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Archive for the ‘Financial competency’ Category

BKR50: Buffett doesn’t do PAP SG50 BS

In Financial competency on 04/03/2015 at 12:21 pm

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.

———————-

 

Budget: Ask in a very loud voice:

In Economy, Financial competency, Political governance on 25/02/2015 at 4:34 am

“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.

http://blogs.reuters.com/breakingviews/2015/02/24/piketty-meets-pragmatism-in-singapore-tax-hike/

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?

SG50 versus BRK50

In Financial competency on 24/02/2015 at 4:32 pm

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.

Buffett Wealth Chart Regular

A long standing CPF sore remains untreated

In Financial competency, Financial planning, Political governance on 23/02/2015 at 5:29 am

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.

Err pay peanuts, get best CEO

In Corporate governance, Financial competency on 22/02/2015 at 5:06 am

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.

So was our very own Mr Peanuts right to say, ” If you pay peanuts, you will get monkeys for your ministers”?

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.

Roulette offers better odds

In Casinos, Financial competency on 17/02/2015 at 11:48 am

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.

http://www.economist.com/blogs/buttonwood/2015/02/mutual-fund-investing

Buy higher, sell higher

In Financial competency on 13/02/2015 at 2:15 pm

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.

http://www.bbc.com/news/uk-england-tees-31025514

Buffett’s Hard Truth on analysts’ recommendations

In Financial competency, Investments on 10/02/2015 at 12:56 pm

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)

Hard Truth about buying shares for yield

In Financial competency, Financial planning on 09/02/2015 at 3:32 pm

[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.

Use gambling instinct to boost CPF savings

In Casinos, Financial competency, Humour on 08/02/2015 at 5:16 am

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.

http://www.economist.com/news/business-and-finance/21625047

Low bond yields not good for equity returns

In Financial competency on 06/02/2015 at 12:19 pm

http://www.economist.com/blogs/graphicdetail/2013/08/daily-chart-8

Low bond yields have in the past been bad, not good, for equity returns.

PM must be doing shumething right, right? ))))

In Economy, Financial competency, Humour, Political governance on 02/02/2015 at 11:30 am

Top destinations for foreign direct investment in 2014

SOURCE: UNCTAD
China $128bn
Hong Kong $111bn
US $86bn
Singapore $81bn
Brazil $62bn
UK $61bn
Canada $53bn
Australia $49bn
Netherlands $42bn
Luxembourg $36bn

$= USD

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?

STI will close lower this yr?

In Financial competency on 28/01/2015 at 1:09 pm

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. 

Financial markets reflect economic fundamentals this time round

In Commodities, Currencies, Energy, Financial competency on 23/01/2015 at 12:59 pm

This is the view of FT columnist and hedgie Gavyn Davies last week

2.5%, 4% not enough for retirees?

In Financial competency on 18/01/2015 at 9:53 am

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.

http://www.bbc.com/news/uk-30862028

Jan- Jun 2015: Hibernate unless mortgaged to eyeballs

In Economy, Financial competency, Financial planning, Property on 07/01/2015 at 11:40 am

(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.

http://blogs.reuters.com/breakingviews/2014/12/16/this-is-as-good-as-global-recovery-gets/

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.

(CNA yesterday)

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.

http://business.asiaone.com/property/news/mortgage-payment-hike-likely-key-rate-rises

S’pore’s prospects

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.

Be contrarian: In 2015 trade against these popular trades

In Financial competency, Uncategorized on 31/12/2014 at 1:26 pm

Most crowded trades

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.

Still trust analyst reports?

In Financial competency on 23/12/2014 at 1:18 pm

As someone I know wrote in FT recently, the worrying thing is that the u/m only happened seven yrs after the banks promised to clean up theur act.

10 Wall Street Firms Fined Over Conflicts in Toys ‘R’ Us I.P.O. The Financial Industry Regulatory Authority fined the 10 firms $43.5 million, saying they implicitly or explicitly offered favorable research coverage in return for a role in a planned I.P.O. of Toys “R” Us.

Why oil price falls bad for mortgagees

In Economy, Financial competency, Property on 16/12/2014 at 12:06 pm

Oil price-led disinflation is desirable as it helps competitiveness gains by reducing cost and price differentials analyst at Lombard Street Research quoted by FT. So gd for economic growth and property prices?

True but then:

Household debt in Korea, Malaysia and Thailand is now in excess of 80 percent of GDP; it’s 76 percent in Singapore. When borrowers loaded up on debt, they expected three things: Money-printing in rich nations would keep borrowing costs low for an extended period; domestic property prices would keep rising; and steady inflation would boost wages, reducing the real household debt burden.

The third part of this equation has buckled. Inflation is low – and slowing – across Asia. As oil prices fall, the slide will accelerate. In Korea, China and Singapore, deflation is now a real threat.

http://blogs.reuters.com/breakingviews/2014/11/28/cheap-oil-worsens-asian-debtors-lowflation-woes/

(Emphasis mine)

Deflation means real interest rates go up.

