Archive for January, 2011|Monthly archive page

S’pore Inc: One up on Korea Inc

In GIC, Temasek on 15/01/2011 at 5:32 am

National Pension Service, South Korea’s biggest investor, may set up a private equity fund with the nation’s business groups, including Samsung Group and Hyundai Motor Group, to invest in overseas resource development.

Sorry Korea, S’pore beat you to these type of ventures. GIC and OCBC’s insurance arm (Great Eastern) joined a group led by U.S. private equity firms KKR and TPG Capital in buying Morgan Stanley’s 34.3% stake in top Chinese investment bank CICC.

GIC bought 9% and 5% stake went to Great Eastern. GreatE paid US$144.3m. Post acquisition, GIC, which already had a 7.35% stake in CICC, will become the second-largest shareholder in the Chinese investment bank. Central Huijin Investment Ltd., an investment arm of China’s sovereign-wealth fund, is CICC’s largest shareholder, with a 43.35% stake.

Internet investing: from heloo to zeloo

In Internet on 14/01/2011 at 5:50 am

Or the brutality of the Net. Or “Easy come, easy go”.

Remember MySpace? Latest woes — cutting half of staff.

MySpace valuation: That would put the valuation at about $500 million to $1.2 billion–with the lower end being LESS than Rupert paid for it, and the upper end being twice what he paid for it (hardly the steal of the century).
Read more: All in US$ and Murdoch paid US$580m for it

Facebook is now valued at US$50bn. But only a few yrs ago MySpace was “valued” at US$65bn, though the foot notes said US$5bn.

Suzhou IPO: Missing from media reports

In China, Infrastructure, Media on 14/01/2011 at 5:49 am

The local media reported that the company managing Suzhou Industrial Park (SIP) could be slated for an initial public offering (IPO) of at least 4.5 billion yuan ($883.3 million), going by conservative estimates.

The project started off with Singapore taking a dominant 65 per cent stake and the Chinese taking the minority interest of 35 per cent. But its shareholding reform in 2001 saw this structure reversed with China taking the majority 65 per cent. Singapore’s interest has since been pared down to 28 per cent following capital injection by new investors.

MM in 2004 listed out four success indicators for the SIP. They are attracting businesses and investments; urban planning and development; ‘software’ transfer; and finally, a public listing. (Extracts from BT, but others too covered story)

Funny none of them reminds us that S’pore Inc invested US$147m in the park as of 2000, and that the losses then were US$90m. Sumething ST reported years ago.

Could it be because the 28% S’pore Inc owns could be worth US$153m (after dilution)? Financially S’pore Inc could have made some money (US$6m), not taking into account its share of the US$90m accumulated loss. If the loss is taken into account, it would have lost US$52m.

Either way a marginal gain or loss (I’m assuming S’pore Inc didn’t invest more), taking into account, if true, the goodwill that our teaching “tai kor” would have generated among the Chinese, something our ministers and our media constantly like to remind us of.

And S’porean self-haters (many on the internet) would be banging their balls in frustration that S’pore Inc didn’t lose big time. Though they would be consoled a lot of ministers and senior civil servants spent plenty of time on this project.

So it’s very strange that our “constructive, nation building” media did not report this triumph of S’pore Inc? Or am I missing sumething?

But then our media is not first world class, only fourth world class. Everything must be “betterest”. Another example

The economy did 14.7%, highest in Asia. This was trumpeted by our MSM last week.

If our stock market was tops (or near) in Asia, there would be the usually trumpets.

But our mkt as measured by STI only did 10.1%. Read the rest of this entry »

In(do)(ia)n bulls: noticed?

In Indonesia, Uncategorized on 14/01/2011 at 5:36 am

Indon mkt is down 8% this yr after doing 46% last yr, one of world’s best.

Reason: investors are worried that authorities are too complacent abt inflation. The Reuters article also tells us that the mkt collapsed in previous bouts of inflation, though the analysts say this time is different (“They would say that, wouldn’t they?)

So might want to curb yr bullishness on all things Indon* on SGX here.

The Indian stock market has fallen more than 7%  from a record high set in November, as investors have grown increasingly concerned about inflation and corruption scandals that have paralyzed the country’s Parliament. The Nifty 50 stock index did close up 1.9 percent on Wednesday, but that came after a six-day losing streak.

I’m still a bull on these countries owning Lippo-Mapletree and Ascendas I (despite it trading above last reported RNAV).


