By ROBERT J. SHILLER
It’s true, as the adage goes, that they’re not making land anymore, but technology that allows more intensive use of land has held down values in the long term.
It’s true, as the adage goes, that they’re not making land anymore, but technology that allows more intensive use of land has held down values in the long term.
NYT Dealbook explains Uber’s biz model of sunsidising the rides of Chinese and Indian customers to starve its competitors of biz:
WHY UBER KEEPS RAISING MILLIONS It feels like almost every other week there is a new headline about Uber raising more money, Andrew Ross Sorkin writes in the DealBook column.
If you add up all the money the company has raised since it started in 2009,it is on its way to amassing $15 billion and has a valuation of $68 billion – all while remaining a private company.
When Amazon went public in 1997, it had raised $54 million and was valued at $438 million.
Uber has to finance its efforts to grab market share in China and India, butit is also trying to mark its territory. Every time Uber raises another $1 billion, investors find it less attractive to back one of Uber’s rivals: Didi Chuxing, Lyft, Gett, Halo, Juno. It is a war of attrition, to starve the competition of cash.
Uber’s efforts seem to have had the opposite effect so far, spawning a long list of rivals, but as the smaller competitors run out of cash, venture capitalists should be less inclined to put up more money.
This arms race comes against the backdrop of falling valuations and there is a rush to take the money while it is still available. Bill Gurley, a venture capitalist who has a stake in Uber and sits on its board, warned investors about unicorns seeking funds: “You are not being invited to a special dance, you are being approached because you are the lender of last resort.”
The question is whether investors will look at Uber’s balance sheet and throw up the white flag. It still has formidable competition from Didi, the market leader in China, which just raised $7 billion. And some of the same investors that have backed Uber are also backing Didi, including BlackRock and Tiger Global. (Some may be hoping that Uber might one day merge its Chinese operation with Didi.)
Uber’s most recent fund-raising effort – focused on the leveraged loan market – aims to avoid diluting the current base of shareholders and having to sell itself at an even higher valuation. It will have to pay up for the financing, but if its valuation continues to grow, it would be a bargain compared with the value of the equity. Uber is hoping to sell debt with a yield of 4 or 4.5 percent.
The question between now and the probable initial public offering in a few years is whether it will have starved all of its competitors along the way.
FT reported that Microsoft had to pay US46bn more than it planned to because of a competing bid.
The high price that Microsoft ended up paying could now lead to deeper cost-cutting at LinkedIn after the deal is completed. Microsoft chief executive Satya Nadella warned Jeff Weiner, his counterpart at LinkedIn, during the bidding that “a discussion of cost synergies in the transaction would be necessary” as Microsoft pushed its offer higher.
Well hopefully those who lose their jobs have share options to cushion the loss of their jobs.
From NYT Dealbook
HEDGE FUND MANAGERS TRY TO STANCH LOSS OF INVESTORS Hedge fund titans may be used to running their firms like elite clubs, but years of poor performance have forced them to open up admission, Alexandra Stevenson reports in DealBook.
More big-name investors like MetLife and American International Group have begun to withdraw their money from hedge funds and the investors who stay get a chance to sit dictate lower fees and better terms.
Hedge funds can no longer just operate on a “2 and 20” model, where investors pay fees of 2 percent of assets under management and 20 percent of any gain in any year. Managers are offering lower fees for investors to keep their money in funds and setting performance targets where investors would pay a fee only if they were exceeded. And the favorable terms are not just offered to longtime loyal clients.
The industry argued that a hedge fund manager’s job was to protect in down years and not outperform in good years, but when hedge fund returns fell with the markets last summer, the point was moot. Some of the best-known managers, including William A. Ackman of Pershing Square Capital Management and Larry Robbins of Glenview Capital Management, have lost money.
And for some investors, acknowledgement of poor performance is not enough. In September 2014, the California Public Employees’ Retirement System announced plans to liquidate its $4 billion hedge fund holdings because of concerns that the investment were too expensive and complicated. In April, the pension fund for New York City civil employees voted to exit its portfolio of $1.5 billion in hedge fund investments. Altogether, investors pulled $15.1 billion from the industry in the first quarter of the year – still a drop in the ocean compared with the $2.9 trillion the industry managers, but the pressure is mounting.
Mr. Robbins apologized to investors recently in an effort to stem the outflow of investor money from his firm. He pledged to “right the ship as quickly as possible” and offered the opportunity to put more money into a new fund that would waive fees. He has continued to lose money – investors in his flagship fund had lost 6.5 percent at the end of May – so he is now offering more favorable redemption terms, allowing existing investors that add more money into the fund to step into the shoes of investors who have left.
(I’ve juz binned the piece I did this morning and rewritten it.)
When a PAPpy boasts about S’pore’s Triple A rating, e-mail to that PAPpy or post a comment asking: “What benefits do the issuer get for a triple A rating versus a double A and what benefits do they give up?”. A bond strategist at BlackRock quoted by the FT asked this question in the another context. He was talking about corporations issuing bonds, but the reasoning applies to countries too.
Triple A status is a virility symbol like extra-big breasts or muscles. Btw, a UK celebrity (She was the partner of Dwight Yorke — Remember him?) with extra-large breasts had to undergo surgery to make them smaller. She was suffering from backache from her frontal heavy load.
Here’s two FB posts from Chris K who was a capital markets man, and self-confessed geek on the impacts of macroeconomic policies on capital markets that explain why triple A status and budget surpluses are not good for S’poreans. (Emphasis mine)
Minister in the Prime Minister’s Office Chan Chun Sing also said at the rally that Dr Chee wanted to give the impression that “we are cheating Singaporeans”. But the market was not stupid, he said.
“Why is Singapore one of 11 countries in world that has triple-A ratings from all three credit rating agencies?” he pointed out.
I’ll answer it for Chan Chun Sing even if he avoided the essential truths of the triple-A rating. That rating is mainly based on
1. The constitution rule that forbids the government from running deficits over the parliamentary term.
2. The massive year-on-year budget surpluses ran by the government, amounting to an average of nearly 10% of GDP per year over the past 15 years alone.
Those budget surpluses that underpins the government finances do not appear out of the blue and they certainly do not result from some magical fiscal policy formula. Those surpluses results from selling land at ever increasing prices, excess returns from investing debt proceeds which includes CPF and low social expenditures.
In other words, those triple-A ratings are paid for by the people and by denying them financial security in retirement and healthcare.
And just to be clear, Norway and Singapore are the only ones among the 11 triple-A rated countries that have long term budget surpluses. That means countries do not need to have budget surpluses to be rated triple-A, sustainable deficits will be enough. Norway’s long term surpluses are from natural endowments, Singapore’s…… let’s put it this way, a transfer of wealth from households to the state.
Despite being backed by the nearly 10% of GDP a year long term budget surpluses, the triple A ratings have little direct to benefit to households. The surpluses are not without consequences to households since they are derived from land sales at increasing prices and denial of social benefits both leading to inadequate retirement and healthcare funding, and to an acceptance of high levels of inequality.
Do read the full post
To conclude, triple A status and budget surpluses, like big breasts can be a problem.
Or “China kua kee”. See that deflation is also a major concern. Commodity price movements are “peanuts”
But notice was missing? Nothing on that gorilla in eoom? The Fed.
Eat yr hearts out Kong Hee, Sun Ho and CHC members for nor seeling the Kingdom of Heaven but lucre.
God loves the Church of England, not you people who believe in the gospel of prosperity. He helps them make serious money while Kong Hee still has to finance his Sentisa Cove penthouse that is less worth than its purchase price.
The church commissioners, who manage the C of E’s £7bn investment fund, said they enjoyed market-beating returns of 8.2% last year but warned they would struggle to keep up that pace in future. Over the past 30 years the fund’s average annual return has been 9.7%.
The commissioners’ private equity managers returned 20.2% during 2015 and the value of the church’s £2bn property portfolio was up by more than 14%. The commissioners continued to invest in forestry with two new holdings in Australia, bringing the total to nearly 120,000 acres, they said. The timberland and forestry portfolio delivered a return of 13% last year.
There’s another report that CoE is a big buyer of Google’s parent.
Beats S&P which in tirn brats hedge funds
“There is one vital difference between gambling and investing. You cannot logically explain why, for example, a given set of cards turned out in a game of poker, but you can work backwards and explain why a stock had to fall. And I think here there is a trap is for unwitting investors. Because the past can be analysed and explained, we think the future can be too.”
By Trutheludes on Betting and investment both require skill and luck
And cockroaches are the new model
When projects like this raise serious money, u know unicorns are history Ftom NYT Dealbook:
A $700 Juice Box for the Kitchen That Caught Silicon Valley’s Eye Juicero, a contraption that requires Wi-Fi to make an eight-ounce glass of juice, has raised $120 million from Google and others.
Also from NYT Dealbook
Cockroach’ Model Gaining Favor Over Unicorns If 2015 was the year of the unicorn, or start-ups that reached a valuation of $1 billion or more, this year is likely to be defined by a very different beast – the cockroach, the creature that can survive a nuclear war, Business Insider reports.
Banks, oil & gas and basic resources are currently trading at unusually large discounts to book value
But could get cheaper another way looking at a low price-to-book ratio, is that the market does not see something as being under valued, rather that the company and its sector face bigger problems
And possible answers
Since Roy had further bouts of verbal diarrhea, after a long spell of good health the noise from cyberspace was supportive of his verbal diarrhea.
Here are four questions that I’ve not heard any anti-PAP warrior, nut or rational ask.
— Why has PM given Roy until 2033 to pay up?
— If PM had not sued, what would have happened in GE?
— If PM had not asked for damages, what would happen in future?
— Why are S’poreans only aroused when there are allegations of wrong-doing?
Why has PM given Roy until 2033 to pay up?Why has PM given Roy until 2033 to pay up?
In other words, why is PM making payments affordable?
To pay the S$150,000 in damages owed to Prime Minister Lee Hsien Loong for defamation, blogger Roy Ngerng will start with payments of S$100 a month for five years, his lawyer said on Monday (Mar 14).
These instalments will start from Apr 1, 2016. After five years – from Apr 1, 2021 – Ngerng will have to pay S$1,000 a month until the full sum is paid, lawyer Eugene Thuraisingam said.
In addition, Ngerng will have to pay S$30,000 by Wednesday, Mar 16 for the costs of the Assessment of Damages hearing.
If he pays all the instalments on time, Ngerng will complete paying by 2033.
Why is PM liddat? Answers please given that the “noise” is not giving him any credit for putting Roy on a “never-never: payment scheme, because to give him credit for making defamation ‘affordable” would imply that Ah Loong’s a really nice guy.
If PM had not sued, what would have happened in GE?
If PM had not sued, Roy and M Ravi, as Oppo candidates in AMK GRC would have been entitled to claim that PM did not sue because Roy’s allegations that he stole our CPF money were true. And this was a good reason as any other not to vote for PM.
And the other Oppo candidates in other wards could also claim that the allegations “must be true” otherwise PM would sue. And this would be a good reason to vote Oppo, even if that Oppo were members of the NSP, a party led by someone who never told us about his criminal conviction and bankrupty.
As it is, almost as soon as PM sued, Roy apologised to PM, claiming that the allegations were untrue giving the lie that he had done research in the issue. Research? What research?
Related post: In 1959, the PAP alleged wrongdoing by a minister. He sat down and kept quiet. He lost his seat and the PAP thrashed his party.
If PM had not asked for damages, what would happen in future?
“… The International Commission of Jurists (ICJ) reiterates that we deplore this practice by the Singapore government of using exorbitant and punitive civil defamation suits to silence its critics”
The problem with not pressing for damages is that it than makes defaming the PM a cheap, effective way of becoming a political “celebrity”. Today, Roy, tom Goh Meng Seng, then New Citizen Han Hui Hui, then s/o JBJ. There’ll be no end of those lining up to defame PM or other ministers because there’s no cost to defaming them. And we know how S’poreans love free things, don’t we?
Why are S’poreans only aroused when there are allegations of wrong-doing?
Seriously, I think that there’s a more important issue than whether PM should have sued or the quantum of damages.
We all know that people* like Uncle Leong etc (self included) have been posting on the relationship of CPF funds and the monies managed by GIC etc for a long time. But the public never took an interest on a matter that should concern them :their retirement and mortgage payment money.
It took Roy’s allegations that PM stole the CPF monies that made the public aware that they could and should better returns than the average of about 3.3% on their balances**.
Surely shumething is wrong, very wrong with the way S’poreans behave? Only when there is an allegation of wrong-doing, do people get aroused and interested.
When my Facebook avatar posted something like the above, he received this totful response from a leading economist and critic of many a govt policy:
What this indicates is that first there is widespread public confusion and mistrust about the CPF, second the CPF system needs careful examination and reform and third until Roy made crazy allegations the government has not seen fit to respond adequately to these issues
I think it’s not just something wrong with Singaporeans but that it shows poor management of policy and public opinion by the government.
More importantly it indicates that in our polity, there are insufficient real channels of feedback on key areas of policy concern that government is genuinely responsive to.
*Even one Harry Lee talked about it in the early noughties when he explained that the govt issued a special bond to CPF and the proceeds of the bond went into the govt’s Consolidated Fund.
*You know when an issue is safe to talk about when an NUS academic is reported in the constructive, nation building ST talking about a topic. Such a topic is the link between our CPF monies and the monies managed by GIC.
As the report on 12 January 2016 is pretty short, here’s almost the full monty from BT:
The government can consider partially pegging returns on the Central Provident Fund (CPF) Ordinary Account (OA) to returns generated by sovereign wealth fund GIC, suggested an academic.
National University of Singapore (NUS) economics professor Chia Ngee Choon acknowledged that GIC returns are already distributed to Singaporeans indirectly through, for example, Budget top-ups to CPF accounts.
But linking GIC to the CPF OA interest rate allows for a more direct channel for Singaporeans to enjoy GIC returns should it do well, she noted. “We don’t want to miss the opportunity of having a higher rate.”
Assoc Prof Chia made the suggestion at an academic symposium on social security at NUS on Tuesday.
OA monies earn either the legislated minimum interest of 2.% per annum, or the three-month average of major local banks’ interest rates, whichever is higher. 2.5% is currently paid out as bank interest rates have been “peanuts”, with the relevant three-month average at 0.21% from August to October 2015.
To get higher returns on CPF, Assoc Prof Chia also suggested that Singaporeans can transfer excess money from the OA, which is used for housing, to the Special Account (SA), which is used for retirement and which generally pays a higher interest rate of 4-5 per cent a year. The CPF Board can encourage Singaporeans to monitor their OA and SA account balances more actively through sending text message or e-mail reminders, she pointed out.
However, people mightbe wary of transferring OA monies to SA, because the transfer is irreversible. Those who transferred might want to use the money to purchase a more expensive house, she added. She suggested an option to transfer money from the SA back to the OA, perhaps with a penalty or administrative fee.
“A high yield often indicates operating problems. One should look for companies that have a long record of dividend growth, but which at the same time have reinvested into their businesses. This is essential for growth in earnings,” fund mgr quoted in FT.
Remember Reits are different, They are leveraged and must pay out most of their profits. If you own Reits like me, you’ll have to pay the devil’s price eventually: rights issues. And thaz assuming things go well.
Capital Economics notes the recent outperformance of EM equities in Latin America and in emerging Europe, the Middle East and Africa, and expects emerging Asia to join the party soon. Valuations there are not high, it notes, and many economies in the region have relatively bright growth prospects.
Here’s something that I dug up from my archives of unused stuff. This praise of CPF appeared in 2014 at https://www.drwealth.com/2014/10/20/3-steps-retire-singapore-like-bogle/?utm_medium=DISPLAY&utm_source=OUTBRAIN&utm_campaign=NOV2014&utm_content=ARTICLE7_RETIRE
“I have been blessed with a fabulous defined retirement plan”
Like all working Singaporeans, I contribute to CPF (Central Provident Fund), our mandatory national social security plan. CPF is made up of 3 separate accounts: Ordinary (OA), Special (SA) and Medisave (MA). Each month when I am working, I make the maximum possible contribution to CPF and eventually when I retire, CPF will pay me back a monthly annuity income. My OA had been used to pay for my housing mortgage, but SA remains untouched, and my MA pays for medical insurances.
Each year, I also contribute the maximum $12750 into my SRS (Supplementary Retirement Scheme) account. This voluntary contribution must be done with cash and provides a tax relief that reduces my tax bill. SRS is a form of forced savings as early withdrawal from the account attracts penalties.
Unlike the CPF that pays a risk free 2.5% to 5%, the SRS pay a very low interest, so I invest my SRS funds for higher yields. I sink my SRS money, using a RSP (regular savings plan), into the STI ETF (Straits Time Index exchange traded fund). What happens is that by the end of each year, I will contribute the maximum $12750 into my SRS account, and in the following year after my contribution, $1000 will be deducted every month automatically and bought into the low cost index fund, the STI ETF. In this way, the process is automated and I avoid timing the market too.
I treat my CPF as a form of bond, as it pays a decent risk free rate. The OA pays 2.5%, while the SA and MA pays 4%. There is an additional 1% paid to the first 60000 dollars. In the long run, with the magic of compounding interest, the amount in my retirement account can be significant. Contributing to my SRS gives me a tax saving and I do not actively manage my investment of the SRS money, as I feed them into the Singapore stock market automatically and regularly with a RSP. Together, my CPF and SRS plans will ensure that I will have 2 strong pillars for my retirement planning.