The born losers who read TRE will be happy to see their fellow S’poreans go bust. Uniquely S’porean.

 

Look on the bright side: No wonder PM thinks govt doing a great job

In Economy, Financial competency, Political governance, Property on 11/12/2014 at 6:39 am

Blog E-Jay* posted this on Facebook to prove point that “PAP, will be voting against you again in 2015/2016. Thank you for making my life difficult.”

Well, there are other, reasonable legtimate ways of looking at the chart:

— Wah flat owners got windfall if they willing to retire to Batam or M’sia

— I should have used bonus for one yr to buy 3-room HDB flat for cash in early 90s . Only thing allowed for us oppressed singletons then: maybe taz why I’m so hard on those who KPKB about being discriminated for trivial things like being gay. Only a real sleaze bas got prosecuted by AGC under 377A. Had to client of M Ravi.

— HDB owners so ungrateful: property worth so much all ’cause of SuperLoong and sidekick Mah. Instead of being grateful, HDB owners fret for their children’s inability to afford “affordable” housing. PAP makes them rich, must also make their kids reach. WTF!

Seriously, what the chart tells us is that Ah Loong allowed Mah Bow Tan to screw S’poreans. And he wants us to vote for him? And not to have better checkers than the Worthless Party is now providing. One of these days, I’ll blog on why PM is behaving like scholar Eng, and how two really rich and privileged kids, to the manor born, so to speak, can teach him some humility and common sense. Then maybe, he doesn’t need checkers. In the meantime, we need better checkers than the Worthless Party’s MPs.

But we got to play our party, deprive the PAP of its two-thirds majority.

*Actually, a revised Magnificent 7 list should include him and Uncle Leong [Added at 11.00am]

Hedge funds Won’t Make You Rich/ But what will

In Financial competency, Financial planning on 09/12/2014 at 11:51 am

Do you, as a pension-fund manager, or rich individual investor, think that you have an above-average ability to pick out the non-superstar hedge funds that will outperform in the future? And if so, why? Also, is your superior fund-picking ability worth the average hedge-fund fee?

If you decide the answer is “no,” then you should consider investing in an index such as the HFRX Global Hedge Fund Index, which replicates hedge-fund returns net of fees — so it helps with portfolio diversification but not fee reduction.

http://www.bloombergview.com/articles/2014-05-21/hedge-funds-won-t-make-you-rich

Bear makes money in bull mkt

In Financial competency on 08/12/2014 at 12:02 pm

Sure he underperforms S&P but it’s like being paid by an insurance co. to buy life insurance.

BEARISH FUND VS. THE BULLS STILL PROFITS The stock market has been rising for years, but Universa Investments, one of Wall Street’s most bearish investors, has found a way to make money anyway, Peter Eavis writes in DealBook. The hedge fund, founded by Mark Spitznagel, is set up with the aim of making money in an economic and financial collapse. Big pessimistic bets usually lose a lot of money when stocks are rising, as they have since 2009. But Universa is saying that its investment strategy has been able to produce consistent gains since then, including a 30 percent return last year, according to firm materials that were reviewed by The New York Times. The benchmark Standard & Poor’s 500-stock index in 2013 had a return of 32 percent with dividends reinvested.

Mr. Spitznagel’s strategy stems from his skepticism toward government efforts to revive the economy. He acknowledges that the stimulus policies of the Federal Reserve and other central banks have the power to drive stocks higher. But they will ultimately be self-defeating, he contends. This theory holds that another crash will occur when the Fed stops being able to stoke the economy. Universa’s strategy seeks to profit when confidence in the central banks is strong ‒ and when it evaporates. “The Fed has created a trap in this yield-chasing environment,” Mr. Spitznagel said in an interview. The Universa strategy has produced gains of 10 percent this year, slightly less than the stock market overall. It’s been up every year since 2008, according to the materials.

Universa is not alone in saying that it can make money in good times and bad. Other firms also offer bearish bets that clients can use to hedge their stock portfolios. Such bets often cost so much that they have to be used sparingly. Yet Universa seems to be saying that its catastrophe insurance is comparatively cheap. The Universa marketing materials say that its strategy would theoretically result in a 16 percent gain if the S.&P. 500 fell 30 percent. For his part, Mr. Spitznagel is certain that another collapse will come.

Dutch Pension Plan

In Financial competency on 20/11/2014 at 1:49 pm

LESSONS FROM THE DUTCH PENSION PLAN “Imagine a place where pensions were not an ever-deepening quagmire, where the numbers told the whole story and where workers could count on a decent retirement,” Mary Williams Walsh writes in The New York Times. “Imagine a place where regulators existed to make sure everyone followed the rules,” she adds. “That place might just be the Netherlands …”. The Dutch system rests on the idea that each generation should pay its own costs ‒ and that the costs must be measured accurately if that is to happen.

