to do so. It maximises the pain among those with greatest need and limited means ...and it maximises the govt revenue.

There is a technician I know with a leg problem. He cannot stand for more than 15 minutes without feeling pain in his legs. Every day he struggles to work in the sardine packed buses and the MRT. Because of the COE system, he can never afford a car.


Relentless rise in COE premiums
Wed, Apr 07, 2010 AsiaOne
By Tony Ng

FRENZIED activity characterised the first Certificate of Entitlement (COE) open bidding for April, also the first bidding where the much-talked about supply cut takes effect.
Premiums rose by as much as 26 per cent for all COE categories.
A piece of Cat A COE, used for small cars of 1,600cc and below, now cost $34,001, up by 19.8 per cent. Similarly a Cat B COE would now cost $45,501, a 26 per cent rise from its last price.
Premium for the open category, used largely for cars, closed shy of the $50,000 mark, at $49,000.

Premiums for commercial vehicles and motorcycles weren't let off either. Both went up to finish at $36,551 and $1,221 respectively.

High Housing Cost : Blame the people!

What is worse than a govt that implements bad policies? A govt that implements bad policies then blame the people who suffer from their bad policies for its negative effects. Sickening isn't it? But the PAP govt has done it again.

"Unrealistic expectations are a reason for some unhappiness about flats"
- Straits Times, 7 April 2010.
The PAP govt opened the floodgates to foreign labor and did not expand the supply of housing accordingly causing the price of flat to escalated by more than 50% in 4 years. Yet it blames the problem on ordinary Singaporeans for having unrealistic expectations. The Straits Times article "Mr. Minister, a nice home, with nice view now please" is extremely insulting - it rubs salt on the wounds of ordinary Singaporeans who are now struggling with the high cost of living and belittles the financial pain ordinary Singaporeans suffer to own a home.
Please read the whole article to pick up flaws. One especially serious one is the chart of median household income vs housing prices. It was meant to illustrate that rising house price is due to rising household income. Using household income is extremely misleading as it has risen because more married women are pushed into the workforce due to the rising cost of living i.e. higher housing prices can drive household income up. Also, rising housing prices can cause couples with difficulties owning a home to share a place with their parents causing household income to rise. Our median worker income rising far slower(median income in 2000[Link] and median income in 2009[Link]). The Reform Party pointed out the discrepency why using household income can be misleading because of the effects of large number of PRs:
"Firstly though he omits to tell us, he probably means residents (which include PRs) and not just citizens when he talks about Singaporean households. Over the past decade the resident population grew by 15% while the resident labour force grew by approximately 25%. This was undoubtedly due to the surge in new citizens and PRs as a result of the government’s liberal immigration policies. The majority of these new residents did not have dependents (hence the much faster rise in the resident labour force than the resident population) and all of them would have had jobs so the proportion of working adults in the average resident household would have risen. As a result we would have seen an increase in real median income per household member without any real increase in the median incomes of Singaporean citizens who were already here before this period began, i.e., the majority of us. Another reason why the Minister’s figure is misleading is that it excludes households consisting solely of non-working persons over 60. If their incomes fell during this period or their numbers increased as a proportion of total households), due not only to the aging population but also because of the diminished employment opportunities for senior citizens as a result of the government’s open-door foreign worker policy, then excluding this group would distort the figure for median income per household member and make it look better than it really is" [Link]
The article uses "resident household income" instead of "Singaporean household income"- to tell how badly affected were Singaporeans by rising housing costs, you have to use Singaporean incomes as a measure. Using misleading statistics to push the blame for the housing situation to ordinary Singaporeans who are finding it increasing hard to cope with rising cost of living is highly irresponsible. The Minister should address the problem directly instead of denying responsibility.

Monday, April 05, 2010

Homeless in Singapore....

Al Jazeera should be commended for keeping the location of these homeless people a secret so that the police cannot raid them.

What happens when the police raids a tent occupied by a poor desperate homeless person at one of our parks:


Jailed for living in illegal tent [Link]
By Sujin Thomas

HOMELESS and unemployed, Noor Mohammad Yassin Ismail pitched a canvas tent at East Coast Park in May, 2007, and lived there for almost a month - without a lease or licence to do so.He was discovered on June 26 of that year, after he was apprehended by park rangers.In court on Tuesday, Noor was asked to produce his Identity Card or passport but he said that he had lost both items. It prompted District Judge Mr Shaiffudin Saruwan to retort in jest: 'I suggest you use a bicycle chain to tie yourself to a tree or you may lose yourself as well.'Pleading for leniency, Noor, who is tanned and skinny, said that he seldom ate, only doing so if friends gave him food. He added that his mother is paralysed and looked after by a younger sibling, while an elder sister does not care about him.

He was fined $800 but could not afford to pay the fine so he was jailed four days instead. He could have been fined up to $2,000


“If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you.” - Vivian Balakrishnan [Link]

Apparently nobody delivered food to Noor who was jailed for pitching a tent at East Coast Park without a permit. A jail cell technically is a roof over your head... so are run down overcrowded shelters. Those 'meals on wheels' programmes are run by volunteers at the YWCA[Link] and not something by the govt. They cover only a small area in Singapore and don't have the resources to help everyone who needs assistance.