*I missed buying First Reit. I tot it would trade at 0.71 (theoretical price taking into account massive rights issue) for a while. No hurry to buy. In New Yr it moved to juz above its last reported RNAV of 0.76. Sigh. Penny wise, pound foolish.

Innovation is not juz for geeks

In Uncategorized on 13/01/2011 at 5:22 am

It’s in services.

Sumehow don’t see SIA doing this. SIA is fairer to customers.

Passengers checking in online or at airport kiosks are offered the chance to participate in what could be described as a sealed-bid multiple-unit reverse auction. Bidders enter a price they are willing to accept to be bumped, but are unaware of the extent to which their flight has been oversold and have no knowledge of the bids of other passengers. Bids are transmitted directly to gate agents, who take the lowest first and rebook passengers as necessary.

Delta’s move is very clever. Airlines currently have a weak bargaining position. Passengers know that if nobody steps forward, offers will escalate, and the statutory payment isn’t bad if airlines have to pull people off flights against their will.

FTS I want here

In Uncategorized on 13/01/2011 at 5:18 am

Why we love pandas?

Facebook: The Chinese boy who got screwed

In Internet on 13/01/2011 at 5:17 am

Wayne Chang’s lawsuit claims he is entitled to a portion of the original $65m settlement made with Facebook.

The 27-year-old formed a file-sharing network called i2hub while studying at the University of Massachusetts, Amherst, which he later merged with their social network ConnectU in 2004.

ConnectU was bought by Facebook as part of the settlement and Mr Chang said that means he is due a share of the deal.

Mr Chang said he was “back-stabbed” and that he has been treated the way the Winklevosses claim they have been treated by Facebook.

BBC Online article on the Facebook story.

One way to get mkt to recover?

In Emerging markets on 12/01/2011 at 11:44 am

Rioting by investors worked in this case. Mkt up 15%.

Fearing further widespread protests, the government … relaxed rules for the banks and for individual investors so that they could borrow more money against shares.

Wikileaks: Don’t be a tease George

In Uncategorized on 12/01/2011 at 5:27 am

Mr Yeo … revealed he had called his Malaysian counterpart Anifa Aman following a report in Channel NewsAsia, quoting Mr Anifa as saying that the WikiLeaks incident has a created a setback in bilateral relations … told Mr Anifa that “there were significant inaccuracies in some of the leaked reports”. CNA report

Don’t like that leh George. Tell him and us what were the significant inaccuracies in some of the leaked reports”

Second time you teasing us. Last time you told us leak cables had to be seen in context. Never did tell us the context did you?

And are you on medication?

Describing WikiLeaks as “disastrous” for US diplomacy, Mr Yeo acknowledged that Singapore officials would need to be more guarded, not just in their talks with the US but with any country …

Err you forgot that the US is the hegemon, and S’pore is a ‘little red speck”? Or you believe all the ST stuff that MM teaches the US realpolik and that the PAP teaches the Chinese Communist Party how rule retain power*. I mean the US became a super power when MM was still at uni and the CCP came into power in 1949 (before PAP was founded) by way of a civil war.


*During the festive hols, ST had several pages on how PAP tot the CCP how to manage China. It was covering Lee Yi Shyan’s trip to China. He was using his PAP avatar, not that of junior minister.

Managing people, the S’pore way

In Wit on 12/01/2011 at 5:19 am

In the English, Italian, German and Spanish footie leagues, if a team does badly,  the manager gets the sack. The view is that the manager is responsible for managing the players to get them to perform at thier best.

In S’pore, the manager retains his job, the players get the sack, even if the manager has been around for almost a decade.

In Western democracies, the ruling party gets replaced if voters are unhappy.

In S’pore, the ruling party creates GRCS, then super-GRCs, all the time telling the voters they are daft and lazy. And, juz to make sure, imports voters. Reminds me of what Bertold Brecht, a famous playwright and Marxist activist wrote:

After the uprising of the 17th of June

The Secretary of the Writers Union

Had leaflets distributed …

Stating that the people

Had thrown away the confidence of the government

And could win it back only

By redoubled efforts. Would it not be easier

In that case for the government

To dissolve the people

And elect another?

He was writing about the East German government after its soldiers had shot some protesters.

At least here, the unhappy voters are not shot, juz ignored, and threatened with a military coup if there is a” freak election result”.

Uniquely S’porean, this method of managing people.

“Pride goes before destruction, a haughty spirit before a fall”

In Uncategorized on 11/01/2011 at 3:26 pm

Too bad sumeone associated with TOC decided to ignore the wisdom of the bible. (During his tenure of Chief Editor, posters were banned from quoting the bible. Don’t know if ban is still in place.)