Going Dutch isn’t easy, and it is quite expensive. There are also elements of the plan that may seem too socialist for American tastes.

What Scrooge McDuck can teach PAP ministers, TRE born losers etc

In Financial competency on 19/11/2014 at 4:05 am

In the 60s and the 70s, I loved getting my hair cut once a month in the Arcade at Clifford Pier. One LKY had his hair there too but the reason why I loved going to the the barber was the comics the shop had. A particular favourite comic hero was Scrooge McDuck, the maternal uncle of Donald Duck, and the grand-uncle of Huey, Dewey and Louie, Donald’s nephews.

Recently, I learnt that he and Warren Buffett are connected.

http://www.investopedia.com/articles/investing/103014/what-can-investor-learn-ducktales.asp?utm_source=coattail-buffett&utm_medium=Email&utm_campaign=WBW-11/6/2014

The PAP administration and all managers (TLCs, GLCs, SMEs and MNCs) can learn from this story

In “The Curse of Castle McDuck” Uncle Scrooge and his nephews make a trip to Scotland to visit his birthplace. Along the way Uncle Scrooge finds his first piggy bank, and says “my life of thrift began with this very bank.” When our adventurers get to Castle McDuck, they discover the old pile is haunted by a glowing hound that terrorizes the locals, and at night druids perform secret rites within the castle walls.

Uncle Scrooge and the nephews trap the druids and their magical hound (which is, in fact, just a dog), and ask them why they drove the McDucks from Castle McDuck after it was built. It turns out that Silas McDuck, who first built Castle McDuck, did it on top of the druids’ stone circle “to cut costs.” Uncle Scrooge blushingly acknowledges that cost-cutting runs in the family. 

Realizing that the McDuck clan has been in error for centuries, Scrooge McDuck offers to share the site with the druids. During the day it will be a tourist site to make money, and at night the druids can perform their ceremonies. In the end, everybody wins.

Scrooge likes to say there is “always another rainbow”, something the born-loser rabid anti-PAP paper warriors should take to heart: stop KPKBing and start working, not skivving at work, or if enemployed, looking for work.

Perhaps PAP ministers can learn from him that money is not the most important thing in life.

Ordinary S’poreans can learn

— “Work smarter, not harder” (so can the PAP administration in its productivity drive)

— “Family is the most important thing”

A gd, disorganised entry from Wikipedia on him

Reits and other high yielders fit narrative for the “New Neutral”

In Financial competency, Property, Reits on 17/11/2014 at 1:58 pm

BOND KING’S MANTRA LIVES ON William H. Gross may have departed Pimco, but executives at the bond giant have embraced his view that a stagnating global economy will force central banks to keep interest rates low, Landon Thomas Jr. writes in DealBook. …

Before he left the firm, Mr. Gross called his insight the “new neutral,” and Pimco is showing no signs of abandoning its departed leader’s mantra. In so doing, the firm’s executives are making the case that the Pimco bond funds that have made investments based on this economic approach will not soon change their strategy. Daniel Ivascyn, who was appointed to succeed Mr. Gross as group chief investment officer, took pains to point out that this new investment tack had many fathers, and emerged from a Pimco-wide brainstorming session this spring. But it is also true that the notion never really took off until Mr. Gross pitched it at an investor conference while wearing sunglasses, Mr. Thomas writes.

Mr. Gross’s economic predictions have failed in the past, but Pimco looks to be on firmer ground this time around. Like Mr. Gross, a number of economists believe that a mix of high debt, low growth and disinflation will force central banks around the world to keep rates from rising. Before he left Pimco, Mr. Gross had begun to invest in riskier, higher-yielding securities like government bonds in Italy and Spain and corporate bonds in Brazil, a strategy that the firm is still following. …

NYT’s Dealbook

Well the equivalent of these in equities would be Reits and other high yielders. Interestingly, FT reports that the fund mgr of Schroders flagship UK fund thinks there is value in income producing equities.

And an alternative view: We are doomed, doomed. Central banks cannot prevent deflation of everything including assets.

 http://blogs.reuters.com/breakingviews/2014/10/06/asset-price-disinflation-may-be-next-big-thing/

Latest US investment philosophy

In Financial competency on 14/11/2014 at 2:58 pm

“Buy & hold” is history. “Trading” is in. Locals (before FTs took over SGX and made contra trading even more difficult) and Hongkies have been doing this since time immemorial.

The new investors’ philosophy seems to be, rather than pay a financial adviser to let their stocks languish in a buy-and-hold paralysis as the market falls, a potentially more profitable move is to pay advisers to protect and increase a portfolio’s bottom line by actively trading.

A perfect example of the vulnerability of the buy-and-hold strategy is the technology stock boom followed by the tech stock bust. Tech stocks in general soared in price during the bull market of the late 1990s. Sun Microsystems whihc is now owned by Oracle Corporation (Nasdaq:ORCL), made software and Internet hardware for a burgeoning World Wide Web. All indicators, technical and fundamental both, pointed toward continued growth and profitability of the company.