Re his faith in STI ETF, it’s clear that Dr Wealth does not subscribe to the Econoist and FT (Too poor isit?). There have been some articles quoting research that indicates that shares may not be the best long term. Example: investment http://www.economist.com/blogs/buttonwood/2016/01/investing
As of February 2013, the longest period of negative real returns from US equities was 16 years. But it was 19 years for global equities (and 37 for world ex-US), 22 for Britain, 51 for Japan, 55 for Germany and 66 for France. Such periods are much longer than most small investors would have the patience to wait.
Another way of looking at the same issue is whether equities beat bonds over the long term; whether the risk premium is really delivered.
The answer is not really.
Best payouts, Middking ROEs. But who cares, payouts matter in this environment, nothing else does )))
What does a rational man do when mkts are in free fall?
Here’s a very interesting tot from an FT reader.
The FT here takes seriously rather than trashing the line ‘rational people lose rationality in fast moving markets’. On the contrary rational people are hyper-rational in such situations. If the herd is running and you stand still, it is you the wolves will catch. There is a rationality to herding, and any multi-agent model will predict it. It is only the time-and-again discredited practice of peering obsessively at bell curves which is irrational.
The point of the game is not to lose money, not to have the cleverest portfolio if prices move as your models show they are supposed to do. If prices show that your portfolio is no good, then you are the irrational one!
Complexity theory has shown that market movements do not correlate to simple narratives, I know it is the pink sheets’ journos job to peddle such simple narratives, but it is nothing less than BS 99% of the time.
Coming back to the headline, keeping yr head means losing money if you are leveraged. But wait, keeping yr head means selling.
Further to this on the debts of S’poreans, where I mocked the idea that juz because assets exceed debt, “No worries”, I juz read in FT, “At the end of its last financial year, it was so highly leveraged that its assets had only to fall in value by 3.6 per cent for the bank to be wiped out.”: “it” refers to Lehman.
Asset values can rise or fall, but debts must be repaid*: thaz a truth not a LKY Hard Truth.
*If one defaults, one can be made bankrupt. Whatever it is, one is crushed.
PAPpies will say no worries, as assets cover debts. But that sounds like what the highly leveraged tycoons said before 1997, 2008 and the credit crunches in the 60s, and 70s and 80s.
And in a deflationary world, the notion of “safe as houses” doesn’t work as an investment thesis. You will pay and pay while the property value depreciates.
Update on 16 Feb at 7’ooam: Debt is eternal.
They now assume that central banks don’t have a clue on how to save the world
What we are seeing, I think, are safe-haven flows. What is causing them, I believe, are central bank actions that undermine market confidence in the belief that central banks will do “whatever it takes”, in Mario Draghi’s phrase, to prevent economic collapse. The loss of faith is clearest in Europe, where Mr Draghi felt pressure to speak publicly on several occasions after the December meeting, in order to clarify that it did not represent a step in a less interventionist or more hawkish direction, and was not an indication of internal dissent over the course of policy. Crucially, those statements did not reverse the damage done by the December meeting. …
The Fed seems to have done something similar to its own standing, through the simple act of moving to tighten while both inflation and inflation expectations remained well below target. Just as Mr Draghi’s saying “whatever it takes” again cannot generate the same boost to confidence as it did the first time around, a simple reversal of the Fed’s December rate increase would not restore the market’s faith in the Fed to where it was a year ago. The Fed would need to do more, just as other central banks that raised rates away from zero prematurely found themselves subsequently cutting rates to levels below where they had stood before. Likewise, the Bank of Japan’s sudden pivot to negative rates raises the possibility that the central bank doesn’t actually know what it is doing.
Faith in central banks is of critical importance now because conventional policy is exhausted. To provide additional monetary stimulus, central banks can only turn to negative rates, to quantitative easing, or to jawboning of markets. It seems to me that, as a result of central-bank missteps, markets are losing confidence that central banks know what they’re doing, and are losing confidence that central banks are prepared to do what it takes to convince sceptical investors otherwise. Unless and until there are adequate demonstrations, it is possible this market panic will continue.
What is especially worrying is that not too much needs to go wrong in the real economy for things to begin breaking …
This NYT Dealbook piece appeared on Tuesday morning NY time. Relevant given what keeps happening since then. Gd description of the worries
INVESTOR NERVOUSNESS OVER BANKING GIANTS Worries about the world’s biggest banks have already played out in the stock markets as their shares have plunged, but there are also ominous signs in markets used to bet on the creditworthiness of large financial firms, Peter Eavis reports in DealBook.
The KBW Nasdaq Bank Index, a benchmark for the banking sector, was down more than 3 percent on Monday and had lost nearly 20 percent of its value this year.
Investors are rushing into benchmark government bonds, too. The yield on the 10-year Treasury note has declined, while the price of gold is rising. TheVix volatility index, also known as Wall Street’s fear gauge, has risen.
When investors sell bank shares or bet against the banks in credit markets, it can be a signal of more serious turbulence. It suggests that banks – usually the gears of an economy, transmitting credit to firms and households – are becoming more vulnerable to market volatility and underlying economic weaknesses.
The declines in bank shares may not indicate that banks are particularly fragile, but that investors are skeptical about their abilities to earn solid profits in the future, partly because of ultralow interest rates around the world.
Still, it doesn’t look too optimistic with Citigroup’s stock trading at nearly half the bank’s book value and European banks grappling with their own problems, which have contributed to the recent deep declines in their stock.
Fears about the health of the world’s banks continued to drag stocks down in Asia and Europe on Tuesday, Reuters reports. The Nikkei plunged more than 5 percent and investors stampeded for haven assets like the yen and gold.
Fears about the global economy also pushed the yield on Japanese 10-year bonds, the benchmark of government borrowing, down to zero for the first time, as Jonathan Soble reports in The New York Times. They quickly fell into negative territory, meaning some investors were buying bonds despite knowing that if they held them until maturity, they would come away with less money than they paid.
“Companies misaligned with sharia law, such as beer brewers and cigarette producers, may be unethical, but these are companies that often offer stable, dividend-paying returns,” says an analyst from Morningstarcovering sharia products.
Related post: UK MPs subject to sharia law
FT also reports that London and Tokyo bear mkts have also resulted in the main of favouring the brave.
Does a bear market inevitably mean recession? No. The 23% one-day decline in American equities in October 1987 (Black Monday) was not followed by an economic downturn. The dotcom boom, and the surge in house prices in America and elsewhere, showed that prices can lose track with fundamentals. The recent decline may merely indicate that share prices were overvalued, and are now coming back to earth, or even a sign that investors have become too pessimistic. More economic news, and more company results, will be needed to tell whether this market signal is the real thing, or just a fake.
From FT’s latest Letter from Lex
On the list of books that everyone in finance should read, Benoit Mandelbrot’s The (Mis) Behaviour of Markets sits near the very top. For those who have made the questionable decision to earn an MBA or a CFA (your correspondent is guilty on the second count) it is an essential curative to the large quantities of pernicious nonsense consumed thereby. Against the classical finance theory, Mandelbrot points out that price changes (unlike coin flips) have “memory”: prior changes have effects on future ones. Stocks demonstrate momentum – until they don’t. The basic pattern of all markets (seen at any scale, from the intraday to the multiyear) is periods of identifiable trend, broken up by sharp periods of volatility, after which a new trend takes hold. Once this fractal picture of market dynamics takes hold, one sees it everywhere.
We have undoubtedly entered one of these liminal periods of volatility that separate longstanding trends. The long bull market is over. That does not mean, however, that it will not be followed by yet another bull market. Lex has no idea how one would know what the next trend will be, except to say that current high valuations of stocks and bonds make high future returns a bit less likely. There is, however, widespread belief that the next trend will be down. We hear talk of deflation, overcapacity, slowing trade and industrial activity, higher interest rates, emerging market debt crises, and various other flavours of economic distress.
In retrospect, it is clear that Lex made its own contributions to the atmosphere of gloom this week.
This is all pretty dour, and we may all need to take a step back. Because bearishness is en vogue, and everyone (Lex included) seems to be particularly aware that bearish data do not mean that the next market is especially likely to be a bear. On the contrary, in fact. Groundless optimism, rather than paranoid pessimism, is the most fertile ground for a bitter harvest. And the week ended with some reassuringly calm words from Jamie Dimon on JPMorgan’s earnings call. As far as he can see, the economy is holding up. Cheap oil prices are not the end of the world. The market’s mood is not a reliable indicator.
“You have a big change in the world out there – people are getting adjusted to China slowing down.”
– Jamie Dimon, chief executive of JPMorgan Chase, on the bakn’s fourth-quarter earnings.
“Technically we are in a bear market. … There is just a broad reassessment of risk right now.”
– Laurence D. Fink, the chief executive of BlackRock, the world’s largest money management company.
As a colleague pointed out, it is tempting to believe the markets only when they are sending a message that coincides with your pre-existing views.
Given that the Fed took the first step in withdrawing the stimulus last month, are market movements an indicator of economic activity or a sign that investors are worried that Daddy is about to cut off their allowance?
Continuing the theme of buying dogs, commodities and energy …
Forget what the financial equivalent of Goh Meng Seng says (reported here), and buy the two fallen Fab 5 stocks? And M’sian Sapurakencana Petroleum? One of Asia’s leading oilfield services groups, if you don’t know.
He’s the journalist equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the about same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.
As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.
There’s deep despair about the oil price as this report from NYT’s Dealbook recounts. But there’s two swallows in the sky:
–Premier Oil has finally agreed to buy all of German utility E.On’s UK North Sea assets in a deal worth $120m (£83m) despite oil trading below US$30,
— Statoil ASA, Norway’s biggest energy company, snapped up a 12% stake in Lundin Petroleum AB to increase its access to the giant Johan Sverdrup field.
The acquisition corresponds to a price per share of about 124 kronor, in line with Lundin’s average price over the past 30 days, according to data compiled by Bloomberg. Lundin shares have dropped about 20 percent since crude started to tumble in mid-2014. Brent oil, the global benchmark, is now trading near $30 a barrel.
“The market situation made it possible for us to secure this position at an attractive price,” Baard Glad Pedersen, a spokesman at Statoil, said by phone. The Stavanger-based company won’t seek representation on Lundin’s board, he said. Bloomberg
At current prices, extracting oil from the North Sea is theoratically the equivalent of burning dollar notes.. Its oil is expensive to extract.
Back to the gloom and doom painted by Dealbook bearing in mind that Monkey is a trickster
NO BOTTOM IN SIGHT FOR OIL PRICES The collapse in commodity prices pushed oil futures even lower on Monday and analysts predicted that the slide was far from over, Jad Mouawad reports in The New York Times.
Oil prices were at a 12-year low on Tuesday, with West Texas Intermediate near $30 a barrel after a decline of more than 5 percent overnight. Brent crude was just under $31 a barrel by the Asian afternoon, as The Wall Street Journal reports.
The drop in commodities prices is being felt throughout the energy sector and beyond. Saudi Arabia said it was considering selling shares in its state-run oil company. Arch Coal, one of the biggest oil producers in the United States, filed for bankruptcy protection to cut its debt. Russia’s main stock indexes plummeted on Monday as oil prices cast a pall over its energy-dependent economy, Andrew E. Kramer reports in The New York Times.
Oil’s decline in the last year was caused in part by Saudi Arabia’s decision not to reduce production. The change, intended to force out high-cost energy producers, backfired on the kingdom and other producers, which now have to consider how to finance their oil-dependent economies.
The slump in oil prices had gained momentum last week on renewed concerns about China’s economy.
Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said that everything indicated a continued oil glut. “Iran is about to re-enter the market, demand numbers and economic indicators look relatively weak, U.S. supply is holding up in a low-price environment much better than people though and global inventories are growing.”
Many analysts expect more declines. Goldman Sachs and Morgan Stanley have both said that oil could drop to $20 a barrel.
David Bowie was also groundbreaking in his use of technology, not least his internet service, BowieNet, which launched in September 1998.
In a time before Instagram, YouTube, Twitter or even MySpace, most artists provided little if any online material to their followers.
But Bowie’s platform not only offered a wide variety of exclusive content, but also several ways to interact with the singer himself.
“In my view, BowieNet had to be the most groundbreaking reachout to fans that I have ever seen any artist ever do,” Craig Carrington, one of its users, says.
“He just had the attitude that if he was going to do it, he was going to do it right.”
BowieNet also operated as a full internet service provider (ISP) in the US and UK, competing with AOL, Claranet and others.
And NYT’s dealbook trports
HOW DAVID BOWIE INSPIRED CHANGES ON WALL STREETDavid Bowie was known for his ability to reinvent himself, but he also inspired a pocket of Wall Street that tries to create money from weird things like billboard rental income and film libraries, Liz Moyer writes in DealBook.
In 1997, Mr. Bowie bundled up nearly 300 of his existing recordings and copyrights into a $55 million security that paid the buyer, Prudential Insurance Company of America, an annual rate of 7.9 percent over 10 years. It was backed by income from royalties, record sales and the licensing of songs.
The Bowie bonds were among the first in a wave of esoteric asset-backed securities deals based on intellectual property. The buyers in these deals tend to be specialized hedge funds or big institutions. Individual investors never got their hands on a Bowie bond because Prudential never sold any of its stake.
It was a good deal for Mr. Bowie at the time. He received upfront cash without having to give up ownership of his songs.
Originally rated A3 by Moody’s Investors Service, the bonds were later downgraded to just above junk status as Internet file-sharing cut into income from album sales.
But others followed in his steps with similar deals. James Brown and Rod Stewart made deals and DreamWorks SKG entered a $1 billion deal involving its film catalog.
Deals backed by unusual assets now make up about a tenth of the asset-backed security market, appealing to investors who want higher yields and are willing to take on more risk.
“Finally”, “Why nothing before?” and “Why so long-delayed?” was what I tot when I read in early January that students who graduated from nine private schools in 2014 are being surveyed to find out what jobs they went into and what their wages are*. I tot of the survey again when I learnt that the O-Level results were released on Monday. And today when I went yo VJC’s Open House (I finally crossed the road to see how a JC works.).
Last year, around this time, I learnt that there are kids who decide to skip JC or poly to enroll in private schools like Kaplan in the expectation of getting degrees earlier and faster than their contemporaries who follow the traditional routes. Given that this is a really more expensive option than going to JC or poly (before going to uni); and given the stories we know of adults disappointed with the qualifications they have gotten, I wondered if these kids and their parents are really making informed decisions.
We all know of working people trying to upgrade themselves by attending part-time degree courses and then finding out that the degrees that they spent so much money, on and effort, on don’t impress existing or potential employers. Their degrees are often equated with “diplomas”.
Shume degrees are more equal than others, meh?
This is what ST reported in early January when telling us about the survey:
Among those being surveyed is Mr Daniel Ng, 30, who got his first degree in logistics management from Kaplan here in 2014.
The former logistics specialist will soon take on a managerial role in another supply chain firm. The job, which requires candidates to possess at least a degree, comes with a salary increase of about 50 per cent.
The former Temasek Polytechnic student ,who started working seven years ago, said getting a degree has created “more opportunities”.
He paid about $20,000 in all for his part-time degree and completed it in 18 months. “Having a degree makes a difference, especially when you are working in a multinational company. Degree holders start at a higher pay grade.”
But Mr Ng knows he is luckier than his peers. “I have friends who also went for a degree, but it made no difference to their work. It’s quite common and is partly why I didn’t pursue a degree earlier.”
Human resource expert David Leong, who runs PeopleWorldwide Consulting, said the survey is part of a long-term move to “align the different education pathways”.
“There are many who quit their jobs to focus full-time on getting their first degree, but they realise after graduating that they are marked against fresh grads who are just 22 or 23 years old,” he said, adding that in most cases, a private degree would translate to just a 5 to 10 per cent increase in pay for mid-career types.
Well the survey results will help inform kids, their parents and adults of the facts on the ground.
*The Council for Private Education (CPE), which regulates the private education sector, is leading the initiative, supported by the Ministry of Manpower and Ministry of Education (MOE).
The CPE told The Straits Times that the information collected will “help to guide future policy formulation for matters related to private education, manpower and graduate employment outcomes”.
A sample of the survey questionnaire asked respondents for their employment status in the year before they started their private studies and six months after completing their last exams at the private school.
They were also asked for their basic and gross monthly salaries before and after getting their degrees.
One question asked the graduates if they wished they had not furthered their studies at a private institute. If they answered yes, they would be asked to select the reason from a list of options, such as their qualification being not as well recognised by employers when compared to those of public institutions, or that the career prospects and wages associated with the degree were below expectations.
The nine schools are: Curtin Education Centre; ITC School of Laws; James Cook Australia Institute of Higher Learning; Kaplan Higher Education Institute; Management Development Institute of Singapore; Ngee Ann-Adelaide Education Centre; Singapore Institute of Management; SMF Institute of Higher Learning and Trent Global College of Technology and Management.
[Update at 3,30pm: U/m is an honest mistake. UmiSIM has done in 2014 survey]
What I find surprising is that graduates SIM University (UniSIM) are not being surveyed: The university is synonymous here with part-time degrees. It also recently started offering full-time programmes in accountancy, finance and marketing. It will introduce a fourth full-time degree in human resource management this year.
As I understand it, its fees of around $30,000 for a undergrauate degree are in line (if not more expensive) with those of the private schools taking part in the survey.
In 2013, I recommended investing in Temasek’s Fab 5 for KS types. Last June I pointed out problems at two of them Keppel and SembCorp Marine because of lower oil prices.
The rot continues as Bloomberg reports
The last time Singapore’s marine services industry was staring at what would eventually turn out to be an 18-year drought in demand for oil rigs, Mr Ronald Reagan was starting his second term as US President.