As you will be aware TOC has been gazetted “a political organisation”.

Can one be surprised seeing that TOC now admits that its ex-Chief Editor could have said “TOC to be a “kingmaker” of the opposition”? The fact that the reporter may not have been entitled to use the quote, doesn’t detract from fact that a person closely associated with TOC seems to have said sumething like that. Anyway neither the reporter nor her rag has responded to the charge of unethical behaviour.

Meanwhile, the consequences of bragging have to be accepted.

MIIF: Unnoticed China play

In China, Infrastructure on 11/01/2011 at 5:45 am

Macquarie Int’l Infrastructure Fund has transformed itself into a China play with infrastructure assets in China and Taiwan. In 2010, it sold all kinds of investments like nursing homes in Canada.

It promises to be a Asian infrastructure play.

It’s latest presentation (Nov 2010) says it has 37cents in cash, RNAV of 80 cents a share, and no borrowings at MIIF level. But if it’s share of its investments borrowings are included gearing is 57%. Taz the catch.

Got to find out how its investments are valued and its plans for its cash.

Let you know. Wary as MIIF has been a dog with fleas. And if one annualises its Sept dividend payment, it yields abt 5%. Bit low for trust that was promising gd payouts at IPO time.

MIIF prior to the restructuring showed the problems of the model that Temasek and CitySpring mgt aped. Macquarie group was a pioneer of the model of using lots of debt to buy boring utility assets, and then spinning the assets off into trusts. Investors got income, Macquarie got fees at every level. Then the economic crisis struck and all lost out.

CitySpring: The problems of borrowing up to the eyeballs

In Infrastructure on 11/01/2011 at 5:23 am

When it listed a few years back, and even nowadays, CitySpring makes two points abt itself:

— Its very high level of debt (94% of debt, 6% of equity at listing*) does not matter because most of the debt is non recourse project financing. If it defaults, CS is not liable to repay because the lenders can only seize the assets and sell them. if there is a shortfall, tough for the lenders.

— It’s the cashflow, stupid. “We measure our performance using cash earnings, instead of accounting profits or losses. Cash earnings is a better indicator of our performance to our Unitholders on the basis that this more accurately reflects the cashflow generated by the businesses, and removes the effect of the accounting treatment of non-cash items on our financial statements.”

Investors now know that while these statements are true, there are nasty side effects to high debt levels.

Debt has to be refinanced periodically and the market may demand a higher interest rate to refinance, and shorter durations. The former has already happened.

And cashflow can be reduced by operational issues and higher interest rates. These happened too. These will effect payouts.

CS shows that the investment model of buying boring utility assets that have strong cashflow with lots of debt only works when credit is easily available and cheap, and there are no expectations of change. Too bad for investors in CS that Temasek decided to follow this model juz before the benign environment was to turn nasty.

Putting in more equity is not the solution because it reduces the yield to unattractive levels.

As to Temasek injecting another asset, this will only help if the trust can get very long-term project financing at very fine fixed rates.

Bottom line for shareholders  — pray for a return the benign conditions prior to 2007/ 2008.

Earlier posting

*Bit like residential property loans?

Market falls, investors riot

In Emerging markets on 11/01/2011 at 5:22 am

Police have baton-charged investors in the capital of Bangladesh after the country’s stock market saw its biggest one-day fall in its 55-year history.

Trading on the Dhaka Stock Exchange index was halted after it fell by 660 points, or 9.25%, in less than an hour.

The benchmark index had climbed by 80% in 2010 but has since recorded some sharp falls in the past month.

BBC Online article

Forget emerging mkts, buy US?

In Emerging markets on 10/01/2011 at 5:12 am

“Ten years ago, we probably had less than 20 percent exposure to the U.S. Now it’s in excess of 40 percent,” said Cindy Sweeting, a manager of the $16.7 billion fund [Templeton Growth Fund], which can invest in companies located anywhere in the world. “Many U.S. companies are well positioned globally, and valuations are about as attractive as they have been in a decade.”

Four American giants — Microsoft, Oracle, Amgen and Pfizer — were among the fund’s top five holdings as of Nov. 30. The fifth is Accenture, the consulting company that operates widely in the United States ….

NYT on why buy American.

Two personal investment ratios to watch and fix

In Uncategorized on 09/01/2011 at 5:39 am

The majority of S’poreans are mortgaged to their eye-balls, if not to their hair-lines.