Yet despite Sun Microsystems’ bright prospects, other tech firms were moving up fast to challenge Sun Micro’s market dominance. The stock fell in the face of competition from IBM (NYSE:IBM) and Hewlett Packard (NYSE:HPQ), and other tech competitors and its price has declined some 85% since its high. Obviously, Buy-And-Hold would not have worked in this instance, and there are numerous other examples of once-high-flying equities which have fallen on hard times and low stock prices.

ST’s writer suggests a trading tactic any investor, who is confronted with a dilemma over taking profit on his winning bet or cutting loss on a plunging stock, is to sell half of it.

Selling half of the investment will release the psychological logjam that comes from trying to decide whether to keep the investment or get rid of it completely. He can then analyse why he bought the stock in the first place, and whether to hold the remaining shares, sell them or buy more.

This ploy is especially useful to a trader who is facing losses on his bets. What should he do if he keeps losing money even though he believes he is right and that the market would see sense eventually?

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={835928295-20153-5633595585}

Related post: https://atans1.wordpress.com/2012/09/04/long-term-investor-while-trading-a-stock/

http://www.investopedia.com/financial-edge/0611/why-buffetts-buy-and-hold-strategy-is-losing-its-appeal.aspx?utm_source=coattail-buffett&utm_medium=Email&utm_campaign=WBW-5/22/2014

PAP administration scores own goal?

In Financial competency, Political governance on 11/11/2014 at 5:03 am

(Update on 12 november 2014 at 4.30am; U/m makes a mistake (“an honest mistake”) in assuming that “yellow” in the table means “gold” or “best”. It actually is an “amber” sign”. Hence the amendments shown.)

Don’t the MND KPIs show WP has a “heart of gold” and competency while proving that the competent PAP town councils have hearts of granite?

This is a plausible reasonable view despite the framing by wannabe Sith Lord turned wannabe Jedi Knight as“I wonder what is more important to the Aljunied/Hougang voter : the need for a contrarian voice in Parliament or a well-run housing estate.”. She is ignoring the fact that the one and only WP estate is as well run as any PAP estate by the three KPIs that should matter to residents: even better than some including the PM’s very own estate. But then she was once upon a time a serious contender to be ST’s editor.

First a reminder of waz the issue is all about.

The bureaucrats in a ministry (MND) in the PAP administration failed the one and only WP town council on two KPIs out of  five  devised by said bureaucrats and the governing party: arrears collection and governance.

Methinks, that the WP’s results will make voters reflect hard on whether

— “The PAP will always be on Singapore and Singaporeans’ side.”

— “The PAP will always do its best for Singapore and Singaporeans.”

(PM on 7 November)

As far as governance, the issue is a very technical accounting issue (which may or may not have financial implications, that may be serious or not) and the WP is playing hard ball. But then wimps* too sometimes have their boiling points. And whatever the PAP and stooges allies may say, this “red” card doesn’t affect the daily lives of residents.

As to the issue of arrears collection, the charge by MND is that the “sharp decline” in the S&CC arrears situation in AHPETC as being “of grave public concern”. Aljunied’s S&CC arrears rate rose from 2.6% in FY10 to 8.4% in FY11 and FY12, after Aljunied merged with Hougang. This was significantly above the national norm of about 3%, the MND noted.

The arrears rate rose further to 29.4% at the end of April 2013. “From May 2013, the TC stopped submitting its monthly S&CC arrears report altogether, despite repeated reminders.”

To me as an honrary club treasurer, once upon a time, this doesn’t look gd. But the devil is in the details. So I’ll not pass judgement on the WP until I hear its side of the story. But its silence is deafening.

Here’s what the PAP should be afraid of: what if LKY’s “daft” S’poreans decide

Those running AHPETC must have hearts of gold to hold back from driving those unable to pay to the wall. Thus demonstrating a caring spirit that others only mouth.?

And not the right views of

Would this seeming inability to collect what is due to the AHPETC make them shake their heads and vow never should this brand of incompetency be allowed to run our country?

Or would the revelations make some among the discerning voters think one or all of the following:

1) There must be a concentration of poor people in AHPETC

2) There must be a concentration of canny skivvers in AHPETC who are able to keep delaying paying what they owe

3) Those who want to be successful should move far away from AHPETC for poverty and dishonest skivving could be as infectious as SARS

http://singaporegirl.wordpress.com/2014/11/06/red-for-mnd-town-council-press-release/

On the KPIs of cleanliness and lift performance it was second to none: being equal to PAP estates. In estate maintenance it was better than five PAP managed councils, including PM’s very own AMK.

So based on MND’s KPIs, one can reasonably conclude that

Those running AHPETC must have hearts of gold to hold back from driving those unable to pay to the wall. Thus demonstrating a caring spirit that others only mouth; and

— The WP is juz as competent, if not better, than any PAP town council in providing services.