Jack-up rigs, used to drill for oil in shallow waters, saw orders evaporate between 1985 and 2003. As Macquarie notes, rampant overcapacity means such a prolonged slump could well occur again. That definitely would not be good news for the rig-building industry’s two Singaporean leaders – Keppel Corp and Sembcorp Marine.
After a decade-long boom, there were zero new orders globally for jack-up rigs last year. With oil prices swooning, and rigs’ daily rental rates having crashed to US$92,000 (S$132,000) from US$130,000 in 2014, there’s a risk that 70 per cent of Keppel and SembMarine’s order book might get cancelled, especially if the Petrobras bribery scandal in Brazil deepens, Macquarie analysts Somesh Kumar Agarwal and Justin Chiam wrote this week.
And there might be more trouble ahead. Since early 2004, the two stocks have returned about 300 per cent, thanks primarily to hefty dividends. Those might now start thinning out. According to analyst estimates compiled by Bloomberg, Keppel’s dividends will shrink by as much as 11 per cent over the next three years, compared with annualised growth of 3 per cent over the past three.
No orders coming in doesn’t augur well for shareholders, who will be far behind debtholders in getting paid, and the latter will have substantial claims. Oil- and gas- linked companies with outstanding Singdollar-denominated bonds have to refinance or repay some $625 million of notes this year, a further $390 million in 2017 and $700 million in 2018, Bloomberg-compiled data shows.
The other big risk comes from the duo’s Brazilian yards. Japanese shipbuilders like Mitsubishi Heavy are cutting their losses and exiting as the Petrobras saga drags on.
Stock in Ensco, the London-based owner of shallow and deepwater rigs, has been hit after Petrobras said it was scrapping a contract in the US Gulf of Mexico because, it claims, Ensco knew about improper payments between a shipbuilder and a consultant when the drillship was constructed, a charge Ensco denies.
Analysts are being predictably slow in sounding the alert. Their median price estimate predicts a 25 per cent jump over the next year in Keppel shares, and a 15 per cent climb in SembMarine.
So far factual or fair comment. But I think the Indian FT* writing for Bloomberg is talking rubbish when he talks of Temasek selling out. Our rig-builders are market leaders, not has-beens like NOL And the oil sector is a cyclical sector, not a declining sector.
Were that triumph of hope over experience to prove elusive, what might Temasek do? It recently decided to sell shipping company Neptune Orient Lines to CMA CGM at $1.30 a share, after having paid as much as $2.80 in 2004 to acquire a part of its 67 per cent stake.
If the Macquarie analysts are right about Keppel and SembMarine eventually trading below book value, like South Korean yards do, then there may not be much point in Temasek’s hanging on to the rig-builders either.
What strholders of SembCorp Marine should be concerned is that SembCorp privates Marine. About 15 yrs ago Keppel did that to FELS.
*He’s the analyst equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.
As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.
Folloing reports that teachers* may soon have to pay for parking in school premises (Is the assumption that these lots will be made available to the public if not used by teachers? I mean schools are not supposed to be public areas, I tot?), a post by an-ex school teacher is going viral on Facebook. I’m sharing it as not everyone will be able to read it otherwise. As all good writing it entertains us, and makes us reflect on the absurdities it reports.
A message from an ex-teacher (which is not me):
you don’t have to feel so upset over the impending parking fees. It’s a good move to be transparent to the public. Since the ministry wants to ensure that it doesn’t give unsubsidized parking to ensure transparency, it’s good to let MOE know that you should also stop paying for stuff out of your own pocket to ensure ‘transparency’ too. Some example of fees that you have been paying out of your own pocket:
1. Classroom deco, charts, notice board materials(excluding manpower and labour fees):$100 at least
2. Coming CNY, Hari Raya and Deepavali deco:$100-$300
3. Resources for teaching:$300(conservative estimate)
4. Remedials/supplementary/enrichment classes:$50 per hr(market rate for MOE tutors).
5. Prizes/gifts/McDonald/pizzahut/KFC treats to motivate students(varies from teacher)
6. Children’s day gifts:$100-$200
7. OT pay for staying overnight at camps, Meet-the-parents sessions at night, meetings during school holidays, learning festivals on Saturdays and Sundays, organizing events for community/MP :$50 per hour
8. Premium fees for last minute instructions from MOE for example, calling parents from 10pm-12am on a Sunday night to inform them of school closure due to haze. $100per hour.
9. Other miscellaneous fees such as home internet or using your personal hp talk time/mobile data to conference with parents/HODs(not including OT pay for doing these after 6pm): $110 per month.
10. Transport fees to attend courses that you are ‘nominated’ to attend. You can’t claim them currently as MOE have already SUBSIDIZED you to attend them.(not that you have any choice)
11. Labour fees for moving cupboards,tables and shelves in classroom/staffroom, cleaning students up after they poo/vomit:$20 per hour.
12. All the money you paid to replace faulty PE/music/art/ICT equipment on your own. Too lecheh to do AOR, ITQ, and then go through Gebiz and evaluation plus endless meetings with KP/AM/P just to get a pair of soccer gloves for your student.smile emoticon
13. Last but not least, fees for marking after 5pm each day, as no marking can be done before that due to meetings/CCAs/meeting parents/meeting vendors/meeting P: $50 per hour.
At the end of the day, is that season parking so difficult to afford? I don’t think so. But the message that the sacrifices of teachers are not appreciated by MOE will have a greater cost than the revenue that it can collect from the season parking. Kudos to my ex-colleagues who are still believing in making a difference to the next generation.
From a (currently much happier) ex-teacher.smile emoticon
Update at 11.20am:
A prominent social activist whose wife teaches posted on FB: Bean counters need to understand, that not all beans can be counted by them.
To which my Facebook avatar ponted out
— Ownself count ownself? )))
— Seriously one of the legtimate complaints that govt depts, ministries have against the AGO is that it can be very selective in what it quantifies. Quantification is not a science, it’s a tool of manipulation. Can justify anything.
*To be fair, it’s not MoE but the Auditor-General’s Office who is behind this piece of nonsense.
George Soros is more gloomy, telling an economic forum in Sri Lanka:
“China has a major adjustment problem. I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
More like 1998 than 2008
If China devalues, then other Asian nations will come under pressure to follow suit, for fear of losing competitive position. That will trigger worries about those Asian companies that have borrowed in dollars. there could be banking issues in Asia.
This is a potentially worrying scenario. Whether 2008 is the right parallel is another matter. If the bearish case does come true, then it sounds more like 1998 when a round of Asian devaluations was triggered by the realisation that growth had been fuelled by speculation. Western economies did manage to overcome that crisis. The real worry is that emerging countries are a lot more important for the global economy than they were back then.
Take yr pick.
In 1986 when I was taught the basics of investing in M’sia, there were M’sian govt US$ floating rate bonds that were really cheap because of a problem in the floatung rates bond mkt that was in addition to Dr M’s antics (e.g. he was alleged to tryto corner the tin market) and a recession which affected M’sia’s soverign rating.
Today The $3 billion debenture is a glaring reminder of the distrust around the fund. The instrument carries a letter of support from the Malaysian government but trades at just 86 cents on the dollar, indicating financial distress. That stands in stark contrast to two Abu Dhabi-backed 1MDB bonds, which have always traded above par.
Early redemption would also draw a line under the fund’s controversial relationship with Goldman Sachs.
1MDB hasn’t decided yet whether to buy back the bonds. Either way, if Kanda succeeds in his ambitious cleanup by completing the deals he has now agreed, 1MDB’s problems will not weigh as heavily directly on the finances of the government as many investors, analysts and politicians had feared.
One thing remains the same, no money to buy those bonds then, and now. Would have made killing then and now.
Here’s a comment from an FT reader which promoted the above headline.
Where do we find bankers that understand prudent lending?
“What is wrong with lending more money into the Chinese stock market?” Chinese banker recently
“What is wrong with lending more money into real estate?” Chinese banker last year
“What is wrong with lending more money to Greece?” European banker pre-2010
“What is wrong with a NINA (no income no asset) mortgage?” US banker pre-2008
“What is wrong with lending more money into real estate?” US banker pre-2008
“What is wrong with lending more money into real estate?” Irish banker pre-2008
“What is wrong with lending more money into real estate?” Spanish banker pre-2008
“What is wrong with lending more money into real estate?” Japanese banker pre-1989
“What is wrong with lending more money into real estate?” UK banker pre-1989
“What is wrong with lending more money into the US stock market?” US banker pre-1929
It’s a global problem.
Some Tiger shareholders feel that they are entitled as these spoled brats isit? They think they like PAP ministers isit?
The Securities Investors Association Singapore (SIAS) said in the open letter dated Dec 18 that some Tigerair minority shareholders felt SIA’s offer was “not reasonable”.
The reason for this, Mr Gerald, president of SIAS, was that shareholders who bought Tigerair shares during its initial public offering in 2010 at S$1.50 a share and subscribed to all three rights issues since then would have paid an average of S$0.67 a share. The takeover price is 0,41
Maybank Kim Eng Securities, the independent financial adviser appointed by Tigerair’s independent directors, advised shareholders to accept SIA’s offer, saying the deal is “fair and reasonable”
But because they’hh lose money, these shareholders think that the offer is “unreasonable”.
Temasek is willing to give Standard Chartered (STAN.L) time to work on its turnaround before deciding on the fate of its underperforming $4 billion (3 billion pounds) stake in the UK bank as part of a portfolio reshuffle, people familiar with the matter said.
“Temasek is giving them time. They’ve had a lot of engagement with the board, and Bill has sort of managed expectations in terms of turning this ship around,” said one of the people familiar with Temasek’s thinking.
Temasek declined to comment.
It was not clear how long Temasek will wait to see the results of the restructuring.
By subscribing this month to its allotted portion of Standard Chartered’s $5 billion share sale, the Singapore investor has buttressed that position for now. But Temasek may become increasingly uncomfortable with the investment if shares in the bank do not recover.
Its paper loss on the Standard Chartered investment was $1.2 billion, excluding dividends, just on the 12 percent stake it bought in 2006, according to calculations by Reuters. Temasek raised its stake to 18 percent in December 2007. Since then Standard Chartered’s shares have lost about two-thirds of their value.
StanChart completed its rights issue late last week. What the local MSM doesn’t tell us
StanChart .. has suffered because of poor peer-market conditions since it priced its shares. But investors, even though they took up almost all of their rights, are also giving a vote of diminished confidence. After StanChart old shares were shorn of the right to buy new shares on Nov. 23, the stock fell to 15 percent below its theoretical settling price. And the 9.8 percent further fall since then is worse than the decline in the Euro Stoxx Banks index.
That’s perhaps not surprising. StanChart, under new boss Bill Winters, is years from earning a return above its cost of equity. Since the new money will mostly go to bolstering the balance sheet rather than promoting productive lending, the return on the new money may be even lower. That might explain why, while Lonmin seemingly faces graver challenges, it’s StanChart to whom the market has blown a bigger raspberry.
Dollars & Sense a usually financial literate site, published the following PAP administration propoganda on wage growth http://dollarsandsense.sg/debunking-3-myths-about-singapores-wage-growth/?fb_action_ids=429056360617791&fb_action_types=og.comments. Has the site become part of Fabrications About the PAP? Money that good meh? Seriously, a little knowledge (especially of stats) is a dangerous thing.
Well the myths are not Hard Truths but facts. And the rebuttals rubbish. They are not based on economics.
My friend Chris K*(a retired financial enginner and rocket scientist, once based in London) writes:
Myths 1 and 2 completely failed to account for what is commonly known as hedonic price adjustments. Hedonic adjustments are marginal variations to the inflation rate in advanced, matured economies but are significantly higher for developing nations or those who have transit from developing to developed status like Singapore. Hedonic price adjustments are the increase in prices due to qualitiative and esthetic changes in a product or service. An example is the difference in prices between a hawker centre and a food court. The increase in prices when one transit to the other is NOT included in the inflation rate.
Once you understand the effect of hedonic price adjustments, you can then understand why the increase in the CPF Minimum Sum to account for cost of living runs significantly higher than the inflation rate.
Same with Myth 3 which also failed to account for the role of investable income in relation to total income. The top percentile has a much higher proportion of investable income because of the cap in CPF contributions. In an era of elevated real estate prices, those who can invest in a 2nd or 3rd property are those in the top percentile and they earned outsize returns om their investable income. This is why the labour policies of the present government favours the top percentile because the rate of return on investment exceeds wage growth for the rest of the income distribution.
*Chris K describes himself thus: Chris is a retired executive director in the financial industry who had mostly worked in London and Tokyo.
They force S’poreans to be pretty financial literate. Look at our ranking.
BUFFETT’S GRANDSON SEEKS A DIFFERENT INVESTMENT ROUTE Howard Warren Buffett, the grandson of Warren E. Buffett, had until recently steered clear of the private sector investing that made his family’s fortune. Now that is changing – Mr. Buffett has helped found a permanently capitalized operating company with big ambitions, mimicking the structure of Berkshire Hathaway, David Gelles writes in DealBook.
Although his grandfather bought companies with timeless appeal, Mr. Buffett’s new company, i(x) Investments, plans to invest in early-stage and undervalued companies working on issues such as clean energy, sustainable agriculture and water scarcity.
But like Berkshire Hathaway, i(x) will buy and hold companies. “A fund structure, with its finite life cycle and investors wanting to see returns, is not the right model for impact investing,” said Trevor Neilson, a co-founder of i(x).
The company is just getting started but the founders are already talking a big game. Mr. Neilson said that friends and strategic partners were investing $2 million to $5 million this year.
Next year, i(x) will accept $200 million from family offices, institutional investors and big companies. Mr. Neilson is pitching to firms like Kleiner Perkins, Andreessen Horowitz and Google.
Mr. Neilson said he hoped that the firm would eventually make investments worth $100 million each year and file for an initial public offering by 2020.
So far, i(x) has not made any investments, though Mr. Neilson said the firm was close to taking its first two stakes.
One possible addition to its portfolio breeds crickets to feed to chickens and fish – an ecological alternative to traditional feedstock. Another makes machines to turn natural humidity into drinking water.
Mr. Neilson and Mr. Buffett say there is a growing market for such futuristic products as investors increasingly take ethics into account. In the meantime, Berkshire Hathaway is under scrutiny for investing in companies that have been criticized over social issues.
Mr. Buffett said he had not asked his grandfather for advice or money.
“Real estate is TIPS (Treasury Inflation Protected Securities) on steroids,” adds Mr Steers. “Reits are not bonds. The most certain thing is that if rates are rising and you are in fixed income you will lose money.” FT
Mr Steers is from real estate investment firm Cohen & Steers in New York and he’s bullish on US real estate.
Meanwhile in S’pore, CNA reported on 18 November
‘GOOD DEMAND’ FOR SINGAPORE-LISTED REITS
“With the lower leverage threshold, there might be more Singapore REITs who will look to tap this source of funding, given it is still treated as equity instead of debt,” said Mr Tim Gibson, co-head of global property equities at Henderson Global Investors in Singapore. His firm manages about US$123 billion (S$175 billion) worldwide. “Investors continue to seek yield in this environment,” he added.
Mr Neel Gopalakrishnan, an emerging-markets fixed income analyst at Credit Suisse’s private banking and wealth management unit in Singapore, said: “Most Singapore-listed REITs have good credit quality. Hence, there is likely to be good demand (for their perpetuals*).”
Singapore’s listed REITs had an average debt-to-asset ratio of 34.6 per cent at the end of September, versus 32.8 per cent from a year earlier, according to data compiled by Bloomberg.
The new cap on borrowings takes effect from Jan 1 and the REITs could issue as much as S$12.5 billion of traditional debt without breaching the new threshold, said Mr Hasira De Silva, a Singapore-based analyst at Fitch Ratings.
That leeway narrows to S$7.5 billion if their S$110 billion of assets suffer a 10 per cent depreciation, he said.
CNA also reports:
Falling values, rents and occupancies for debt-backed properties could tip Singapore’s economy into further trouble amid the slowest growth in three years.
Office rents may fall as much as 7 per cent this year and another 8 per cent next year as demand slows, according to property consultancy DTZ, while home prices keep declining as a result of cooling measures and loan curbs.
On Oct 26, office landlord Keppel REIT sold S$150 million of perpetual debt without a so-called step-up coupon, a gradually rising interest rate that is usually a feature of such bonds. It sold the notes at 4.98 per cent, 183 basis points more than seven-year debt it sold in February.
In the same month, business park owner Ascendas REIT raised S$300 million issuing similar notes, while serviced apartments specialist Ascott Residence Trust issued S$250 million of them in June.
The value of Singapore’s office buildings fell 0.1 per cent in the quarter ending Sept 30 from the previous three months, while shop prices declined 0.3 per cent, according to data from the Urban Redevelopment Authority.
Home prices dropped 1.3 per cent, the most since the second quarter of 2009, according to data compiled by Bloomberg.
The FTSE Straits Times Real Estate Investment Trust Index has dropped 11.4 per cent this year, on course for its worst annual performance since 2011.
Meanwhile risks for Reits here will increase in 2016 because weak economic fundamentals will weigh on demand while new supply is added into most sectors, Fitch Ratings said in a report released on 23 Nov.
Fitch expects S-Reits with stronger balance sheets to become more acquisitive in 2016 as they try to boost earnings growth by capitalising on lower asset valuations. Sector leverage – as measured by debt to total assets – is likely to increase in 2016.
On hotel ones, earnings will likely continue declining next year, but at a slower pace, as visitor arrivals into Singapore is expected to recover. Nevertheless growth in hotel room supply in Singapore will continue to outpace demand, leaving operating conditions challenging for the sector.