They shld be thinking of pushing up their  Capital to Income Ratios and pushing down  their Mortgage to Income Ratios.

This US-centric piece explains the ratios and why they are impt.

Capital to Income Ratio. It’s simple to calculate. I just add up all my investment capital and divide that number by my annual income. My investment capital means the money I’ve saved in my … brokerage accounts and savings accounts. It doesn’t include any equity I have in my home because my home isn’t available as an investment in retirement. In fact, my home is really an expense, not an investment. Note you shld include as savings yr CPF Special acct and MediSave Acct. Read the rest of this entry »

See who is publicising BLYC

In Uncategorized on 09/01/2011 at 5:38 am

The official publication* of the PAP chose to publicise the YouthClub@BoonLay’s activities.  Doesn’t it look strange that a political party’s official publication would publicise the activities of a non political club? The existence of this article in Petir supports the point Kum Hong was trying to make.

For those who were planet hopping and who have juz returned to earth: Siew Kum Hong wrote an article that school and grassroots work (as commonly understood by the public) do not mix. He was commenting on an ST article abt YouthClub@BoonLay. ST had reported that mummy, a PAP MP, had successfully lobbied a minister for MoE to approve her son’s club as a CCA. Boon Lay is in her GRC.

The piece  got denials (implicit in case of MoE) that the club’s activities were political from MoE (it would say this, wouldn’t it?), from a parent and Victor.

Declaration of interest: I admire Kum Hong for his civic society activities. Funny as a Rafflesian, he doesn’t seem to have learnt the lesson that most Rafflesians are taught: worship Mammon.

*Many S’poreans will be surprised to learn that Petir is the only official publication of the PAP, and that none of  the  SPH or MediaCorp publications, stations or channels are the official voices of the PAP. They are only “constructive, nation building” organs.

Poor China: screwed again

In China, Economy on 09/01/2011 at 5:38 am

China is being shafted again.

China lends money to the US so that Americans can buy Chinese gds. It’s the biggest holder of US govmin bonds, losing billions yearly.

Now it’s lending to EU countries so that EU can buy Chinese. Article China’s support appears aimed at curbing losses on its growing financial investments in Europe, as well as helping to thwart a deeper downturn in an economic bloc that has overtaken the United States as China’s largest trading partner.

All this lending doesn’t reflect that china is the financial hegemon

Lord Keynes said, “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.” The quotation means that if someone owes a large amount of money, the borrower too is at risk.

HSBC doesn’t think M’sians, Indons and PAP are daft

In Economy, Indonesia, Malaysia on 08/01/2011 at 5:30 am

Malaysia and Indonesia will move into the top 20 list of economies by 2050.

S’pore is doomed unless more FTs are let in.

Daily Telegraph article.

S’pore Inc: Think like a M’sian Chinese

In Economy, Malaysia on 08/01/2011 at 5:29 am

Skip the bits in italics if you are tired of hearing the words “UBS report”.

The UBS study on Prices and Earnings, ranks S’pore as the 11th most expensive city for Price Levels (what with S$500,000 HDB flats not uncommon), but 43rd for Wage Levels (all those FTs forcing down wages).

What this means is that S’pore is first world in expenses but third world in wages.”Neither fish nor fowl” as Jesus would have put it.

This divergence influences M’sians from becoming Stayers.

This piece tells how M’sians game the system. Hubby remains PR here, wife becomes citizen. Both get benefits of citizenship of the two countries.

And who can blame them based on the comparisons between S’pore and KL? Certainly not me. If I were in their shoes, I would do the same. But who can blame the Bumiputeras for thinking that the M’sian Chinese will cheat them, given half the chance?

As to the economics of living in M’sia: Kuala Lumpur is ranked the 68th most expensive city. And 57th in Wages. KL is third world in both. Conclusion: KL people got better standard of living taking into account both expenses and wages.

This conclusion is supported by fact that Malaysians have more purchasing power than us. KL is ranked at 47th,  Singapore at 49th place for Domestic Purchasing Power.

So working here but planning to retire in M’sia is very logical.

Not everything is lost for local-born S’poreans. There are various packages for retirees to “move on” to M’sia. And there are many S’poreans who have retired to M’sian informally. They can extend their stays indefinitely with any problem, so far.

There are even S’poreans who live in JB and commute here daily without problems with the M’sian authorities. One such is a high-ranking but low flying civil servant. Yes, it is a hassle. But then only daft S’poreans think that everything should be convenient or free*.