Oh what a tangle web we weave …

Related post: https://atans1.wordpress.com/2014/11/06/arrears-collection-governance-aljunied-voters-will-decide/

 

Great article on life insurance

In Financial competency, Uncategorized on 26/10/2014 at 4:56 am

This appeared sometime back. I highly commend reading it both for oldies and newbies.

She went over what main types of policies were available – term, whole life, endowment and investment-linked policies – and how they worked.

She also laid out the various areas of possible coverage and explained, step by step, how my current policies fit within that overall structure.

It was the first time anyone had taken the trouble to make sure I knew how things worked.

I found out from the walk-through that while I was probably adequately covered for hospitalisation and the later stages of critical illnesses, I didn’t have any coverage for their earlier stages.

I also didn’t have any accident coverage or income protection, for instance.

If I had taken the time to find a good agent earlier, I would likely have been able to avoid the current mad rush to figure out what insurance policies I should lock in before I turn 26 in a few days.

Why the hurry? Well, insurance premiums often depend on your age at your next birthday, as I have learnt.

Besides still being eligible for youth discounts in Europe, 25-year-olds turning 26 get to pay less for insurance premiums than those a year older.

The difference between being 25 and 26 worked out to about $150 extra a year for the plan I was buying – which is not a lot, but is still money.

Younger people generally pay lower premiums due to their relative good health and lack of pre-existing medical conditions.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={582229581-20557-9571802615}

A delusion? PAP confident it regained lost ground

In Financial competency, Political governance on 20/10/2014 at 5:41 am

Surely not when S’poreans in their 20s and 30s and their parents have difficulties in the PAP’s version of paradise? If these two groups have problems how can the PAP expect to hold the line at 60% of the popular vote? Let alone improve it to 65-66%*.

Speaking at a seminar organised by the Singapore Exchange and SIM University sometime back, one Mr Kevin Scully (who has been around in financial services so long that I wonder if he is related to Dracula) puts it: “You cannot rely on your children for financial support because they probably have more debt and cashflow problems than you. My daughter is getting married, and she needs $700,000 to pay for her flat.”*

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={489390965-20577-4829937219}

As the SunT writer put it very succinctly, “My generation has enjoyed the Singapore miracle, so to speak, when big-ticket items such as HDB flats cost a fraction of what they are worth now. If we have difficulties financing our retirement, the next generation will have an even rougher ride.”

And their parents while benefiting from asset appreciation (or inflation, if one is a die, die anti PAP cyber warrior) have a problem, illustrated also by Kevin Sculley:

the costs of food and health care have vastly outpaced the six- and 12-month fixed deposit rates over the past 10 years.

“We need to get returns of at least 3 to 5 per cent on our investments just to stand still. Clearly, this will not come from bank deposits.”

As the SunT writer puts it

He flagged another problem for those of my generation – people in their 40s and 50s – namely, the likelihood that many of us may run out of money during retirement because of inflation.

It was a sobering thought for those of us at the seminar organised by the Singapore Exchange and SIM University.

So how can this be true? [T]he People’s Action Party (PAP) was confident it had regained lost ground since the 2011 general election. Its confidence stemmed, it was said, from a huge survey that it had been conducting over the past few months …  https://atans1.wordpress.com/2014/10/17/fts-then-1970s-now/

But then S’poreans could be like the victim in a long-term relationship with an abusive partner. A bit less abuse, a bit of tender loving care and the victim is ready to accept more abuse in future.

*I’m assuming that the PAP believes that it needs a clear, biggish majority to ensure that it retains the “moral” right to continue paying PAP ministers their relatively huge salaries while not doing too much to deserve the money (think RI boys Hng Kiang and Yaacob). If it doesn’t, it could resort to very serious gerrymandering so that the 35% core vote (die, die must have PAP) keeps the PAP in power, with the help of egoists Tan Kin Lian (and Goh Meng Seng, his PE 2011 adviser), s/o JBJ and Tan Jee Say, who are more than happy to split the Oppo vote.

We [Barisan Socialists] won thirteen seats at the elections, averaging 15.000 votes to each seat. The PAP won thirty- seven seats, averaging 7,000 votes to each seat. The United People’s Party, whose function was to split the left-wing votes, campaigned on a programme that was somewhat similar to ours but more extremely put. Only their leader, Mr. Ong Eng Guan, was elected. We received 201,000 votes (35 per cent) and the PAP 272,000 votes (47 per cent). The difference is only 70,000 votes out of a total electorate of nearly 500,000. The UPP took away 49,000 votes (8 per cent), causing us the loss of seven constituencies (apart from Mr. Ong’s), and saved four PAP Ministers from defeat.

http://archive.spectator.co.uk/article/29th-november-1963/23/the-situation-in-singapore

https://atans1.wordpress.com/2014/07/21/want-a-pekatan-here-its-disunited/

 

 

 

 

 

SMRT is dysfunctional, still/ Why unaffordable CoEs should make S’poreans happy

In Financial competency, Infrastructure on 15/10/2014 at 4:52 am

What was SMRT thinking?