“We expect ratings of CDL Hospitality Trust (BBB-) and Far East Hospitality Trust (FEHT, BBB-) to remain stable, supported by strong balance sheets, and around 40-50 per cent of income stemming from fixed rent.”
Other hospitality Reits considered in the report include Ascendas Hospitality Trust and OUE Hospitality Trust.
On industrial Reits, pressure on earnings will increase in 2016: the world economy is weak”We expect lower-specification industrial assets, such as warehouses and multi-user factories, to see weaker rental reversions than for higher-specification assets, such as business parks. The demand for business parks is stronger, and a significant part of the new supply is pre-leased,” it said. Ascendas REIT, Mapletree Industrial Trust and VIVA Industrial Trust are among the industrial REITs covered
The strong performance of healthcare Reits is likely to continue in 2016, supported by robust demand for medical services and an ageing population in Asia. Healthcare SREITs’ long-term lease structures with a high degree of rental protection and their high proportion of fixed-rate debt will also support earnings growth.
*Landlords in Singapore are planning to issue perprtual bonds which are treated as equity to get around new rules curbing their debt amid a property slump. Data from Fitch Ratings showing Reits having issued a record S$700 million of perpetual notes with no set maturity date thus far this year.
The Monetary Authority of Singapore is capping borrowings of Reits at 45% of assets from next year, and debt that can be considered equity (Perpetuals) offers landlords a way out.
Under global accounting rules, bonds with no fixed maturity that allow the deferral of coupon payments can be treated as equity.
Enjoy Deepavali but be prepared to suffer during Christmas, New Year and CNY. Interest rates are likely to go up.
Just over a week ago when I wrote this, interest rate futures implied less than a 3o% chance of a tise by the Fed in December (markets didn’t think the Fed would raise), whereas the odds were close to even (could go either way) yesterday morning our time. Then in NY time, interest rate futures moved to price in a 58% possibility of rate “lift-off” occurring in December, up from 50% earlier in the day. Chairman of Fed said December would be a “live possibility” for a rate rise if incoming data supported that expectation.
Despite charging such high fees, they too behave like retail investors. From Dealbook
VALEANT SHOWS THE RISK OF FOLLOW THE LEADER The recent plunge in Valeant shares has revealed the dangerous tendency for hedge funds to plunge in and out of stocks in a herdlike fashion, Steven Davidoff Solomon writes in the Deal Professor column.
The hedge funds invested in Valeant, which includes names like William A. Ackman and John Paulson, took a hit. ValueAct Capital has beenenormously invested in Valeant. Although it sold 4.2 million shares a month ago, the fund still owns 4.4 percent of the company and had made a return of more than 2,100 percent as of September.
Herd investing is common among hedge funds. Goldman Sachs runs an index of the 50 stocks most widely held by hedge funds. At the top of the list is Allergan – there are 67 hedge funds that count it as one of their top 10 holdings. It is followed by Apple and Facebook. Valeant makes No. 10 with 22 percent of its shares held by hedge funds.
“Looking at the list, one has to shake one’s head,” Mr. Solomon writes. “After all, I, too, can do this trick of investing in big and well-known tech and pharmaceutical companies, for much less than the fee of 20 percent of the profits that hedge funds charge.”
Mr. Solomon wonders whether many hedge funds are simply playing follow the leader. With thousands of stocks, hedge funds seem to be concentrating their bets on larger caps and certain industries, like tech and pharmaceuticals. This may work in a rising market, but a decline would be painful.
If hedge funds are all about alpha – finding investments that are undervalued and that can outperform the broader market – then migrating to smaller stocks might bear more fruit and make their research the most useful.
Other people’s money: A financier’s plaything. “The goose that lays golden eggs has been considered a most valuable possession. But even more profitable is the privilege of taking the golden eggs laid by somebody else’s goose. The investment bankers and their associates now enjoy that privilege. They control the people through the people’s own money.” (Louis Brandeis, U.S. Supreme Court justice.)
[Err Substitute the words “PAP administration” for A financier’s plaything and The investment bankers and their associates and you see that the young hooligans of “Free Our CPF” are onto something.
Pension plan: A collection of unpayable corporate promises backed by inadequate funds and managed on the assumption of unrealistic returns.
Economists still forecast rise in Fed rate before year’s end. Despite a tempering in the US labour market, 65% of the 46 economists from leading banks polled by the FT said the central bank would increase the federal funds rate at its December meeting.
Contrast this to market expectations, where observers have played down the chance of tighter monetary policy before next year. Putting their money where their mouths are, futures markets predict a 32.3% chance of a rise by December, with March currently given an even chance of a Fed move.
Fronm NYT Dealbook
RISKY STRATEGY SINKS SMALL HEDGE FUND At the height of the 2008 financial crisis, investors would have had a gain of more than 600 percent, according to projections in investor documents for the new hedge fund, Spruce Alpha. But the fund, which started in April 2014, has failed to turn recent market turmoil to its advantage and has lost investors 48 percent of their money, Alexandra Stevenson and Matthew Goldstein report in DealBook.
The under-$100 million fund, which was managed by the $1.5 billion Spruce Investment Advisors, has moved its positions into cash, a person with knowledge of the fund said. The fund has told investors that they can redeem what remains of their money.
This sudden reversal of fortune at Spruce has highlighted the way hedge funds rely heavily on exchange-traded funds and derivatives to profit from short-term turmoil in the stock markets, and the way some use back-tested data to market to their investors.
Back-tested results in hedge fund marketing materials have long drawn scorn from some in the hedge fund world. They are typically recreated with the benefit of hindsight, making it easier for a fund to post hypothetical good results.
It is not clear exactly what caused the big losses in August. Spruce Alpha used a sophisticated strategy that involved derivatives to amplify returns from trading in E.T.F.s. The strategy seeks to make money off stock market volatility.
Trading in E.T.F.s has become controversial with big-name investors blaming them for the violent swings in the market and Laurence D. Fink, the chief executive of BlackRock, which sells more traditional E.T.F.s, warning that E.T.F. strategies that rely on derivatives could blow up.
The tests at Spruce Alpha had apparently not simulated a situation like Aug. 24, when some E.T.F.s seized up in the first few minutes of trading.
Todd Rosenbluth, director of E.T.F. research for Standard & Poor’s Capital IQ, said leveraged E.T.F.s were an inherently risky strategy that is more akin to “gambling than investing.”
Googly, for the uninitiated is a really wicked, evil bowling movement where a cricket ball bowled as if to go one way that actually breaks in the opposite way. It’s even more wicked, evil than the curveball in baseball or softball.
Below is the kind of question that should be included (and was) in a nation where tuition for one’s kids accepted fact of life as a means of keeping themahead of the rabble: the problem is that almost every kid tutored.
“Thinking cannot be taught” is a comment on this.
And it’s so hilarious that someone grumbled that the coins could be of different weights. Or that it’s an IQ question, not a maths question. “They can’t handle the possibility that their children are not smart enough, even though they themselves only have half the intellect.”
FYI, MOE justifies it by saying pupils are taught to estimate as part of their primary school education.
No got so much money, unlike you.
I tot the above when I read this [T]hose with a bigger appetite for risk can consider picking up counters selectively, said Mr Roger Tan, chief executive of Voyage Research.
“Investing is about taking risk and individual stock picking, whether based on fundamentals or technicals, is a risky business. I would say that if they have kept sufficient cash in their bank account, that is their insurance,” he said.
“The market is actually offering brave investors a good deal. At current prices, the price-to-earnings ratio is 12.6 and price-to-book ratio is 1.12. If investors have excess funds, they can consider buying into the market, but do it slowly. Cost average downwards,” he added.
In this type of market, what I want to know is yield.
Here’s something interesting from Fidelty on the share buyback versus dividend debate. (Via FT):
The two are often treated as if they were the same thing, when there are quite different financial transactions.
Share buybacks are an acquisition of an asset, with a price to earnings multiple. They are not a risk-free investment, indeed they are very risky. A dividend is a long-term commitment to shareholders to distribute excess returns. It is not an acquisition.
Therefore, a company will attract very different shareholders depending upon which route it takes. Buybacks will attract activist and event-driven shareholders, while dividends will attract a more stable shareholder base.
Dominic Rossi is global chief investment officer of equities at Fidelity
From NYT Dealbook
ROUGH AND TUMBLE FOR HEDGE FUNDS The fallout from the global sell-off has few limits. Many on Wall Street have been caught off guard and money managers at some of the biggest hedge funds in the United States have had their vacation plans interrupted, Alexandra Stevenson and Matthew Goldstein report in DealBook.
One adviser had to hop around on conference calls from his cabin in the woods. Another said investors had requested play-by-play commentary and performance figures. With the reason for the plunge so unclear, many have not been willing to stick their necks out and speak publicly.
It is clear, however, that August numbers are not looking good for them. Hedge funds went into the sell-off bullish, with $1.5 trillion in long positions – bets that stocks will rise in price – compared with $684 billion in short positions, bets that stocks will decline in price, according to an analysis of the industry by Goldman Sachs.
The 10 stocks that Goldman said were the most widely held by hedge funds – stocks like Apple, Citigroup, Facebook and Amazon – were down from 5 to 10 percent over the last three trading days.
Leon G. Cooperman, founder of the $9 billion hedge fund Omega Advisors and a longtime market bull, is emerging as a big loser in the chaos. As of Friday, his fund was said to have lost 11 percent this month, according to people briefed on the matter. The firm was hit hard by big declines in the share prices of Allergan, AerCap, Citigroup and the American International Group.
One hedge fund manager who invests mainly in United States stocks, speaking on the condition of anonymity, said he would not be surprised if the average fund lost from 3 to 7 percent in August. He said the last week had been brutal and the losses had come far faster than most would have anticipated.
Even the world’s biggest hedge fund, Bridgewater Associates, led by Ray Dalio, was not spared. The $162 billion firm told investors on Friday that its Pure Alpha fund was down 4.7 percent for the month. Going into August, the Pure Alpha portfolio had been up 11.8 percent for the year.
After six years of a bull market run, few hedge fund managers have been brave enough to short stocks with much conviction. To take a short position, a trader sells borrowed stock in a company that he or she thinks is overvalued in anticipation of buying it back at a cheap price. Those that have taken short positions have not been hit as hard by the sell-off.
Hedge funds that scoop up distressed assets at bottomed-out prices also began to eye opportunities. “What I have told investors is the economy is fine but now is a great time to be buying some things when they get hit,” said Marc Lasry, a co-founder of the $13.9 billion hedge fund Avenue Capital Group. “Other people may be having issues,” Mr. Lasry said. “For us, that is an opportunity as opposed to a problem.”
How Emotion Hurts Stock Returns People feel losses more sharply than gains. So watch ESPN or do anything to avoid looking at your sinking portfolio.
Two consecutive days of 8% losses (Mon and Tues), the Chinese stockmarket’s biggest two-day plunge in nearly two decades
People are interested in national issues, not just town council matters, Sylvia Lim says (TOC). Well the need for a town council to have an accounting system that is fit for purpose is also a national issue. OK I exaggerate. It’s an issue at least in areas where the WP is contesting, is a fairer statement.
Auntie Lim*, Gilbert Goh**, TOC (As SPH and MediaCorp are to the PAP, so TOC** is to the WP) and TRE are trying to equate the lapses at PA and other government entities and departments identified by the Auditor-General with that of the the lapses at AHPETC identified by the Auditor-General.
The big difference is that the while the Auditor-General says nasty things about the way the govt bodies like the PA does things, he doesn’t say that they don’t have an accounting system that is not fit for purpose. He is able to pick out lapses in the PA and other govt bodies because they have proper accounting systems. The accounting systems allow the lapses to be noticed.
But he says that the AHPETC accounting system sucks so badly that no proper records are kept.
The Auditor-General pointed out, inter alia, that AHPTEC did not “a system to monitor arrears of conservancy and service charges accurately and hence there is no assurance that arrears are properly managed”.and “No proper system to ensure … proper accounts and records were kept as required by the Town Councils Act.” (Related post https://atans1.wordpress.com/2015/02/10/conflicts-of-interest-what-conflicts/
Because proper records are not kept, no-one knows if there are irregularities. There may be none but there may be some or many: who knows? And what if there are major irregularities?
The way things are going, only a PAP win in Aljunied will ensure that the truth comes out on whether anything is wrong. WP is dragging its feet on setting the system right. It is moving to the Bishan/ Toa Payoh model of directly managing the cleaning etc, which will allow it to say it has “moved on” without resolving the issue of irregular accounts.
Someone posted this analysis on Facebook
Having read the full report, the responses by APHTEC and AGO and PWC’s responses I would say the following.
1. That management and supervision for the first two years were sorely lacking , to the extent that corporate governance is needed , FMSS and FMSI was allowed both management powers, payment powers without supervision.
2. Whether current WP members accept it or not. There is a difference between Management Companies appointing their own people to the TC as GM’s when the management companies are owned by the GOV or GLCs and hence there is no direct pecuniary interests and when in the case of FMSS everything is owned and attributed to Miss How and her Husband and there is a direct pecuniary interests.
3. I could accept the need to appoint FMSS. I cannot accept the need to appoint FMIS whereby the shareholders were both the deputy GMS for lift EMS services. To the extent that there are only a few TC management companies and they refused to help , can the same be said of lift management companies ?
4. To an extent the problem can be laid at the head of the Sec Gen and Low. The people under his leadership trusted low and low I believe trusted miss how.
5. The trust was built over her management of the TC in Hougang for many years and it just seems that when faced with the problem of integrating seven town councils which in itself will be the largest town council in SINGAPORE, she lacked both the management and accounting expertise necessary to integrate all the bits and pieces.
6. FMSS at the end of the day seems to have bitten of more than they could handle, likewise FMSS was not adequately supervised by all the MPs and the leadership within the party for whatever reason.
He could have added, but didn’t, that the WP TC Chair and Vice are lawyers, albeit one was from SMU law school. And there is another MP that is a lawyer, a former partner is a top US law firm. Btw, one, M Ravi called these lawyers three,”cow dung” in another context.
One wonders why they didn’t draw up better conflict of interest mgt rules for the TC’s consideration. And if they did, why were these not implemented? Because Low trusted the Ms How?
Let’s be very clear, the PAP administration didn’t bully or fix the WP on this issue of bad record keeping. This was self-inflicted.The managing agent bears a lot of responsibility for the state of affairs. It didn’t keep proper records of who it was paying, and for what purpose. The AHPETC failed in its duty to monitor what the managing agent was doing.
The inability of the AHPETC to keep proper records is now personal.
I now live in Marine Parade GRC (Joo Chiat kanna rezoned). I’ve voted for the WP since I was able to vote (bicyle thieves, an ex-Woodbridge patient) because I believe that a one-party state is bad for S’pore; but do I want to live in a GRC managed by the WP, a party that couldn’t keep proper records, and is in denial over this fact? And which throws smoke on the issue. It can’t bluff me because I was a Hon Treasurer of a club https://atans1.wordpress.com/2014/11/23/ahpetc-sadly-pap-ib-gets-it-right/.
And I’m not alone: the neighbours (they are accountants, lawyers etc), and the really real Marine Parade residents I talk to, are wondering if the bad record keeping will continue. We know WP can keep the area clean and tidy, but can it keep proper financial records? https://atans1.wordpress.com/2015/08/16/pap-wp-dont-do-accouting/
*Ms Sylvia Lim says the Aljunied-Hougang-Punggol East Town Council (AHPETC), has been singled out for “exemplary treatment” by the government.
She also called on the govt to “act with similar vigour, by withholding grants and commencing legal proceedings”, against gov’t depts and stat boards which have been found with financial irregularities in the Auditor-General’s Report.
Ms Lim made the call in her court affidavit on the hearing on the MND’s application on Monday.
**A statement seeking support from the public has been posted online as a petition calling for the government to investigate fully the recent slew of financial and accounting irregularities unearthed in the Auditor-General’s Office (AGO) Report.
“We… hope our government will investigate thoroughly the AGO audit lapses and come up with a official statement to address the concerns of the people,” the statement, posted on change.org, said.
“The lapses are both glaring and shocking as Singaporeans have all along place their trust in a government that has enjoyed above-board corruption-free governance for a very long time,” the statement by Gilbert Goh said.
***TOC has again banned my Facebook avatar from commenting on TOC’s Facebook posts. It’s TOC’s right. But so like the PAP. But then WP is nothing more than PAP Lite and TOC is its poodle. And let’s see if a TOC founder stands as a WP candidate this GE.
In https://atans1.wordpress.com/2015/08/10/pm-aiming-left-to-hit-the-centre-axed-pap-mps-who-dont-get-it/ I pointed out that MP Liang Eng Wah didn’t have a clue about financial sustainability. Turns out
Liang Eng Wah in his day job is an MD at DBS it appears and he is also chairing the Parliamentary committee on finance and trade. If this is the kind of talent we have in banking and politics……. jeez!
I didn’t realise that DBS would employ as a MD someone who doesn’t know finance.
Thank God I don’t own DBS shares. Btw, I have Haw Paw shares which has a stake in UOB. Depending on the relative share prices, I get a big discount on the operating biz of Haw Par. The Wees also control Haw Par.
Find a a small company with good revenue growth, very little debt, good margins and low valuations, Miton’s Gervais Williams says, and you can expect good income to follow, he tells the FT. He’s a UK fund manager who has juz started ian income investment trust to invest in small cap UK cos. His existing funds (including an income fund) have a bias towards this sector
Those buying bonds, growth and quality stocks and the US dollar will be exposed if the world economy starts going well, for a change.