But if you get killed in a racial riot, or yr mansion gets burned down (Bumiputeras might mistaken you for a cunning local Chinese), or yr assets get seized, don’t blame me. Blame those cunning M’sian Chinese whom the Bumiputeras have gd reason to mistrust.

And remember, the system there hates you.  “You will be proud that you own a house, rather than a small pigeon hole in another country,” a M’sian Chinese judge told some S’pore litigants recently. They got doubly screwed.

And who shld S’poreans blame for making so many S’poreans daft that they can’t be as cunning as M’sian Chinese? PAP? You can certainly think it, but you’re not hearing it from me.

*”Remember that you are a S’porean, and have consequently won first prize in the lottery of life.”A paraphrase of a statement made 100 years ago by Cecil Rhodes. Substitute “an Englishman” for “a S’porean” will you get the true quote.

Rebalancing can lock-in profits, trim losses

In Financial competency on 07/01/2011 at 5:21 am

What is rebalancing?

Rebalancing a portfolio involves setting a fixed portfolio allocation before you even invest. So, for example, if you have a fund dedicated to S’pore equities and S$ deposits, you first need to fix your allocations. Say you are an aggressive investor and allocate 95% of yr portfolio into S’pore equities by buying an STI ETF, and 5% into money market fund and S$ deposits.

Then, at the end of a fixed period (say every six or 12 mtrhs: you must choose a time frame and stick to it), you buy or sell the STI ETF until you have the 95%/ 5% allocation again: i.e you rebalance. And you must  do this consistently.

Alternatively you can rebalance whenever the STI ETF moves a certain %age  say 20%  (you must choose a %age and stick to it).  Say the STI ETF falls to 20% (yr predetermined level), you use yr cash deposits to buy more ETF shares to maintain the 95/5 balance: this is rebalancing. If it goes up 20%, you sell the 20% increase, and put the money on deposit.

Another example. You have an equity portfolio using ETFs that is aligned with the MSCI World Indices. This means 42% is invested in a US ETF, 45% in an ETF of other developed countries, and 15% in developing markets. Periodically you buy or sell to retain this original balance. Or alternatively you can rebalance when the proportions move out line by a certain %age

Why do it?

What rebalancing forces you to do is to take profit from your best performing investments, and invest more into the underperforming ones. This is a mechanical, non-discretionary method that works on the principle (or observation?) that markets, sectors and asset classes are cyclical: that nothing  will ever be the best performer all the time,  and neither will any market or asset class be a dog all the time.  Bit like the wheel of reincarnation or the saying, “This too will pass”.

The expectation (hope?) is that “the method will eventually result in you buying more of a market when that market is low, and selling some of the market that has gone up sharply. Thus, it ultimately results in an investor buying low and selling high, which is the recipe for a successful portfolio,” Fundsupermarket GM in a BT article.

And yes, the fixing of time periods or%ages can be arbitrary but at least they give you some fixed points of reference.

S’pore Inc: Hard work for little reward?

In Economy on 07/01/2011 at 5:21 am

Sounds like S’pore: Hard work for little reward backs China’s economic growth

These vignettes from the article could easily be said of S’pore too

— “Compared to the last generation, my impression is that this generation is under more pressure,” she says.

“The current generation has to worry about so many things.

— “In the workplace, if you don’t work hard enough, somebody else may replace you and you may lose everything.”

“I work long hours … There’s no compensation for extra work. I think I should get paid for it.”

— “Normally it will cost a whole family’s savings to pay the down payment and then they have to work 20 or 30 years.”

He says that makes Chinese workers “mortgage slaves”, working to pay off their mortgage until they are in their forties or fifties, but then having to worry about their children’s housing problems.

“It’s like an endless circle,” he says.

“The only way you can try to get ahead is to do as much overtime as they’ll pay you for.”

— a student in his final year at the university, says that if he is lucky enough to get the job he wants, he will not have any choice but to work as hard as he can.

“If there is one thing that mostly makes the people work hard here, it’s the feeling of uncertainty about their life in the present or in the future,” he says.

Investing: Five easy steps

In Investments on 06/01/2011 at 6:38 am

One of the authors  of “The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future” was a top bond trader but after he retired, he found out that he knew little up until that point about basic asset allocation among stocks and bonds and other investments or the failings of active portfolio management is shocking, until you consider the self-regard that his master-of-the-universe colleagues taught him. “It’s American to think that if you’re smart or work hard, then you can beat the markets,” he said.

The book asks readers to make just five decisions.