SMRT said on Monday it had decided against making a takeover bid for Addison Lee, London’s biggest minicab operator after

Britain’s Sky News reported over the weekend that SMRT was planning a £800m (S$1.6bn) for Addison*.

It shouldn’t have even tot of bidding because SMRT’s market capitalisation of S$2.3bn was only 30% more than reported bid price.. It’s finances are not in great shape either. At the end of its last financial yr, cash flow was negative and gearing stood at 65%, while it also suffered its first loss in its fare business.

It also has operational problems here.

So what were the ex-scholar and his fellow ex-SAF officers thinking?

Plenty of things to do in S’pore (including more reliable service) and it doesn’t need any distraction abroad,”

And going abroad in a political nightmare for the govt and SMRT: if it loses money, S’poreans will be screaming (rightly) that the public is subsidising their failure overseas.

The investment bank that brought a proposal to SMRT to bid should have been sent packing immediately, not entertained enough so that a staff member would leak that SMRT was planning to bid.

Happinness is taking public tpt

It’s ’cause commuting by public transport makes people happy.

No this isn’t ST propoganda for the the PAP govt, LTA, SMRT or ComfortDelgro/ SBS.

But a study in the UK where cars don’t cost a fortune, and where the public are unhappy with expensive and crowded public transport.

The University of East Anglia study surveyed 18,000 passengers and found that even when other factors that may affect wellbeing were taken out of the equation commuters who travelled to work on public transport were happier (that is, scored lower on feelings of worthlessness, unhappiness and sleeplessness) than those who drove. Key to it all is what public health experts call “active travel”. Drivers are choosing a “non-passive travel mode” requiring constant concentration. This can be boring, isolating and stressful. Active travellers, on the other hand, have time to relax. The simple walk to and from the station appears to have intrinsic value. As the UEA economist who led the study put it: “It appears to cheer people up.”

While we’re putting things simply, apparently the people who chose to take public transport were around half a stone lighter, too – the bodyweight benefits were found to be on a par with cycling. I don’t wish to do down the car, and perhaps I’m unusual in some ways – my commute is often the only hour in my day that is truly my own, which must go some way to making it special. If I had all day to read and listen to podcasts and radio programmes, perhaps I’d feel differently. But who has all day to do those things? Moreover, who wouldn’t feel better if they added half an hour or so of moderate exercise to their daily routine?

http://www.theguardian.com/lifeandstyle/2014/sep/28/why-commuting-public-transport-makes-you-happy-lauren-laverne

The LTA and our constructive, nation-building media missed a PR trick when they disn’t highlight the UK study (The Guardian is the kind of paper that only Maruah-type people and economic illiterates like Roy read) when trumpeting, The number of bus services that were crowded during peak periods has fallen substantially over the past two years, following the addition of 450 buses under the Government’s Bus Service Enhancement Programme (BSEP).

‘Giving an update on the programme, the Land Transport Authority (LTA) said the number of bus services carrying passengers at more than 85 per cent capacity during peak hours had fallen from 96 before the implementation of the BSEP to 38 in July.

The S$1.1 billion BSEP was launched in 2012 to boost connectivity and bus-service levels. Under the programme, a total of 1,000 government-funded buses will be added to the public transport network by 2017. [CNA]

The media went ape reporting the joy of commuters at the extra buses.

Locals can still afford CoEs

So we learnt last week that FTs didn’t cause CoE prices to (only 13% went to foreigners, Wonder waz the PR %? As usual not given.

———————

*Addison Lee is being put up for sale by its private equity owner, Carlyle Group, which paid £300 million for a majority stake in April 2013. Carlyle has decided to start an auction process after receiving unsolicited offers for the business.

Private equity firms BC Partners, CVC Capital and Charterhouse were reportedly among those making bids.

 

 

Integrated Shield Plans? Waste of money? Cont’d

In CPF, Financial competency, Financial planning on 19/08/2014 at 4:30 am
When TRE republished my piece on S’pore overinsuring their healthcare that pointed out, But seven in 10 armed with IPs that target Class A wards in public hospitals chose to stay in lower ward classes when hospitalised. Only one in 10 from the same group chose private hospitals.Echoing a similar trend were those with IPs that target private hospitals – six in 10 chose lower ward classes in public hospitals. The committee noted twice in its report that many Singaporeans want medical treatment beyond that provided in Class B2/C wards but have “over-stretched themselves to buy the most expensive product for higher protection”.,
two responses stood out, one rubbishy (but which I suspect explains why many gold plate and gem encrust their Medishield plans) and the other sensible.
But both imply that because the money’s there in the Medisave a/c so spend it leh (a major point of my piece was that the ltd uses of Medisave “encouraged” gold plating and gem encrusting medical insurance. Btw, an actuary tells me that insurers don’t really make much money from such plans, but admits that it could be because they are inefficient.):
Ace:

This analysis by Cynical Investor is too simplistic. There are many consideration for buying a medical insurance.