The thesis secular stagnation has been good for “conservative” investors like me.
|“The old order changeth, yielding place to new,|
|And God fulfils himself in many ways,|
|Lest one good custom should corrupt the world.|
(Or “Weakening economy? Uniquely PAP solution: reverse quantitative easing”)
Let me explain.
The US had a massive quantitative easing (QE, a respectable form of printing money to stimulate the economy) exercise to save the US (and the world from recession) and is now easing back on QE and planning interest rate hikes soon because the US economic is doing But Japan, the Eurozone and China have some form of QE because of worries about their economies.
Our economy is not looking good. S’pore’s economy contracted sharply in the second quarter as manufacturing slumped and is at risk of tipping into technical recession. Price pressures are subdued and expectations are building for the central bank to ease policy once again at a twice-yearly review in October. As S’pore focuses on the exchange rate, not monetary policy. an easing of S$ is called for.
But if anything the S$ could strengthen. S’pore’s plan to launch a savings bond* to encourage long-term retail savings is worrying domestic banks and those like Citi, HSBC, MayBank and StanChart who have big retail operations here, and economists who fear this bond will push interest rates up and suck cash out from an already anaemic economy.
This could cause a flight of cash from bank deposits into these bonds and force interest rates higher as banks compete to attract savers. Higher S$ rates will attract money, strengthening S$.
“Launching a retail savings bond now is almost like reverse QE,” said Chua Hak Bin, an economist with BofA Merrill Lynch here, Reuters reports.
He points to the already slowing deposit growth in the banking system, with just S$3.8 billion (US$2.8 billion) of deposits being added in the first five months of 2015, just 20 percent of the total growth last year.
He suspects the government would invest the savings bond flows overseas** (more money for HoHoHo to double down her bets at the casino***). That would further pressure loan growth, by tightening available cash and triggering a rise in deposit rates, he said.
“So the timing is not ideal. The economy has stagnated in the first half and this will worsen the situation.”
Citibank analysts expect that of a total S$559 billion of deposits in the banking system, 36 percent are savings deposits held by households. If on average the central bank issued about S$6 billion worth of bonds each year, S$30 billion would flow from the deposit base into bonds over five years, they estimate.
MAS Managing Director Ravi Menon played down fears the bond will cannibalise bank deposits.
“The savings bonds issuance numbers pale in significance compared to the total size of the banking deposits,” he said but note that the government says it will issue a maximum of S$4 billion worth of bonds this year, which is still more than a fifth of deposit growth in 2014.
Whatever, down right bizarre this decision to issue the bonds. now. But then a GE is coming.
And the bond is really good for savers. “The Singapore Savings Bond is bending the risk-reward paradigm in investors’ favor,” said Zal Devitre, head of investments at Citibank in Singapore.Government bonds yield about 0.95 percent for one-year and 2.6 percent for 10 years. Bank deposits fetch around 0.25 percent for a year and just double that for 24 months.
Other evidence that Tharman (and Hng Khiang for that matter) are aliens from Bizarro S’pore:
Backgrounder from Wikipedia: The Bizarro World (also known as htraE, which is “Earth” spelled backwards) is a fictional planet appearing in American comic bookspublished by DC comics. Introduced in the early 1960s, htraE is a cube-shaped planet, home to Bizarro and companions, all of whom were initially Bizarro versions of Superman, Lois Lane and their children and, later, other Bizarros including Batzarro, the World’s Worst Detective.
In popular culture “Bizarro World” has come to mean a situation or setting which is weirdly inverted or opposite to expectations.
*The new bond, which will begin selling in October, will have a term of 10 years. It will offer the same yields as government bonds or ten times the returns on bank deposits, and can be redeemed without penalty at any point. They are are aimed at meeting a long-felt need for long-term investment options in the low-yielding economy. “The Singapore Savings Bond is bending the risk-reward paradigm in investors’ favor,” said Zal Devitre, head of investments at Citibank in Singapore.Government bonds yield about 0.95 percent for one-year and 2.6 percent for 10 years. Bank deposits fetch around 0.25 percent for a year and just double that for 24 months. the Monetary Authority of Singapore (MAS), has set a cap of S$100,000 on individual investments in the bond.
**Bizarro bonds: “Guaranteed to lose money for you”
***The late Dr Goh Keng Swee called the stock market a casino.
PROTECTIONS FOR INVESTORS INFLATE START-UP VALUATIONS Don’t believe all the hype over the “unicorns,” or start-up technology companies valued at more than $1 billion, Randall Smith writes in DealBook, pointing to the late-stage financing terms that inflate a company’s valuation before any initial public offerings of stock – often with little or no disclosure of those terms. Venture investors say that these terms include extra protections, like a discount to the price of any eventual initial offering, a minimum return on investment or extra shares if the company later raises money at a lower valuation. Early stage investors warn that these terms can jeopardize a company’s financial stability, diluting the value of their original stakes and worsening a company’s prospects in a downturn, but the protections appeal to company founders because they provide new cash at the highest nominal valuation, reducing dilution if all goes well.
The protections can push up a unicorn’s valuation 10 percent to 25 percent, said Rick Kline, a lawyer at Goodwin Procter whose firm does legal work on start-up and initial offering financings. He said the phenomenon has been part of a general “frothiness” in late-stage valuations. Neeraj Agrawal, a general partner at Battery Ventures, said such structures work for companies when, “like ‘The Lego Movie’ theme song, everything is awesome.” But, he added, “things won’t always be awesome, and when they aren’t, a company can blow up over this issue.”
THE CASE AGAINST A TECH BUBBLE Last month, three partners at Andreessen Horowitz – Morgan Bender, Benedict Evans and Scott Kupor – made the case to the firm’s limited partners for why today’s tech boom is different from that of the dot-com era. It’s not too surprising that a major venture capital firm is arguing that Silicon Valley is not in a bubble, Steven Davidoff Solomon writes in the Deal Professor column. But he says that the presentation, which was released to the public, is worth a look, “not just for the debate over whether a bubble exists but also because it leads indirectly to the fate of the unicorns and the eventual fallout.”
The partners cite plenty of data to back up their arguments. E-commerce has a lot of growth potential in the United States, making up only 6 percent of retail revenue, and technology funding as a percentage of gross domestic product is only 2.6 percent, compared with 10.8 percent in 1999. Another key difference is the unicorn factor, the start-ups with a valuation of at least $1 billion. Gains that used to go to the public through stock offerings are now going to private investors, the partners contended, citing the example of Facebook. When Facebook went public with a valuation of more than $100 billion, all of its gains went to private investors.
However, Professor Solomon writes, the Andreessen Horowitz presentation inadvertently highlights the problem of the unicorns: No exit.“Competition among venture capitalists to get in on technology start-ups is driving up prices exponentially. But that pricing is justified only if there is an exit. And as Dan Primack noted recently in Fortune, there isn’t one for unicorns.” The venture partners may be right that private markets have pushed out the public ones, but Professor Solomon contends that this shift does not justify the ever-increasing valuations or identify potential buyers of these unicorns. “Perhaps most important, it is silent on how to salvage a unicorn investment when it sours,” he writes.
The problem for the investor trying to avoid crowded trades is not just spotting them, but managing to resist joining in. The basis for crowding is usually compelling. The US economy seemed to be doing well; the Swiss central bank was stopping the currency strengthening; and the ECB seemed to be offering a guarantee of easy profit on German bonds. The fact everyone agreed seemed not to matter.
It is hard to buck the consensus. Investors need to recognise that while the story may be obvious, the risk that it is wrong is not properly discounted. When that risk becomes clear, “the mass volte face is what causes some of these crowded trades to reverse spectacularly,” says Altaf Kassam, head of equity applied research at MSCI.
James Mackintosh, Investment Editor
FT, sorry for the cutting and pasting such a long extract. I know, I know good quality journalism and profits is hurt by such an action. But given that the FT is almost as leftist as the Guardian on Greek austerity (i.e. making the Greeks face reality) …
Actually we should be in C or D not B.
When we were upgraded to B from C in 2013, the constructive, nation-building BT reported: The Republic has moved up sharply in the latest Melbourne Mercer Global Pension Index rankings, placing its Central Provident Fund (CPF) among the top 10 retirement-income systems in the world.
Singapore jumped from 13th to seventh spot, with its overall index value at 66.5 this year, up from 54.8 last year.
Although the Republic moved up a grade – from C to B – Mercer said the CPF system has room for improvement in some aspects “that differentiate it from an A-grade system”, although it had a sound structure and many good features.
The 20 countries in the rankings were scored in three key areas: adequacy, sustainability and integrity.
Denmark, the Netherlands and Australia held onto their top three spots. Denmark, the first country to achieve an A grade last year, maintained it this year, despite its overall score falling to 80.2 from 82.9.
Mercer said: “Denmark’s well-funded pension system with its high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations, are the primary reasons for its top spot.”
Singapore’s B grade puts it in the company of other highly developed countries such as Germany, the US and France.
Mercer said the Republic’s overall index rose mainly because the Organisation for Economic Co-operation and Development (OECD) revised its approach to recognise the CPF’s three separate accounts, instead of just its retirement account.
The OECD also updated its data on private pension coverage.
Obviously Mercer and the OECD don’t realise how CPF Life is structured. It sucks as this piece explains why https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/ (Warning I quote some chim analysis which is no BS like Roy’s analysis).
We get screwed even though it’s our own money that’s funding our retirement.
Because as Chris K (writes for TRE but is no cybernut) one of the persons I quoted in above link concludes: The writer does not accuse the government of deliberately profiting from the financial risks of longevity. However, the triple provision, triple redundancy or in the strictly local parlance “kiasu, kiasi, kiabo” of absolutely ensuring not a single cent is spent on retirement funding, can only mean that there will be excess money left from CPF LIFE which reverts back to the government.
Some may call this conservative financial management but there is a very thin line between such conservative financial management and indolent financial management which arises from coercion and monopoly over retirement savings. Undoubtedly, the usual price of not getting more from their retirement funds is paid by you and me.
Btw, an FT actuary tells me that Chris K argument is financially sound.
“In 2013 we decided to go for Reits as a long-term hedge for inflation,” Heman Womg, executive director of the HK Hospital Authority Provident Fund Scheme (HK$57.9bn /US$7.5bn).
Source: Today’s FT
Platers are so -sick that they sell despite whatever the CCP is ordering, doing?
THE great Charles Kindleberger described the pattern of how bubbles form and then burst in his book “Manias, Panics and Crashes”. His model, which was linked to the work of the economist Hyman Minsky, saw the process as having five stages: displacement, boom, over-trading, revulsion and tranquillity. China looks like it is following the model pretty closely, having reached stage four already. The Shanghai Composite rose 130% between September 2014 and June 12 this year and has fallen 31% since then, with another 6% decline today [yesterday].
Ewcovwewd a bit today
S’pore has been ranked 97th out of 145 countries in a Global Well-Being Index survey by polling firm Gallup and “well-being solutions provider” (whatever doesthis mean) Healthways announced on June 24. Panama came in first for the second consecutive year heading the list for physical and purpose well-being, and second place for social and community.
Worse, in Asean, we ranked behind Myanmar (20), Malaysia (41), Philippines (43), Thailand (50), Indonesia (73), Vietnam (93). Cambodia came in slightly below Singapore at 99. (More details at end of the article from CNA)
The cybernuts were out celebrating this ranking (showed S’pore was a terrible, horrible place), while the constructive, nation-building media was quiet on analysis and commentary.
I wasn’t too surprised because the rankings were based on personal feelings: Responses were categorised by Gallup analysts as “thriving”, “struggling” or “suffering”. Countries are then ranked on the percentage of the population that is “thriving” in three or more elements of well-being. And S’poreans are always complaining, unhappy about almost everything.
What I found interesting is that S’pore scored well in“managing your economic life to reduce stress and increase security”, Singapore was ranked ninth worldwide.
Seems delusional of the S’poreans surveyed given
— The cost of “affordable” public housing (25 year to pay morgage), leaving very little room to build up retirement savings.
— The cost of owning a car.
— A public transport system that sucks if one is working and can’t afford a car.
— Most of the gains in real wages comes via the CPF increase that employers have to gove.
— The almost 40% of the salary that is tied down with restrictions.
And they still think they are doing “managing your economic life to reduce stress and increase security”.
The PAP administration must have put something into the water supply.
btw, Gallup is a very respectable polling organisation, unlike our Institute of Policy Srudies.
Survey respondents were asked ten questions and asked to rate their responses on a five-point scale. Responses were categorised by Gallup analysts as “thriving”, “struggling” or “suffering”. Countries are then ranked on the percentage of the population that is “thriving” in three or more elements of well-being.
For financial well-being, which Gallup defined as “managing your economic life to reduce stress and increase security”, Singapore was ranked ninth worldwide.
Singapore was ranked 72nd worldwide for community well-being, defined as “liking where you live, feeling safe and having pride in your community”.
It scored 111th in purpose well-being – “Liking what you do each day and being motivated to achieve your goals”; 127 in social well-being – “having supportive relationships and love in your life”; and 137th in physical well-being – “having good health and enough energy to get things done daily”.
The index aggregates the scores in the five categories to arrive at Singapore’s overall 97th ranking.
Reports said that about 25% of Chinese listed firms had requested to have their shares halted from trading on Tuesday.
The U$19 billion stabilisation fund looks tiny next to the US$3 trillion worth of freely tradeable shares, and the combined average daily trading in Shanghai and Shenzhen of over US$200 billion. Only 9% of the latter.
From NYT Dealbook
CHINESE MARKET PLUNGE POSES A DOUBLE THREAT In China, a stock market rout has racked up losses that make the Greek debt crisis look puny by comparison: $2.7 trillion in value has been wiped out since the Chinese stock market peaked on June 12, which is six times Greece’s entire foreign debt, or 11 years of Greece’s economic output, Keith Bradsher and Chris Buckley write in The New York Times. The steep drop in the mainland markets not only challenges the Chinese government’s efforts to cast itself as an all-powerful entity, they write, but it also poses a risk to the global economy, which can ill afford an economic shock in China.
Harry Harding, a specialist in Chinese politics who is a visiting professor at the Hong Kong University of Science and Technology, said the stock market plunge could produce three successive ripples, involving investment losses for households, slower economic growth and a political backlash against President Xi Jinping of China and his team, Mr. Bradsher and Mr. Buckley write.
Over the weekend, Mr. Xi’s administration made it clear it would do whatever it took to stem the stock market losses. On Saturday, 21 brokerage firms said they would set up a fund worth at least $19.4 billion to buy blue-chip stocks, and both of the country’s stock exchanges suspended all new initial public offerings. Then on Sunday, the China Securities Regulatory Commission said the central bank would inject capital into the state-controlled China Securities Finance Corporation, which lends to brokerage firms, and Central Huijin Investment, a company owned by the country’s sovereign wealth fund, said it had recently bought into investment funds traded on the stock exchanges. The measures appeared to have their desired effect on Monday. The Shanghai stock market jumped 7.8 percent at the start of trading, but it quickly erased much of its gains, closing 2.4 percent higher.
My eyes rolled when I read the CEOs of above two cos recently said that their cos follow the accounting rules. (Remember, credible doubts have arisen over whether their accouting reflects their financial position.)
The best riposte to “We follow the accouting rules” came recently when an ex-convict recently addressed a FT conference.
“There may be a fundamental difference between a company following the rules and a company presenting a true picture of its financial position,” said Andrew Fastow, the infamous treasurer of the even more infamous Enron, to a FT conference.
Or as he puts in another way, that it’s possible for a company to comply with accounting standards while at the same time painting a misleading picture of its real financials.
I tot it tragically funny when he said he went to prison partly for doing things that got him a best CFO award: innovative off-book entities.
Sun Tzu’s “The Art of War” is widely read as a manual of how to win victories without fighting*.
There is no equivalent of a Chinese “The Art of Investing”.
But here are two precepts that the FT has gleaned from throwing fortune sticks:
— The motto of mainland investors has long been that he who does not believe in the greater fool theory is the greatest fool.
— High valuations will make it easier and cheaper to recapitalise state-owned groups, hence a reason why the Chinese authorities seem pretty relaxed about stroking an equity bubble.
“We think it would be premature to call an end to this rally, given the importance of the stock market to helping China’s state-owned enterprises and key industries obtain much-needed financing, and the likelihood of more monetary easing,” HSBC also says.
*Edward Luttwak (he would have been a strategist during the period of the Three Kingdoms or the Warring States) wrote a book on Chinese strategy, and pointed out waz wrong with Sun Tzu’s precepts.
Coming in for criticism by name is Sun Tzu, whose writings of 2,500 years ago, including “The Art of War“, are the main source of what Mr Luttwak calls “the flawed principles of ancient unwisdom”. He grants that the cunning statecraft, stratagems for deception and diplomatic finesse advocated by Sun Tzu may have worked when used by one warring Chinese state against another. But he argues that these doctrines have served China poorly in fending off other adversaries.
With a quick pass through the history of China’s engagement with Jurchens, Khitans, Mongols, Manchus and other Asiatic nomads, he notes that China has been ruled by Hans, its ethnic majority, for only about a third of the past millennium. “While Han generals in charge of large armies were busy quoting Sun Tzu to each other, relatively small numbers of mounted warriors schooled in the rudely effective strategy and tactics of the steppe outmanoeuvred and defeated their forces,” he writes.
The bit about being thrashed regularly by the nomads is a fact, not a Hard Truth.