First, will you go it alone? The two authors suggest hiring an adviser who earns fees only from you and not from mutual funds or insurance companies …

Second, divide your money among stocks and bonds, big and small, and value and growth. The pair notes that a less volatile portfolio may earn more over time than one with higher volatility and identical average returns. “If you don’t have big drops, the portfolio can compound at a greater rate,” …

Then, further subdivide between foreign and domestic. Keep in mind that putting anything less than about half of your stock money in foreign securities is a bet in and of itself, given that American stocks’ share of the overall global equities market keeps falling.

Fourth, decide whether you will be investing in active or passively managed mutual funds. No one can predict the future with any regularity, the pair note, so why would you think that active managers can beat their respective indexes over time?

Finally, rebalance, by selling your winners and buying more of the losers. Most people can’t bring themselves to do this, even though it improves returns over the long run.

NYT article

Whatever you do attend Fisca’s talks

What is a fair price?

In Uncategorized on 06/01/2011 at 6:37 am

Via S’pore Daily, I’ve been laughing at Tan Kin Lian’s grumbles on what he considers expensive fees.

His comments reminded me about a story about a locksmith. Dan Ariely, a professor of psychology and behavioural economics at Duke University and an author of books on behavioural psychology aimed at the layman, tells the story of how an apprentice locksmith used to take 30 minutes to mend a lock. When he finished, his clients would thank and tip him.

When he became more experienced, he could mend a lock in a minute. He charged the same rate. But now customers complained about his rates and refused to tip him.

Then there is a story of a famous US Supreme Court judge. The first time he was assigned to write a judgement, he wrote his judgement quickly (he had a reputation for delivering speedy judgements as a lower court judge) and circulated it to the other judges. His piece was criticised as superfical, not worthy of a Supreme Court judge. He was told to rewrite. He did no such thing. A few months, he circulated it again. The piece was praised for its scholarship. Subsequently, whenever assigned, he would write quickly but keep the pieces in his drawer, circulating them months later.

It’s about our perception of value. The longer it takes, the more valuable, is one perception.

Well in investing the holy grail is buying undervalued assets that are unfairly priced by the market, and selling them when the market overvalues them, again unfairly pricing them.

Time to convert yr housing loan from floating to fixed rate interest?

In Economy, Property on 06/01/2011 at 6:23 am

Warren Buffett is doing this for his loans.

Nearer to home, I knew someone in SPH who opted for a fixed rate loan, 20 yrs ago. Others there said he was “daft”. He reminded them of their comments when in 1994 the Fed tightened rates and they found their interest payments doubling or tripling.

There are times when paying a premium in return for certainty is a better option. Taz how S’pore prospered. You know what you get from the PAP. Can’t say the same for UMNO or an Indonesian government. There you pay and take yr chances. E.G. it is a lot cheaper to build storage tankers in Johor or Batam, than here. Yet S’pore is the preferred site oil farms. Oil traders even rent tamkers and park them off S’pore when the oil farms are full.

The trouble with auditors

In Accounting, Corporate governance on 05/01/2011 at 5:25 am

Today’s financial industry may be too complex and too subject to opinions for the accountants to get right, even if they want to. Witness PricewaterhouseCoopers, which audited both Goldman Sachs and AIG. At the height of the financial crisis, the exact same securities on each firms’ books were valued at radically different prices. In other words, there was no way to compare the two firms’ results.

The complexity makes the accountants even more susceptible to pressure from management. That pressure is all too real. And the problem in Enron’s case was never the consulting business. It’s that the accountants forgot who they were working for. They’re supposed to work for investors, not management. Their job is to make sure investors have a fair chance at assessing a company’s financial condition.


Put simply, the unfortunate truth is that corporate bad behavior often pays. Thus, if accountants always behave like homo economicus — the hyper-rational, purely opportunistic hero of economic theory — rampant frauds are only to be expected.


NYT article

Why Doctor Goh didn’t believe in economic stimulus packages

In Economy on 05/01/2011 at 5:24 am

This tale would illustrate his thinking.*

1. It is a slow day in a small town, and the streets are deserted.

2. Times are tough, everybody is in debt, and everybody is living on credit.

3. A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

4..1 As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

4.2 The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

4.3 The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.

4.4 The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

4.5 The hooker rushes to the motel and pays off her room bill with the motel owner.

4.6 The motel proprietor then places the $100 back on the counter so the traveller will not suspect anything.

5. At that moment the traveller comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.

6. No one produced anything. No one earned anything… However, the whole town is now out of debt and you can look to the future with a lot more optimism.

Now you know how economic stimulus packages works…….nothing really!