In an emergency, for example if you faint at Tanglin Shopping Centre, the nearest hospital is Gleneagles Hospital which is a private hospital. If you are NOT covered under the highest plan and you go to Gleneagles Hospital, you will need to pay much higher out of pocket. You can of course go to SGH where you can be fully reimburse for the charges but it is further away and you may not have the luxury of time in an emergency.

For non-emergency cases, you can plan which hospital to be admitted but the fact is that the waiting time for admission to B2 or C wards for such cases can be as long as up to 9 months. Can you take the pain for so long and do you want to wait?

Hence most people would opt to buy the most expensive plan when they are young since the full premium can be paid by Medisave. When you are older, you can still downgrade to a lower plan if premium is an issue.

Singaporeans are not as stupid as the report make us up to be. We may be Kiasu but we are definitely not DAFT.

 

spiny dogfish:

One reason why people buy the most expensive plans is because of the very rapid escalation of hospitalization costs. That and the fact that the insurer has an obligation to renew your plan but is NOT obligated to allow you to upgrade.
When i bought my first shield plan the benefits were enough for a private hospital. When i got hospitalized this year the benefits had not changed as i had naively not upgraded my plan for years. The benefits were only marginally enough for B1 ward. The benefits do not change but the costs keep rising.
And i was told that had my conditon been a chronic one like say cancer or heart disease, it was possible that should i wish to upgrade my plan i would either suffer loading or that very condition would be excluded. BUT i could renew my plan, no problem.

After that you bet i’ll take the highest plan i can afford. In 5 years who knows what this plan will be good for. Just take it as front loading. The real issue is rising medical costs. Dealing with the insurance is treating the symptoms not the disease.

Importance of incentives (e.g. ministerial) & financial courses/ Dangerous to buying for yield

In Financial competency, Financial planning on 18/08/2014 at 4:40 am

Actively managed funds generate more fees for brokers which could explain a large part of their popularity. I’ve never once had a broker recommend a passive strategy and they look very disappointed when I mention it. Incentives matter.”—on “Practice makes imperfect”, August 9th 2014

Reminds me that tying ministers’ and senior civil servants, bonuses to GDP growth is problematic. The Chinese  have in principle stopped making GDP growth a KPI. They found that it skewers officials actions towards environmental degradation and urban sprawl because promoting heavy industries and building housing are the “betterest” ways to get GDP growth.

Crediting the classroom
New research shows that courses in finance at school can help reduce the harmful repercussions from taking on too much debt later in life

Danger of buying for yield alone

Even Neil Woodford, a star UK fund manager, has put the shares [HSBC] into his new income fund – it is the only bank in his top 60 holdings.

But the 12 per cent share price fall over the past year has wiped out more than double the value of dividends paid in the same period. That shows how dangerous it can be to hold shares for the dividend alone.

(FT’s Lex)

Will PM, tonite, give peace of mind on CPF Life Standard?

In CPF, Financial competency on 17/08/2014 at 4:26 am

(Or “Numbers don’t lie — the CPF default plan, is awfully bad“)

I doubt it. [Update on 18 August 4.30am: He didn’t touch on it. If S’poreans bitch, bleat, kpkb maybehe’ll fix it in next yr’s NatDay Rally speech. Remember GE coming.]

Further to my non-quantative rant on CPF Life, two number-crunchers have worked out how nasty and expensive the standard CPF Life plan is. I’m surprised that Roy ngerng has not got round to calling this “criminal misappropriation” yet. Probably, he is waiting for Uncle Leong to explain the numbers to him. Roy may be gd with words, but he is worse than me when it comes to quantative finance, let alone basic maths and stats. At least he wasn’t in finance. (Btw, I would like to point out to Woody Goh that a gd parent would not have devised such a unfair default standard plan, or cPF Life in general. Btw2, since when has govt become our parents? Juz because PAP been in power since 1959, doesn’t mean it has become our parents.  Even the CCP doesn’t regard itself as the parents of China. Woody Goh, we are not living in N Korea. You’ve been reading the ST, I assume.)

 Seriously, a financial planner, who is no second hand car or life insurance salesman, in a tie,  told me, “Someone asked me, why is the default option the worse one? I told him, yah that’s precisely why its the default option” when he sent me this link showing how
bad the standard plan is: http://www.ifa.sg/cpf-life-standard-is-the-worst/ (Warning very chim).
The author concludes, I speculate that the ‘poor’ returns of CPF Life Standard is due to the fact that all of the CPF RA is being invested into the common insurance pool while only a small amount of CPF RA under CPF Life Basic goes to the insurance common pool. The seemingly poor return is probably due to the ‘penalty’ of early exit from the pool in order to help subsidise the remaining in the pool who live too long. This is how insurance works through risk pooling. Unfortunately, we do not know whether this risk pooling is efficient as there is no further benefit illustration available.