These charts from FT tell in charts what the NYT Dealbook describes in words below:
CHINA MOVES CLOSER TO INCLUSION IN MSCI INDEX Though MSCI decided on Tuesday that it would hold off on adding Chinese domestic shares to its emerging market index, China is moving closer to joining the global benchmark, Neil Gough writes in DealBook. In its decision, the index company cited concerns over China’s cumbersome investment quotas, restrictions on money flows, and questions over the legal status of foreign shareholders. But MSCI said that in the coming months it would work with China’s main securities regulator to address the company’s concerns and that it may make a special decision to include Chinese stocks, also known as A-shares, in its benchmarks before the next scheduled annual review, which takes place a year from now. “It is clear from MSCI’s announcement today that it is only a matter of time before A-shares are added to global indexes,” Louis Lu, a portfolio manager at CSOP Asset Management, which invests in mainland shares, said in an email.
“The decision – and the waiting period – reflects the changing face of China’s financial system,” Mr. Gough writes. Over the last two years, the country has embarked on a series of overhauls to the financial system, but foreigners remain wary because they continue to face challenges in gaining access to the Chinese markets. Mr. Lu said that the delay by MSCI is likely to motivate the Chinese government to “accelerate the opening of its capital markets and provide greater accessibility to international investors in the near term to increase the chance of inclusion as soon as possible.” If China can assuage MSCI’s concerns, analysts estimate that the country is likely to see several billion dollars of new investment pour in initially, with that figure rising to more than $200 billion over time.
Even my dogs know that when interest rates rise, the yields from Reits should fall, and so will the unit prices.
Here’s shumething from FT that I didn’t think about
but for those investing primarily for income, the yield you obtain at the beginning when you buy your investment is a big protection. If you are happy to keep receiving your income, there is no need to sell the Reit for a loss as interest rates move up.
Of course you will be aware that rising interest rates could lead to problems for Reits’ biz model. But taz another issue.
And I suspect that soon Reits, Biz trusts (or in the US master limited partnerships, MLPs)will be an alternative asset class to those who at present invest in junk bonds for their yield.
Ministers like to point out to the German industrial system (world class SMEs, R&D, apprentice system, productivity, employer union co-operation) as a model that S’pore is folllowing or trying to. After all we are the Prussians of Asia: dour, prickly, and efficent (es SMRT).
Err so why not minimum wages here? The Germans introduced a minimum wage this year, and the economy’s still powering ahead.
Germany’s labour market is defying orthodox economic wisdom. For years, most mainstream economists warned that a proposed minimum wage of 8.50 euros per hour would price up to a million workers out of their jobs. But so far the wage floor, which came into force in January, has not stopped Europe’s largest economy from churning out additional jobs.
Following up on https://atans1.wordpress.com/2014/10/28/improving-productivity-try-this-pm-tharman-possible-reasons-for-peanuts-real-wages-growth/, the latest findings by experts like Stephen Cecchetti, an economist at the Brandeis International Business School, have found that a very large financial sector tends to precede weaker growth in productivity. “When pay on Wall Street is so high relative to the rest of the economy, you’re creating incentives for people to go into that industry that may not be the best for society over all,” Mr. Cecchetti said.
Or as recent paper by him says high-growth financial industries hurt the broader economy by dragging down overall growth and curbing productivity.
But you can have too much of a good thing. The 2012 paper suggests that when private sector debt passes 100% of GDP, that point is reached. Another way of looking at the same topic is the proportion of workers employed by the finance sector. Once that proportion passes 3.9%, the effect on productivity growth turns negative. Ireland and Spain are cases in point. During the five years beginning 2005, Irish and Spanish financial sector employment grew at an average annual rate of 4.1% and 1.4% respectively; output per worker fell by 2.7% and 1.4% a year over the same period.
— Domestic credit to private sector (% of GDP) in Singapore was last measured at 112.57 in 2011, according to the World Bank. Domestic credit to private sector refers to financial resources provided to the private sector, such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment.
— The financial sector employs about 5% of the total workforce.
No wonder the PAP administration has always wanted to link pay rises to productivity? They know that in an economy where finance is so important, productivity increases are not possible?
More details below*
The u/m is typical of what the PAP admin says about productivity:
Even as the Singapore economy grew moderately well at a “new normal” for 2014, Singapore is falling behind in productivity, said Minister for Trade and Industry Lim Hng Kiang … Singapore is “not achieving the two to three percent (labour productivity) growth rate that we’re aiming for”.
The 10-year annual target set by the Economic Strategies Committee for 2010 to 2020, however, has remained unchanged.
“In some some sectors, the performance is very decent; for example in the financial services and insurance sector, productivity growth is above 2 per cent per year. Because they are facing international competition, they have to restructure quickly”
However, he pointed out that the domestic sector is still not showing “very good results”. This was particularly in the manpower-dependent areas of construction, retail, as well as food and beverage.
… voiced concern about the transport engineering sector ,,,”this is a very cyclical business and now with oil prices coming down, their order book is still good for the next three years. But there will be a down cycle soon, and that will affect their productivity if they don’t restructure fast enough.”
And to help businesses, the Minister said the government has rolled out programmes on a broad scale, such as the Productivity and Innovation Credit scheme, as well as more targeted approachs like SPRING Singapore’s Capability Development Programme where individual companies get advice on their business growth.**
*Really chim stuff. The new paper examines why this might be. One part of the thesis is a familiar complaint, neatly summarised in the 2012 paper
people who might have become scientists, who in another age dreamt of curing cancer or flying to Mars, today dream of becoming hedge fund managers
In short, the finance sector lures away high-skilled workers from other industries. The finance sector then lends the money to businesses, but tends to favour those firms that have collateral they can pledge against the loan. This usually means builders and property developers. Businessmen are lured into this sector rather than into riskier projects that require high R&D spending and have less collateral to pledge. On a related note, see our recent Free Exchange on how bank lending has become more focused on residential property.
A property boom then develops. But property is not a sector marked by high productivity growth; it can lead to the misallocation of capital in the form of empty Miami condos or Spanish apartments. In a sense, this echoes the research of Charles Kindleberger who showed that bubbles are formed in the wake of rapid credit expansion or Hyman Minskywho argued that economic stability can lead to financial instability as financiers take more risk. And it reinforces the recent McKinsey report which shows that too much total debt (not just government debt) can be bad.
In specific terms, the authors suggest that
R&D-intensive industries – aircraft, computing and the like – will be disproportionately harmed when the financial sector grows quickly. By contrast, industries such as textiles or iron and steel, which have low R&D intensity, should not be adversely affected
The paper looks at two indicators for finance sector growth – the ratio of bank assets to GDP and that of total private credit to GDP. For industries, they examined financial dependence (the need for outside capital to finance growth rather than retained cashflows) and the R&D intensity. They find quite a large effect.
The productivity of a financially dependent industry located in a country experiencing a financial boom tends to grow 2.5% a year slower than a financially independent industry not experiencing such a boom.
This is highly significant, given that most developed economies would love to gain 2.5 points of productivity especially in a world where demography may be constraining growth.
As the authors conclude
there is a pressing need to reassess the relationship of finance and real growth in modern economic systems
This seems right given the whole focus since 2008 has been about reviving and stabilising the banking sector so it can lend to small businesses. Instead (or at least as well) it should have been about channelling finance to those industries that can expand and employ more workers. On this point, it is encouraging that the European Commission has issued a green paper on capital markets union today, hoping to diversify the financing of small businesses away from banks. But perhaps the last word should be left to Winston Churchill, who spotted this problem nearly 90 years ago when he said that
I would rather see finance less proud and industry more content
The usual BS (Since then: On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded at a slower pace of 1.1 per cent compared to the 4.9 per cent in the preceding quarter, according to advanced estimates from the Ministry of Trade and Industry.)
Based on advanced estimates, the Republic’s economy grew by 2.1 per cent on a year-on-year basis in the first quarter of 2015, announced the Ministry of Trade and Industry (MTI) in a press release on Tuesday (Apr 14). This is the same rate of growth as achieved in the previous quarter, it added.)
But in February, the MTI minister said:
When asked if the official forecast of 2 to 4 per cent economic growth in 2015 is realistic, Mr Lim said: “This is our typical range going forward, around 2 to 4 per cent … so this is the kind of new normal that we are aiming at and this year we expect growth at about the same rate as last year, because the global environment is still challenging.”
He noted that the US was the main driver of growth for last year, and is likely to remain so this year. “Essentially it’s only the US economy that’s doing well. Europe and Japan are having a big challenge and China is managing to have a soft landing at best. So the external environment is at best slightly better than last year, but not that much better.”
“HIGHER QUALITY GROWTH”
Looking ahead to the Economic Strategies Committee’s target of 3 to 5 per cent annual growth for Singapore between 2010 and 2020, Minister Lim said that “if you look at our performance in the 10 years between 2000 and 2010, the economy grow around 6 per cent per year. But if you look at the last 4 years we are averaging around 3 per cent.”
He added that the government had worked towards slower, but higher quality growth. This included reducing the flow of foreign workers, and growing at half the rate that the country did 10 years ago.
One bright spot for the economy this year could be in oil prices. Mr Lim said the recent monetary easing by the Monetary Authority of Singapore was in response to the drop in commodity prices, and a low inflation environment. As a result, exports should benefit from a lower Singapore dollar.
“Lower oil prices, we think its net plus for the economy, because we are an oil importing country, it’s a net plus for the businesses because electricity prices will come down, transport prices will come down. So businesses will do much better their input costs will come down”
But Mr Lim also cautioned that the low interest rate environment would end soon, “it’s likely that in the US the interest rate will be raised sometime this year…at some point in time, we must adjust to a more normal situation where interest rates have to reflect the cost of people lending you money.” He added that this is the reason why MAS has taken steps in the last few years to ensure personal debt remains healthy.
Amid the uncertainties in the global economy, Mr Lim said the focus for Singapore’s economy as she celebrates her golden jubilee is to perhaps emulate the US economy.
“We are having a more developed economy structure, our demographics are very similar to Japan and Europe – we are ageing very rapidly. So how do we try to have an economy that is more innovative, more dynamic, more like the US economy and less like the European and Japanese economy. That’s our big challenge.”
– 938LIVE/ly in February
One of my favourite love-to-hate MPs said something sensible before LKY’s death dominated the news: that the joint consent of both spouses should be required when a member’s CPF withdrawal is linked to a CPF charge on the couple’s jointly owned property.
She should have gone on to say that this principle should also apply where a working couple jointly use their CPF funds of buy a flat. The right to withdraw funds should be subject to the veto of the other partner. It’s their money that was pooled to buy that flat.
And yes, more financial competency courses so that more will learn about the BS Roy spins. “The Republic scored 68 points out of 100, a drop of four points from the previous survey conducted in 2013” (Singapore Sees Decline In Financial Literacy: Survey, Matthias Tay).
Seriously, At the moment, concepts taught in schools rarely go beyond the basics of saving and borrowing, and even at the institutes of higher learning the economics subject shares little about day-to-day financial knowledge and skills. Young Singaporeans seem poorly equipped to handle such responsibilities, or – progressively – apply concepts learnt in the classroom.
There is also a common misconception that financial literacy only involves the complicated investments in or management of stocks, debts, or derivatives, though – as the MasterCard index has shown – individuals should be familiar with basic money management, financial and retirement planning, and investment.
*… We are concerned that stay-at-home mothers, not having accumulated much Central Provident Fund (CPF) savings, cannot benefit from the latest CPF enhancements.
They will continue to rely on their spouses’ CPF for their retirement. Therefore, even as the CPF enhancements provide members with greater flexibility, it must be exercised with the goal of also providing retirement adequacy for their spouses.
The Government is encouraging spouses and children to top up the Retirement Accounts of their loved ones, by paying an additional 1 percentage point for the first $30,000 for members above 55.
I have asked that joint consent of both spouses be required when a member’s CPF withdrawal is linked to a CPF charge on the couple’s jointly owned property.
There is still much we can do to educate and encourage couples to optimise their CPF balances. Financial literacy and understanding of the latest CPF changes are essential to help women attain retirement adequacy. The PAP Women’s Wing will start a movement to help women and their families understand the impact of these changes and to make better decisions for the family.
Foo Mee Har (Ms)
MP for West Coast GRC
Treasurer, PAP Women’s Wing Executive Committee
“Investment based on genuine long-term expectation is so difficult today as to be scarcely practicable,” wrote Keynes in 1935. Only Buffett since then has shown that Keynes is wrong.
LKY (with his 30-yr investments in Merrill Lynch sold at a big loss after less than a few yrs, Citi and UBS) and Ho Ho Ho (with her investments in the Chinese banks and StanChart) show the wisdom of Keynes.
AIM in London is having problems with Chinese listings.
Now Sordic (see below).
“The LSE should never have allowed these Chinese companies to list,” the FT reports
Sorbic International PLC Thursday said its former Chief Executive Wang Yan Ting is refusing to hand over the corporate seals and business licenses of its Chinese operating subsidiary, and he is also refusing to handover about GBP7.7 million in cash that Sorbic claims belongs to it, meaning its financial position remains uncertain.
Sorbic last month said it had removed Wang as group CEO and as CEO of its Chinese subsidary, Linyi Van Science and Technique, because it was still frustrated by its inability to move money out of China, a move that Wang was blocking. It wanted the money to repay outstanding loan stock of about GBP3.75 million and to cover its own costs. It also terminated Wang’s role as its legal representative in China, replacing him with a Chinese lawyer, and said it would focus on releasing the funds held within China.
On Thursday, Sorbic said Wang has declined to hand-over the company’s corporate seals, known as chops, and business licences, which he removed from the premises before he was dismissed. The local police were contacted, but deemed Wang’s non-cooperation as a commercial matter and were therefore unwilling to assist, the sorbate food preservative producer said.
That means that the subsidiary’s bank accounts and day-to-day operations still remain under Wang’s control.
“Furthermore, Mr. Wang has confirmed that he has transferred funds belonging to the company which remain under his control and, to date, he has refused to return them,” Sorbic added, saying that management accounts as of end-March showed total cash balances of about CNY72 million, or GBP7.7 million.
“The board has been informed that the company’s factory in Linyi continues to be fully operational and Mr. Wang remains in regular contact with the company,” Sorbic said.
Sorbic is wholly reliant on the transfer of funds from China to meet its operating costs and to repay the GBP3.75 million in outstanding loan notes, which are in default.
Sorbic’s shares were suspended last week at the request of the company pending clarification of its financial position. It said Thursday its shares will remain suspended and it will provide further updates in due course.
Citi and Merrill Lynch used to be known as the the banks that always joined a party when it was just about to go wrong. The sub-prime crisis proved the point.
Well Merrill Lynch no longer exists but Citi survived, just. Now it’s big in derivatives, very big and GIC still has a stake in it (It’s one of LKY’s forever investments). Let’s hope it’s not curtains Citi when derivatives tank.)
CITIGROUP’S RESURGENCE Seven years after Citigroup teetered on the brink, the bank’s traders and investment bankers have come roaring back,Peter Eavis writes in DealBook. The bank’s resurgence on Wall Street, which has involved acquiring huge amounts of derivatives, comes as many of its rivals pull back in the face of new regulations intended to make the financial system safer. But even as the bank has surged ahead, it has not trumpeted its comeback. Instead, its most senior executives have largely emphasized streamlining operations that have little to do with Wall Street, like agreeing to sell a unit that focuses on subprime loans.
Citigroup’s investment bank is no longer involved in the toxic activities that were most dangerous to the bank’s health, Mr. Eavis writes. The bank also has higher levels of capital, the financial buffer that reflects a bank’s ability to absorb losses. Such steps have helped it slowly regain favor with regulators. “Still, figures for Citigroup’s Wall Street operations show a bank that is on something of a tear,” Mr. Eavis adds. The unit that encompasses the firm’s investment bank, for instance, had $1.06 trillion of assets at the end of last year, a 12 percent increase from the level in 2010.
“Perhaps most astonishing is Citigroup’s meteoric growth in derivatives, the financial contracts that allow banks and investors to place bets without actually owning an underlying stock, bond or currency,” even as new rules have persuaded many banks to cut back on the amount of derivatives they hold,” Mr. Eavis writes. Citigroup has flexed its muscles behind the scenes to protect its derivatives business from certain new rules. But the growth of Citigroup’s investment bank and its derivatives business has raised concerns among financial specialists who support tougher regulations.
(NYT’s Dealbook some months back)
Singapore – where the ratio of household debt is 75% About 75% of this household debts are mortgage loans – See more at: http://www.straitstimes.com/news/opinion/eye-the-economy/story/spore-not-headed-debt-disaster-20141125#sthash.oh3vAXO3.dpuf
The “affordable” 25 year HDB loan is responsible for S’pore’s high household debt. And remember it’s not freehold not a 99-yr lease from the govt.
S’poreans like Brits are stupid? [T]he economists calculate that homeowners discount future benefits over the very long run at a rate of 2.6% per year. This is lower than the rates used by governments to assess infrastructure projects or by pension funds to evaluate their liabilities, and suggests that the general public is more patient than the authorities give it credit for.
They cost him money.
Something I just read. It appeared on 3rd March in the NYT Dealbook
BUFFETT’S WARNING ON BANKS Warren E. Buffett has long ridiculed the financial industry. But his annual letter to shareholders “seemed to amp up the pugnacity and was clearly noted by the industry,” Andrew Ross Sorkin writes in the DealBook column. Mr. Buffett used his letter, published over the weekend, to warn his followers about “the Street’s denizens.” He criticized investment bankers for urging acquirers to pay up to 50 percent premiums over market price for publicly held businesses and railed against spinoffs.
“No doubt, Mr. Buffett speaks the truth. There are countless examples of the build-it-up-and-tear-it-down phenomenon,” Mr. Sorkin writes. “But as Mr. Buffett often points out the foibles of the finance industry, he also extols the personal virtues of some of the biggest names in investment banking. Berkshire owns a stake in Goldman Sachs, and Mr. Buffett has talked publicly about owning shares of JPMorgan Chase in his own account.” He has praised Lloyd C. Blankfein, Goldman’s chief executive, and Jamie Dimon, the chief executive of JPMorgan.