In other words, economic stimulus packages, expand claims on wealth, not wealth itself. They don’t help the economy.

Instead Doctor Goh believed that reserves should be used to keep the economy going in bad times.

*He did not tell this story. I use this story, which a friend sent me recently, to illustrate his thinking. I’ve read many of his speeches and essays. They are gd, easy reading.

Insider trading: Extending the doctrine

In Corporate governance on 05/01/2011 at 5:23 am

What US prosecutors are targeting

On May 22, 2009, an unnamed investment professional rang up James Fleishman, a salesman at the consulting firm Primary Global Research.

The anonymous executive was seeking a very particular type of service: an expert who could provide specific, timely information about a particular company. In other words, someone with a “pretty good handle on what’s happening.”

Three weeks later, Mr. Fleishman’s firm had set up for its client a phone call with a manager at Dell, who divulged sensitive information like sales figures and monthly forecasts.

Such conversations — recorded for federal investigators and described in a criminal complaint filed on Thursday — underpin the newest batch of insider trading arrests. With the latest round of charges, authorities have indicated that they are taking aim at so-called expert networks, firms that offer paid access to professionals with deep knowledge of their industries.

Invest in the neighbourhood in 2011?

In Indonesia, Vietnam on 04/01/2011 at 5:23 am

Seems sophisticated investors are looking beyond the ‘BRIC’ countries (Brazil, Russia, India and China). I’ve seen predictions that by 2020, the “Future 7″ (F7) countries (Argentina, Egypt, Indonesia, Mexico, South Africa, Turkey and Vietnam) will account for 1-in-10 global consumers, and per capita disposable income will rise by 52% in real terms. The F7 are characterised by youth and urbanised populations, combined with rising incomes and the expansion of the middle class.

Well two of them are neighbours: Indonesia and Vietnam.

Lippo-Mapletree Reit, First Reit,  Berlian Laju and Samudera are Indon plays listed on SGX.

There is one Vietnam play, Latitude.

On you can invest via an EFT listed here.

Go do yr homework. You might make money without investing on a foreign exchange.

BTW I got some Lippo-Mapletree.

S’pore Inc: Are local talents emigrating too fast?

In Uncategorized on 04/01/2011 at 5:22 am

We have been told that the reason why we need immigrants is because the economy is creating more jobs that there are S’poreans to fill them; we are picky abt the jobs we are willing to do; we are “less hard-driving and hard-striving” because “the spurs are not stuck into the hide”; and society is greying fast because we are not breeding fast enough. If the flood of immigrants lessens, we will end up like this

But many S’poreans believe that the reason for the liberal policy is that the govmin wants to keep wages down, and to ensure a vote bank for the PAP.

Here’s another possible reason: the government is worried that too many S’poreans are migrating for the economy’s gd.

Yesterday I was reading this by Ng Kok Lim. The following bit at the end of the article caught my attention

Emigrant stock as % total population 6.1% (S’pore)  5.3% (M’sia)

Emigrant stock as % non-immigrant stock 10.4%(S’pore) 5.8% (M’sia)

The stock of emigrants of Singapore origin is 10.4% of our non-immigrant population. This percentage is far higher than Malaysia’s 5.8%. If high emigration rate is worrying, then Singapore has more to worry than Malaysia.

Well I know M’sia is worried by its emigration numbers. In 2010, I attended several seminars on M’sia’s latest development plans*. In all these seminars, a major concern of the M’sian officials present was the loss of talent going overseas**. There were plans to attract M’sians back.

If Kok Lim’s S’pore numbers are reliable*** then we could have the unspoken, unpublicised reason for S’pore’s very liberal emigration policy: the government is worried that S’poreans are cashing in on their properties and moving on. Local talent is being lost, and foreigners are needed to replace them.

Not a gd ad for S’pore as an attractive place to live and work, neh? Or for government policies?

Update on 5 January 2011: And doctors lead the way out of S’pore. My mum juz told me that one of the doctors at clinic we use is “moving on” overseas. Her hubby (another doc) is going abroad.

*I used to flog M’sian equities to fund mgrs in London and Milan and retain an interest in all things M’sians despite being a true blue S’porean by birth.

**One official said the M’sian govmin realised that something was wrong when the data showed Malays emigrating. It wasn’t juz the usual unhappy Chinese and Indians. BTW, the officials also said the spike in property prices here in 2008  coincided with an increase in the numbers of M’sians coming here. There was a recession here, but things were worse in M’sia. There was a recession and concerns abt racial riots.