What explains Mr. Buffett’s stance on the industry? One investment banker and blogger wrote over the weekend that Mr. Buffett “despises investment bankers and employs his considerable folksy charm to scare potential business sellers away from using us for the plain and simple reason that we make his job harder and more expensive.” For his part, Mr. Buffett, when reached at his office in Omaha, explained that he was trying to educate his shareholders. “There’s nothing wrong with looking at the biases of a given field,” he said.
The constructive, nation-building media are quoting the “experts” as saying that there will be a sympathy vote* for the PAP. The anti-PAP cybernuts are cursing their luck that their wish came true (LKY died) but are worried that the PAP will not now lose the GE as they had expected: taz how deluded or nutty they are.
Let’s cut to the chase and analyse nthe available data shall we?
First, the data on LKY’s lying-in-state and funeral
About 1.5 million people paid tribute to Mr Lee at sites around the country this week the government said.
[T]ens of thousands lined the streets to view the funeral procession carrying Mr Lee’s coffin through the city-state.
Now the analysis.
If all the 1.5m that paid their respects were citizens and voters, that may conceivably result in the PAP getting 70% of the popular vote in next GE.
Not good news for the WP (their MPs would lose their cushy, well-paid jobs where the only KPI is how silent they are), Dr Chee’s SDP, people like me who want an end to the PAP’s hegemony, and the cybernuts.
But we can reasonably assume that there were people below the voting age who paid their respects. And we can also reasonably assume that of the 1.5m in attendance, only 0.96m are of voting age (In 2011, 2.1 m out of 3.3m citizens were of the voting age i.e. 64%)
Even if we assume that there were no FTs paying tribute (Impossible because, after all, he did say that FTs are more hardworking than S’poreans: respect begets respect) and no anti-PAP people paid their respects (but we know at least the Chiams, P(olitian) Ravi, Jeannette Chong anfd New Citizen Han Hui Hui** did go to some tribute), 0.96m is a lot less than the 1.2m who voted for the PAP in 2011. In fact, it represents only 45.7% of the popular vote.
Where’s the missing 14.3 of the popular vote that voted for the PAP?
Now 0.96m is higher than the 35% of the popular vote that die-die must vote for the PAP (the voters who voted for Tony Tan the PAP’s (and it’s rumoured LKY’s) preferred presidential candidate. But it’s a lot less than the 70% or 1.5m that voted for Tony Tan and Dr Tan Cheng Bock. Dr Tan has never renounced his PAP past, unlike Tan Kin Lian who lost his deposit, so we can assume that the 35% of the voters who voted for Dr Tan are willing to back the PAP.
So sympathy vote? What sympathy vote? Where’s it coming from?
There may be one, but how to prove it?
Seriously, what I’ve tried to show** is that the 1.5m figure (a very good turnout in the context of a population of 5.5m) can be explained by the turnout of the core PAP supporters, their children, and FTs.
Given LKY’s high regard for FTs and that the FT PMEs live the good life here, it’s a fair bet that many FTs paid their respects. I mean even the Indian manual workers (who we are told are bullied and exploited) hold him in high regard: their villages back home honoured him in their traditional ways. Ways which annoyed at least one anti-PAP activist who is ethnic Indian.
As I wrote at https://atans1.wordpress.com/2015/04/06/why-pap-didnt-do-well-in-2011-but-will-do-better/ and https://atans1.wordpress.com/2015/03/24/are-you-better-off-now-than-you-were-in-2011/ there are other factors that should help the PAP increase their share of the popular vote in the coming GE. If the PAP does better than in 2011, there is no need to talk of a sympathy vote.
The experts should not BS about the sympathy vote without any evidence. Now if they had access to the results of polling and analysis of focus groups which they or third paries like IAD or PA conduct, fair enough: but if they don’t they should juz sit down and shut up. And think.
*Actually so did I. On the day of the funeral I tot the PAP could get 70% of the popular vote if the election is held in June or September: until I tot about the matter.
**She cursed him on Facebook sometime back, saying she was hoping he’d die soon. Well she got her wish, so maybe taz why she went to the lying-in-state? Her way of dancing on his grave?
***Of course, my assumptions can be challenged. Challenge them please.
Given that the S&P500 is near its recent high again, European mkts are looking good and the Greater China mkts are having a ball, this extract on our market from CNA 31st March seems appropriate:
Going into the second quarter, analysts are optimistic that the upward trend will continue. Major events at home, such as the SEA Games, are expected to have positive spill-over effects – particularly in the transport, tourism and hospitality sectors.
However, a major downside risk could be the impending US interest rate hike. Analysts said that if the roll-out is properly managed, the effect on equities could be minimised.
Said Mr Nicholas Teo, market analyst at CMC Markets: “The other driver is that global liquidity will still be fairly good, despite the potential US rate hike; I think that process will be managed, and with that management.
“I think equities will still be the asset class that will dominate this year. Singapore sits nicely in Asia and we will see a benefit of that fund flow coming through. So with that, Singapore would probably ride that wave.”
Die Die don’t blame me if you believe these guys.
Q1 winners and losers for momentum players
Singtel was one of the top performers for the quarter, with its share price jumping 12.3 per cent. It was followed closely behind by property developer Hongkong Land, with returns of 11.7 per cent.
Sector-wise, telecommunications and real estate investment trusts (REITs) continued to do well -even as commodity-related sectors, such as commodity suppliers and offshore and marine, underperformed.
I’ll take my dividends, Reits’ payouts and be content.
(Or “Ah Loong imitated Buffett, not dad”)
When business leaders make mistakes, they have nothing to lose from a proper apology
Thus runs the subtitle of a an aricle in an article sometime back FT which goes on: One business leader who has no problem detailing his mistakes is Warren Buffett. He regularly does it in his annual letter to shareholders. This year’s marked the golden anniversary of his and Charlie Munger’s control of Berkshire Hathaway so he dredged up 50 years of mistakes.
They included investing in dying textile companies and seeing acquisition “synergies” evaporate.
More recent mistakes included holding on to Tesco shares even though he knew it was likely that the UK retailer’s initial problems were just the first in a series. “You see a cockroach in your kitchen; as the days go by, you meet his relatives,” he wrote.
The reasons Mr Buffett gave for his mistakes were not poor advice, or lapses by his managers, but his own “thumb-sucking”, “childish behaviour” and “I simply was wrong”.
The advantage of pointing out your own errors is not only that it deprives others of the opportunity but that it makes it plain that business is hard, that we make mistakes and that only by examining them can we reduce, but not eliminate, our chances of making them again.(FT extract)
Well it didn’t work in politics for our PM did it?
Ah Loong in 2011 departed from dad’s Hard Truths of “Never explain, never apologise”, “PAP is never wrong”, “The message is always right. Blame the messenger, not the message”, “THE LKY way or the highway”, and “It’s the song, not the singer”..
In an attempt to avoid losing a GRC and setting a new record low for the popular vote, he said, “If we didn’t get it right, I’m sorry. But we will try better the next time.”
It was an apology that Prime Minister Lee Hsien Loong saw fit to repeat twice on Tuesday during the People’s Action Party (PAP) first lunchtime rally at Boat Quay next to UOB Plaza.
PM Lee acknowledged some of the government’s initiatives have resulted in “side effects”, such as problem gambling among Singaporeans due to the opening of the Integrated Resorts.
He also cited the congestion in public transport because of the increased intake in foreigners.*
Fat good it did him or the PAP say the hardliners in the PAP and other “Lee Kuan Yew is always right” groupies: the PAP only got 60% of the votes (PAP’s worst result ever) and lost a GRC that had two ministers and one junior minister.
Worse in the presidential vote that followed, the PAP’s preferred candidate (Dr Tony Tan) won by a handful of votes from Dr Tan Cheng Bock. They shared 70% of the vote, showing that with the right formula, the PAP could do well.
The problem is that the PAP don’t have the right formula.
So apologising doesn’t always work, FT writer. The problem for Ah Loong is finding the right formula. More on the right formula soon.
*“These are real problems, we will tackle them. But I hope you will understand when these problems vex you or disturb you or upset your lives, please bear with us, we are trying our best on your behalf,” said PM Lee to a crowd of about a thousand.
The secretary-general of the PAP continued, “And if we didn’t quite get it right, I’m sorry but we will try better the next time.”
Pushing on with a message he had for voters on Monday, PM Lee also admitted the government had made two other high-profile errors.
“We made a mistake when we let Mas Selamat run away. We made a mistake when Orchard Road got flooded,” he said.
“No government is perfect… we will make mistakes. But when it happens we should acknowledge it, we should apologise, take responsibility, put things right. If we are to discipline somebody, we will do that, [Err, the train services are getting worse under the “new” CEO and tpt minister, but no-one is being fired] and we must learn from the lessons and never make the same mistake again,” said PM Lee.
Yet, he explained the difficulties in making decisions with incomplete information.
For instance, if the government knew there would be a sudden surge in demand for HDB flats in mid-2009 and that foreigners would have created such congestion on the roads, it would have ramped up plans for more flats and MRT lines.
“We’re sorry we didn’t get it exactly right, but I hope you will understand and bear with us because we are trying our best to fix the problems,” he said.
The government will build 22,000 flats this year and open one new MRT line every year for the next seven years however, the government “has been right more often than wrong,”
BLACKROCK’S NEW BREED OF E.T.F. Exchange-traded fund have been a hit with passive investors for years. Now, BlackRock is introducing a new type of bond E.T.F. that aims to “blend the best of active investing (security selection) with index investing (cost and consistency),” Landon Thomas Jr. writes in DealBook. Of the financial inventions in the history of Wall Street, few have been as successful as E.T.F.s, which hardly existed 15 years ago and now, at $2 trillion, make up close to 15 percent of the mutual fund industry.
BlackRock’s iShares division has become a crucial profit driver for the fund company, accounting for close to a quarter of its $4.6 trillion assets under management. “The rush into E.T.F.s has come at a time when the performance records of mutual fund portfolio managers, especially on the equity side, have been poor,” Mr. Thomas writes. According to Morningstar, 74 percent of equity mutual funds trailed their benchmark index last year. For that reason, the bulk of E.T.F. flows have been into large fundsthat track stock indexes. Bond E.T.F.s have also grown in size in recent years, though the numbers have been smaller.
BlackRock’s new fund, called United States Fixed Income Balanced Risk, will invest in an equal split of corporate bonds, which will benefit if rates spike upward, and Treasury securities, which will protect the fund if rates fall. “Because these funds target a specific area of demand in the market but follow an index, they are seen by their champions as joining the best aspects of active and passive fund management,” Mr. Thomas writes. “Yet because the cult of the bond manager still holds sway, there have been few if any quasi-active bond funds that have thrived.”
Likewise stocks with sustainable, decent dividend yields like Temasek’s Fab 5
“The Fed rate projections have been significantly lowered over a three-year horizon. This points to a later lift-off,” FT quotes a BNP Paribas economist.
In simpler English:
“The Fed is in no rush,” said Ward McCarthy, chief US economist at Jefferies.
“At the current juncture, the timing of the liftoff is still indeterminate and will depend upon the inflation data. The policy statement eliminated the use of ‘patient’ in forward guidance, but the FOMC also described the new forward guidance as being “consistent” with the prior forward guidance.”
He added: “The word ‘patient’ was removed, but the meaning of patient remained.” (BBC)
Or as Reuters puts it: The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels.
Same reasoning applies: Appealing to greedy but gullible people works?
HEDGE FUNDS KEEP ATTRACTING CASH Hedge funds have underperformed a simple blend of index funds 60 percent stocks and 40 percent bonds for three-, five- and 10-year periods, but the lure of higher returns with lower risk ‒ or even zero risk ‒ continues to beckon, James B. Stewart writes in the Common Sense column. Large investors added $1 billion during January and more than $88 billion in 2014, according to data compiled by the investment consultancy eVestment. Total hedge fund assets are now more than $3 trillion.
Painful memories of the financial crisis and the persistent low interest rate environment may be driving investor interest, said Peter Laurelli, vice president for research at eVestment. Many funds promise to address both issues by blunting the impact of another market crash while generating higher returns than United States Treasury bonds. “Institutions are not only pouring more money into hedge funds, but they also appear to be engaging in a classic pattern of many individual investors, which is to chase returns and shun losers,” Mr. Stewart writes.
He adds: “Of course, how today’s ever-growing universe of hedge funds will perform in the next crisis remains to be seen. Unlike United States stocks and bonds, they are lightly regulated. They aren’t that transparent. Many aren’t that liquid.”
Fudging data without lying. LOL.
ANOTHER LOOK AT BUFFETT’S SUCCESS Warren E. Buffett has made Berkshire Hathaway’s shareholders “an astounding amount of money,” Jeff Sommer writes in the Strategies column. And he provided a window into just how much in his annual letter to shareholders, which included a table on its second page that enumerates the market return of Berkshire shares, year by year. Until now, Mr. Buffett has measured success using the change in book value of his shares.
“However you analyze it, Berkshire’s long-term performance has been awesome. Using market value, he says, its shares gained 21.6 percent annually compared with 19.4 percent for book value and 9.9 percent for the Standard & Poor’s 500-stock index, with dividends. Using market returns, the shares gained a cumulative 1,826,163 percent since he took control,” Mr. Sommer writes. But gone in his letter this year was a comparison between the book value return and the S.&P. return, which would show that he trailed the S.&.P. again, using book value. Counting 2014, Mr. Buffett has underperformed the S.&P. 500, using book value, in five of the last six years.
“By shifting to the market value metric ‒ for the first time in 50 years ‒ his returns look better. Would he have added a table on his golden anniversary showing market value if it had been a bad year for Berkshire in the stock market, whose judgment he has often disdained? I don’t know. Mr. Buffett declined to comment,” Mr. Sommer adds. But to outperform the market consistently, as Mr. Buffett has done over most of his career, “is exceedingly rare. That’s worth celebrating, even if it’s also worth asking why the recent years haven’t been extraordinary.”
As I wrote here, the PAP like Buffett did very well in the early days by people who believed in them; not so well in recent yrs: https://atans1.wordpress.com/2015/02/24/sg50-versus-brk50/
Update on 21 March 2015. Letter to Economist defending change in comparison
Valuing Berkshire Hathaway
You criticised Warren Buffett for moving the goalposts by now giving more weight to Berkshire Hathaway’s share price than its book value (“Corresponderous”, March 7th). But the goalposts should have been moved long ago. The previous practice of using book value per share versus the total return of the S&P 500 was an apples-to-oranges comparison of an accounting measure with a market-valuation measure.
Naturally, Berkshire Hathaway’s book value per share would underperform when the S&P’s price-to-book ratio was soaring, as it did by 21% in 2013. Likewise it would outperform in years like 2008, when valuations were plunging. Comparing the change in Berkshire’s market value to the S&P’s total return is the best way of measuring how the market judges Berkshire’s strategy.
But then he doesn’t face a general election. He lets this metric talk the walk: Over the last 50 years,the stock is up 1,826,163 percent.
But to be fair to the PAP, he like the PAP did better in the early yrs than in the recent past: https://atans1.wordpress.com/2015/02/24/sg50-versus-brk50/
But then he doesn’t pay himself so much and he is no hypocrite unlike Jos Teo https://atans1.wordpress.com/2015/03/04/jos-teos-double-standards-walk-the-talk-chiams/ and Gan Kim Yong (See below for Gan’s hypocrisy and double standards.
BUFFETT HINTS AT SUCCESSOR Warren E. Buffett released his annual letter to shareholders on Saturday, reflecting on his 50 years in control of Berkshire Hathaway, one of the world’s biggest companies. In his 24,000-word letter to commemorate his golden anniversary at the company, Mr. Buffett looked back on less prescient moves. He also railed against investment bankers, accusing them of being nearsighted and self-serving.
But what made perhaps the most waves in the business world over the weekend was Mr. Buffett’s hint that the board of Berkshire Hathaway hadidentified his successor as chief executive. “Both the board and I believe we now have the right person to succeed me as C.E.O. ‒ a successor ready to assume the job the day after I die or step down,” Mr. Buffett wrote. “In certain important respects, this person will do a better job than I am doing.”
Mr. Buffett did not reveal that person’s identity, but in a separate letter, Charlie Munger, the vice chairman, suggested that either Ajit Jain, an insurance executive at the company, or Greg Abel, the head of Berkshire’s energy business, was most likely to receive the job. Mr. Buffett’s son Howard will become nonexecutive chairman when his father no longer serves in that role.
The letter also detailed Berkshire Hathaway’s success. Last year, the company’s market value increased by $18.3 billion. Over the last 50 years,the stock is up 1,826,163 percent. Although Berkshire did not strike any megadeals last year, it continued to grow by making 31 smaller so-called bolt-on acquisitions that will cost a total of $7.8 billion. Mr. Buffett also reiterated Berkshire’s interest in making a deal worth $5 billion to $20 billion, but he said that many of the deals pitched were of inferior quality.
Well Gan, what about ministerial pay monetising public service?
[I]ntroducing a direct caregiver allowance may monetise family support and filial piety, said the Minister for Heath Mr Gan Kim Yong in Parliament on Tuesday (Mar 3).
In a written response … about whether the Ministry will consider the provision of allowance to caregivers taking care of an elderly, a family member with special needs or disabilities, Mr Gan said family support and filial piety are “priceless” and should not be monetised.
“After GE, will the PAP administration raise GST rates and by how much?”
After all, an ally and cheer leader of the PAP administration wrote about the Budget:
Mr Tharman flagged this gap … about the 1 percentage point projected gap between long-term revenues and long-term spending. The latter is tipped to go up to 19 to 19.5 per cent of GDP from now, as Singapore opens its coffers to spend on health care, retirees, and on infrastructure and investment in education. The former hovers around 18 to 18.5 per cent of GDP.
How to make up the shortfall of about 1 per cent of GDP?
This is a structural issue that will have resonance beyond this Budget.*
As it’s unlikely that the Wayang Party will raise the issue about the rise in GST rates after the GE in Parly* because it may still be hoping to curry favour with the MIW by not asking difficult questions, responsible bloggers and cyber-warriors should ask the question.
So should all voters (pro PAP or anti-PAP alike, GST affects everyone) who meet their PAP MPs and their
PA grassroot hangers-on when they come to lobby for votes. Especially when the MPs and hangers-on boast of all the goodies voters are getting, parroting a gushing a PAP apologist, if ever there was one,who wrote in ST:.
I tried frantically to keep up with noting down the giveaways as Finance Minister Tharman Shanmugaratnam reeled them off as he announced the Budget 2015. …
All in, it can be said to be a sensible yet generous Budget, albeit at the expense of the very high-income. It may disappoint those who wanted a big SG50 Bonus to celebrate the nation’s Jubilee. But it does give out a mass hongbao to all Singaporeans, via top-ups to education funds for children and students, and via the new $500 SkillsFuture Credit for workers. – See more at: http://www.straitstimes.com/news/opinion/columns/story/singapore-budget-2015-7-reasons-why-years-robin-hood-budget-matters-20150#sthash.CK7uOl8a.0xjbXaNf.dpuf
The answer we want to hear is what Tharman said in 2011
Finance Minister Tharman Shanmugaratnam has reiterated that the goods and services tax (GST) will not be raised for at least another five years …“As Finance Minister, I have made that very clear in Parliament that at least for the next five years – it does not mean we will raise it in five years’ time – but at least for five years, there is absolutely no reason to raise the GST, because this was the whole idea – we strengthen our revenue base in time. (CNA)
And finally let’s remember that all this money the PAP administration is throwing at us is our money, not that of the PAP’s administration.
*Yes, Yes I know: Mr Tharman has a way to close that 1 per cent gap: Use projected long-term returns from Temasek Holdings.
The Net Investment Return formula framework was implemented in 2009. He said: “Under the framework, the Government is allowed to spend up to 50 per cent of the expected long term real returns on its net assets managed by MAS and GIC.”
Temasek was left out as it was undergoing a major change in investment strategy. Mr Tharman said it was a good time to add Temsek to the mix.
So this Budget is important for signalling the long-term gap in revenue and spending.
It is also significant for using a new framework that allows Singapore to tap a wider pool of money from expected investment returns on its reserves into the future.
“The move will bolster our fiscal resources at a time when we have to fund long-term critical infrastructure and develop the human talent and capabilities to secure our future.”– See more at: http://www.straitstimes.com/news/opinion/columns/story/singapore-budget-2015-7-reasons-why-years-robin-hood-budget-matters-20150#sthash.CK7uOl8a.0xjbXaNf.dpuf
Doubtless, the cybernuts will say that their heloo, Roy the Hooligan is responsible for this change in govt policy, though I’m sure s/o JBJ would dispute this, saying Tharman stole his idea.
But do remember that the other cybernuts’ hero Ong Teng Cheong wanted all the returns from the resreves locked away for good. It’s in the DNA of the PAP to make life tough for us. So unless we get the PAP to rule out a GST increase after the election, we could get screwed.
This is what a FT based here says: Ten years ago, the Singapore’s preferred choice would have been to raise its goods and services tax. Levies on consumption are easier to collect and less flighty than the incomes of high-earning expatriates. But that option is now politically infeasible. The People’s Action Party, which has ruled Singapore throughout its 50-year history as an independent nation and must call an election by January 2017, is wary of upsetting voters.
But this cock (Trash?) forgets that the administration can raise GST after the GE, if no-one holds its feet to the fire on the issue in the run up to the GE.
**Mrs Chiam may have other issues that she thinks are more important and this batch of NMPs are not the kind to rock the boat. And I don’t blame them, if the co-driver (each MP getting $15,000 a month) sets a bad example, what can one expect?
Berkshire Hathaway celebrates 50 years under Mr Buffett’s control this year
If you had $1000 in BKR in 1965, you’d be worth US$11m ++ http://www.businessinsider.sg/if-you-had-invested-with-warren-buffett-2014-8/#.VOryoXyUc7E
PAP got so good meh?
A little humility pls PAP. Especially as Mr Buffett pays himself “peanuts” by yr standards.
On Friday, someone (no PAP rat) mumbled something about rising expectations as though it was a bad thing. I said given high ministerial and civil service salaries, very high expectations and standards must be the quid pro quo for the salaries especially as ministers and civil servants seem to have security of office despite non-performance (think Yaacob, Mah Bow Tan, Raymond Lim, Lim Hng Khiang). He conceded the reasonableness and fairness of the link.
Yesterday, I read something in TRE which should have been solved a long time ago by the PAP administration (ministers and senior bureaucrats) but not: S’poreans, after the age of 55, having to make HDB* mortgage payments in cash , even though they have some money somewhere in the CPF accoint which remains locked up..
I been driving taxi for the past 5 years now and recently turned 55. For the past 9 years, I have had zero CPF contributions and have slowly used up all the remaining balance in my CPF Ordinary Account to pay for my monthly HDB loan. I even had to give up all my insurance policies, since I couldn’t afford to pay the premiums any longer.
Earlier in the year, I sought assistance from my PAP MP to use my CPF Special Account, which still had about $90K balance left but which is utterly useless since it falls far below the stupid Minimum Sum of $155K. After my MP’s appeal, CPF Board allowed usage of my Special Account to pay my monthly HDB loan (of course la, appeal from PAP MP what!).
To my huge surprise, I have now received an officious letter from HDB asking me to pay cash for my monthly housing loan because of my turning 55. This means that my Special Account has now been converted into a “Retirement Account” and because it falls way short of the $155K Minimum Sum, I could no longer use my stupid CPF to pay for my HDB loan. This is how idiotic the law works against those Singaporeans like myself who are struggling to make ends meet everyday.
On Facebook someone posted this in sympathy:
Many people will not have that minimum $155k in their CPF when they turn 55 because a lot of it will have been used to pay for housing. Unless they bought their house at the age of 25, many will still be serving their home loans when they reach 55**.
So, if they do not have the minimum $155,000 in their CPF by the time they are 55, does that mean they must use cash and cannot use the monies in their CPF?
What if after using cash, they only left with a few hundred dollars each month?
Who knows? Maybe after 55, they start to get pay cuts and their children are in their early 20s and servicing their own education loans?
I cannot fault the logic of these complaints.
There should be provision within the rules to ensure that someone in this situation can automatically keep on using his “Retirement Account” to fund his HDB mortgage payments. “Lose the flat so that he got retirement fund”: WTF?
Sadly the whole CPF system is in such a mess that the following extract from the FT about the USSR reminds me of the problems of reforming the CPF system: Before the Soviet Union collapsed, Russians compared the problem of breaking free from their Communist past to a frog in a swamp that wants to jump out but finds it has a hippopotamus stuck to its backside.
The PAP will only tinker with this sacred cow and Hard Truth.
But will S’poreans trust an Oppo coalition (assuming the WP joins such a coalition) to solve the problem? Somehow I doubt this too.because support for the opposition comes from disenchantment with the PAP administration – and is not a vote of confidence for the opposition parties.
So the tinkering goes on but let’s hope this sore is treated soon.
*Actually all mortgage payments but if one has private property, one can look after one’s self.
**And do remember that the really rich minister said a HDB flat was affordable because it could paot-off over 30 yrs. The HDB now restricts the period to 25 yrs.
As you can see from below (via a FT article), the best performing public pension fund paid its CEO US$O,45m (18.66% return). The worst paid its CEO 16.3X more at US$7.4m. Yet the fund returned only 10.9%.
The fund that paid peanuts got a good CEO. The fund that paid serious money got a monkey.
But the problem with high pay relative to performance is cynicism about the people getting it. Our millionaire ministers should ponder the closing words of an FT article about an annual oil “bash” in London last week:
Even as the champagne flowed during the week … “Our clients invited us to this party and they’ve clearly spent a lot of money on it,” said a marine services company executive at one bash. “But why are they not paying us our $80,000?”
I would add: After a while, one stops believing.
Here’s an interesting quote from a rich Oz “After you have about $5m to $10m, your lifestyle doesn’t really change that much,”says Clive Palmer. He’s juz dropped off the top 50 richest Ozzies.
Or “Why PAP administration shld allow S’poreans to gamble their CPf funds in casinos” Funny Roy’s research doesn’t uncover this fact?
Typical of PAP administration to favour foreigners who don’t have to pay toll. LOL.
BETTING on red gives the punter an 18-in-37 chance (in America) or 18-in-38 chance (in Europe) of success in roulette. Parcel out your money carefully and you might have a diverting 20 minutes or so until it’s all gone, with a few wins along the way. If the odds were just one-in-four, then the whole game would be much more discouraging.
But those have been the chances, over the last 20 years, of largecap US mutual funds beating the market. It has happened in just five calendar years.
A Star Wars toy that cost £1.50 when it came out 35 years ago has sold at auction for £18,000.
The figure, of bounty hunter Boba Fett, was put up for action by Craig Stevens, from Croydon, who is a former chairman of the UK Star Wars Fan Club.
He bought the figure, still in its original packaging, for £50 in 1990.
Buffett said since he began investing in shares at the age of 11, he had never once bought something on the basis of an analyst recommendation. (FT)
[A] safe dividend needs a business that is sustainable and profitable not just for a few years, but over the decades, or more than the entire life of some quite substantial companies, FT.
And do remember that Reits, Biz Trust, pay out most of profits, cashflow.
No need for govt’s double talk of discouraging gambling, helping problem gamblers while having casinos and Toto. Juz embrace gambling LOL and use it to encourage less well-off S’poreans to save more in their CPF. And this allows the PAP administration, if it wants to, to screw the poor by lowering the interest rate.
Seriously, on top of the usual interest rates, offer “prizes” to less well-off S’poreans if they put additional $ into the CPF. The theoretical basis for the suggestion is as follows:
found that the presence of a prize-linked savings account increased the rate of total savings: the current consumption of respondents decreased by 7% when the option became available. In addition, they found that people reduced their use of the stand-alone lottery when they had the option of prize-linked savings. Strikingly, this effect remained even if the scheme offered a much lower average rate of return than the lottery or the fixed-interest rate options. That suggests premium bonds may well have saved the British government a lot of extra interest payments over the lifetime of the scheme.
These authors also found—confirming Macmillan’s suspicions—that these prizes were particularly attractive to those participants on low incomes or with a poor record of saving. Prize-linked savings induced individuals who reported little or no savings to increase their saving rate by an additional four percentage points compared with the average respondent.
The authors suggest that adding a random element to the interest rate entices people because it removes the stigma attached to gambling by packaging it with the more positive act of saving. That may explain why the concept has been so wildly successful. In Britain, they are now the most popular financial product after bank accounts; 21% of households are currently invested in them. Premium bonds have even spurred several private imitators, such as one product offered by Bank of Scotland which hands out monthly prizes to those who invest in it. Prize-linked savings accounts, it seems, have turned out to be not quite as squalid as Wilson once thought.
Low bond yields have in the past been bad, not good, for equity returns.
Top destinations for foreign direct investment in 2014
Money keeps on rolling in despite what the anti-PAP cyber warriors claim about mismanagement of the economy. And it’s not “hot” money but the most desirable type
And since I’m smiling while looking at my bank and CPF statements, he (and Tharman and others) must really must doing something right. I’m juz not grateful, isit? And 40% of voters are like me?
As James Mackintosh points out in the FT, there is a remarkable relationship between the first day’s trading in a calendar year and the returns for the whole 12 months.
This is the view of FT columnist and hedgie Gavyn Davies last week
Roy Ngerng (the anti-PAP mob’s Xiaxue) had alleged that the govt criminally misappropriated our CPF monies, and denounced the rates paid. Well, UK over-65s rush for 2.8%; 4% retirement bonds.
More than £1 billion of government pensioner bonds have been sold in the first two days after they went on sale.
The one-year bond pays an annual interest rate of 2.8% before tax, and the three-year bonds pays 4% before tax. Interest will be added on each anniversary after investment.
… the best one-year bond on the open market was currently paying 1.85% interest and the best three-year bond was paying 2.5%.
Investment is limited to £10,000 in each bond, making a maximum of £20,000 per individual.
(Updated on 9 January 2015 to include bit about clueless “consultant”.)
2015 is likely to begin in a merited atmosphere of gloom …
“Lowflation”, basically stable prices, is set to make everything worse. The already heavy debt loads of both consumers and governments will become more burdensome as nominal GDP growth slows down. The sharp fall in commodity prices may increase spending power in some countries, but it could turn lowflation into outright deflation.
But if mortgaged yr eyeballs …. https://atans1.wordpress.com/2014/12/16/why-oil-price-falls-bad-for-mortgagees/ and
A key interest rate that housing loans in Singapore are pegged to rose sharply for a second day, indicating home owners may face higher mortgage payments.
Bloomberg data showed the three-month Singapore Interbank Offered Rate (Sibor) was fixed at 0.62052 per cent at 11.30am on Tuesday (Jan 6), up from 0.57762 per cent on Monday.
Sibor is the rate at which banks lend to one another and is a widely used measure of the cost of funds. The three-month Sibor had been creeping up previously, rising from around 0.4 per cent in October to around 0.45 per cent at the end of last week.
Many housing loans are pegged to three-month Sibor. Oversea-Chinese Banking Corp (OCBC), for example, is currently offering home loans at three-month Sibor plus 0.85 percentage points for the first three years, according to its website.
The lending rate is reviewed every three months.
Assuming mortgage rates in Singapore rise to 2 per cent from around 1.5 per cent currently, a home buyer with an outstanding loan of S$500,000 and 20 years remaining will need to pay around S$2,530 a month, up from S$2,410. Should the rate rise to 3 per cent, the monthly payment will increase to S$2,770.
But here’s one mortgagee who lives in lala land. She obviously is not into finance.
New home owner Huang Sijia, 26, who took out a Sibor floating loan last year, is sticking to her package for now. “I am not too worried because the interest rates have been quite stable for the past three years,” said the consultant.
3% this yr 3.1% next yr from 3.3% and 3.7% respectively say the worse than fortune tellers forecasters
Private sector economists are less upbeat about the growth outlook for the Singapore economy this year, and have moderated their growth expectations for almost all sectors, according to a quarterly survey released by the Monetary Authority of Singapore (MAS) on Wednesday (Dec 17).
The economists polled in the survey said they expect Singapore’s economy to grow by 3 per cent this year, down from their median forecast of 3.3 per cent in the previous survey in September.
The latest estimates are in line with the official growth forecast of 2.5 to 3.5 per cent, which was announced in August.
The lower forecast comes after gross domestic product (GDP) growth in the third quarter was weaker than expected. The economy expanded by 2.8 per cent during the quarter, lower than the median forecast of 3.2 per cent in the previous survey.
Manufacturing is now expected to grow by 3.5 per cent this year, down from the 4.2 per cent in the previous survey. Construction is now expected to grow by 3.4 per cent, down from 4.7 per cent. The forecast for wholesale and retail trade has been revised to 2.4 per cent from 2.6 per cent, while the forecast for accommodation and food services has been revised to 1.2 per cent from 1.5 per cent.
Finance and insurance was the only sector that had its forecast revised upwards. The sector is now expected to expand by 7.3 per cent, up from the 5.5 per cent in the previous survey.
INFLATION LIKELY TO SLOW
Inflation is expected to slow, with the economists forecasting the consumer price index (CPI) to come in at 1.1 per cent for the full year, down from the 1.8 per cent forecast in September. Core inflation – which excludes accommodation and car prices – is expected at 2 per cent, down from 2.2 per cent in the previous survey.
Looking ahead, economists expect GDP will expand by 3.1 per cent in 2015, down from the 3.7 per cent in the September survey. Headline inflation and MAS core inflation are forecast to be 1.1 per cent and 1.9 per cent, respectively.
The MAS Survey of Professional Forecasters is conducted every quarter after the release of detailed economic data for the preceding three months. The median forecasts in the latest report were based on the estimates of 22 economists
(CNA late last yr)
The final sign of winter: lemmings have made M&A deals
Michael J. de la Merced writes in DealBook. Some 40,298 transactions ‒ worth nearly $3.5 trillion ‒ were announced worldwide in 2014, according to Thomson Reuters. It was the biggest year in deals since 2007. Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom led the global M.&A. tables for financial and legal advising.
Sure, debt financing was cheap and stock prices were climbing. But perhaps the biggest change, deal makers say, is that corporate boards and management teams realized that their ability to expand their companies on their own had become more difficult. And with some semblance of predictability in the markets, boards now feel more comfortable taking the plunge, Mr. de la Merced writes. The busiest sectors for the year have been the oil and gas industry and the pharmaceuticals industry. But the biggest deals of the year, including the assumption of debt, have been takeovers in the telecommunications industry, including Comcast’s $45 billion proposal to buy Time Warner Cable.
“The question now is whether the confluence of factors that enabled the merger revival will carry over into 2015,” Mr. de la Merced writes.
You’ll learn that there are reasons to trust the wisdom of crowds in most cases. Remember only at turning points is the crowd wrong.