***The M’sian numbers he quoted are in line with what the M’sian officials were saying at the seminars.

Investing in Reits

In Investments, Property on 02/01/2011 at 5:29 pm

BT published a long piece that could serve as a primer on how to invest in Reits. Reit Primer.

Two complaints abt piece.

One is that it doesn’t talk abt buying Reits that trade at big discounts to latest reported RNAV. True there may be gd reasons why some Reits trade way below RNAV. But savvy investors can make $ buying Reits that they think shld not trade way below RNAV and holding them until they trade above or juz below RNAV, while getting good payouts while waiting. Useful Reit table for yields and RNAVs.

Those who bot Ascendas India Trust (trumpets pls) when it was trading way below its RNAV have made gd capital gains. I should have sold  out but the yield is pretty decent.  And India is now hot and RNAV could rise.

The other complaint abt the piece is that Reits can use the low interest environment to refinance their debts at lower rates and for longer tenures. Analysts from DBS and OCBC are saying this is happening.

BTW, high-yielding Reits  courtesy of ST scan0004. Declaration of interest: I own units in three of them. (Update on ^ January 2010: Now own four of them.)

Update on 4 January 2010

Must read — a summary of Soro’s piece (many yrs ago) on the danger of buying a Reit trading above RNAV (and attraction).

Another gd Reit table.

Quitter’s view of FTs

In Uncategorized on 02/01/2011 at 5:08 pm

A Quitter who left S’pore when the PAP came into power was here to see his relatives who were Stayers. (BTW, he is the richest person in the family.)

He said it was interesting to note that the Indians were the most hated of the FTS here.

The local Chinese hated them because they were Indians. I pointed out that it wasn’t racial. An FT had told me and the police that she didn’t care abt S’pore’s laws because she was an Indian FT. Her unmuzzled German Shepherd had attacked my dog.

The local Indians hated them, he said, because the FTs looked down on the local Indians as “low caste” Indians. I said the local Indians had a point. The Indian FTs (largely fair-skinned) are snotty towards local Indians who are darker. One Aryan from Nepal is rumoured to have asked Tamils in the ST newsroom if they were high caste Hindus, saying she was a high caste Hindu.

And the Malays hate them, he said, because they tot that the inflow of Indians was to further marginalise the Malays. They are presently second with 19%, even though MM has written-off the Malays saying in September last year that “We’re largely Chinese and Indians”.

A more appropriate symbol for the PAP?

In Holidays and Festivals on 02/01/2011 at 11:35 am

SDP’s Danny (and nothing to do over the hols other than partying) got me thinking of 21st century symbols for the other parties.

As MM Lee believes that local-born S’poreans are “less hard-driving and hard-striving” because “the spurs are not stuck into the hide”, and as the other PAP  ministers, and GLC CEOS are forever scolding S’poreans (taking the cue from MM?), maybe the PAP should buy over the Hammer symbol of the Workers’ Party?

The Hammer can be used as the 21st  century equivalent of the Hammer of Thor. Once owned by the PAP, the Hammer will automatically change from a symbol of the power of the working class (not that many around nowadays, everyone’s middle class nowadays), into a symbol of hammering into shape “less hard-driving and hard-striving” local-born S’poreans into “more hard-driving and hard-striving” S’poreans that the PAP (especially MM) can be proud of.

BTW, did anyone notice that the lightning bolt of the PAP looks like this?

File:Runic letter sowilo variant.svg

Add another oneFile:Runic letter sowilo variant.svg File:Runic letter sowilo variant.svg and we have a sign associated with the Nazis (National Socialists): the SS, a Nazi military unit that had two distinct branches. One branch were elite fighting men, feared and respected by the Allies in WWII. The other butchered Jews and other Read the rest of this entry »

Citibanking: S’pore leads the way

In Banks on 02/01/2011 at 5:28 am

NY follows.

Citi executives celebrated the new branch, which was modeled after high-tech branches in Singapore and Hong Kong that were apparently very well received by customers there.

Err OK HK too.

May you have the fortune of the fisherboy

In Holidays and Festivals on 01/01/2011 at 9:45 am

One day Shah Mahmud, riding with the Wind
A-hunting, left his Retinue behind,
And coming to a River, whose swift Course
Doubled back Game and Dog, and Man and Horse,
Beheld upon the Shore a little Lad
A-fishing, very poor, and Tatter-clad Read the rest of this entry »

Key signs of mkt top

In Investments on 01/01/2011 at 7:18 am

Interesting reminder of what to watch out for.

Gd fortune in 2011.


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