Nevertheless, the present values gap between CPF Life Standard and CPF Life Basic is too large to ignore. It is difficult to determine what are the ‘fine prints’ for such a large discrepancy between CPF Life Basic and CPF Life Standard as there is no policy contract available unlike a traditional annuity plan available from private insurance company.

(my emphasis)

In TRE, someone working in finance posted this less technical explanation, coming to the same result:

Here is a comparison between the default CPF Life Standard Plan payout for the writer meeting the minimum sum of $155,000 and the example of Mr. Tan in the CPF Life Handbook, who has $100,000, below the minimum sum, property pledge required. The writer’s payout is derived from the CPF Life Estimator. Mr. Tan’s given in the handbook. The assumed investment rate is 3.75%, the low end of the assumed investment rates for CPF LIFE.

  Chris K Mr. Tan
RA at 55 155,000 100,000
Monthly Payout from 65      1,215        822
Bequest at 65 187,263 108,505
Bequest at 75   41,829   11,909
Bequest at 85             0             0

At 55, CPF deduct half the minimum sum, $77,500 the first premium instalment from both the writer and Mr. Tan. The remainder of both RAs earned 4% with an extra 1% on first $60,000. This will be on combined balance, including the first premium which earned rate of 3.75%. At age 65, the remaining RA pays for the second premium instalment. The writer calculates the accumulated capital at age 65 and then amortised against the CPF Life estimated payout. Here are the numbers (CPF does not reveal its calculation so the writer use the default common sense approach)

  Chris K Mr. Tan
RA at 55 155,000 100,000
Monthly Payout from 65     1,215        822
Accumulated Capital at 65 225,453 147,171
Residual Capital at 65 225,453 147,171
Residual Capital at 75 149,529   93,412
Residual Capital at 85   39,689   15,638
Capital depletion age 88 years old 86.75 years old

The first thing that jumps out is the disparity between the estimated bequests and the residual capital after drawing the monthly payouts.  At age 65, without a single payout, the bequest is $187,263 against accumulated capital of $225,453. As an annuity plan, the difference can be explained as those who expired earlier providing the reserves for those who lived longer on the basis of risk pooling.

However, the next thing that jumps out is the capital depletion age which is when the accumulated capital is completely drawn down: 88 years for the writer and 86.75 years for Mr Tan, both well in excess of the 82-83 years life expectancy. The government in effect made triple provisions for those who lived beyond the life expectancy:

1) the excess over the bequests of those who expired earlier

2) stretch the monthly payout well beyond life expectancy and

3) to a smaller extent having those who met the minimum sum compensate those who did not, which then begs the question why should anyone want to meet the minimum sum.

If that is not enough, legislation has been provided to wind up CPF LIFE in case the Plans are insolvent.

The Basic Plan

To avoid a long article, the writer provides a brief summary of the Basic Plan which is predicated on drawing most of the monthly payout from the RA while the annuity only kicks in at age 90. As such, the Basic Plan provides a larger bequest from the RA and over a longer time frame but with lower monthly payout compared to the Standard Plan.

At age 55, the first CPF Life premium instalment equal to 10% of the respective RA is deducted. At age 65, the second instalment equal of 10% of the accumulated RA balance is deducted. The writer draws $1,098 per month from his RA as the payout under the Basic Plan while Mr. Tan draws $737. At the age of 90, the remaining balances in the RAs will be completely depleted. Then, the CPF Life annuities start providing their respective payouts. If both expire before age 90, here is the unused accumulated capital in their respective CPF LIFE annuities and if they live, the capital depletion age.

  Chris K Mr. Tan
Annuity accumulated capital at 90 86,384 61,896
Annuity capital depletion age 96.75 years old 95.5 years old

When the government said a third of Singaporeans who are 65 today will live beyond 90, then two thirds of them will not see a single cent paid from the CPF LIFE annuity. Again the government has built in triple provisions 1) the payout from the RA is stretched well over life expectancy 2) annuities kicking in well beyond life expectancy, guaranteeing massive reserves to pay for those who live beyond 95 3) to a smaller extend, those who meet the minimum sum mitigating those who do not.

Conclusion

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.

(My emphasis)

Chris K

* Chris K holds a senior position in a global financial centre bigger than Singapore. He writes mostly on economic and financial matters to highlight misconceptions of economic policy in Singapore.

Fyi, I was lucky enough to be under the old system and I didn’t opt for any of these plans. If I live too long, I’d die financially if the CPF was all I had. The good concept but as usual messed up by the PAP govt in its meanness: The Standard plan offers an annuity scheme similar to what retirees in Britain opt for. The Basic plan is commonly adopted by US retirees.

Reminder, the Basic plan is closer to the Minimum Sum scheme that is no longer available.

If MOM correct about CPF, why need FTs, growing population? Cont’d

In CPF, Financial competency on 15/08/2014 at 4:23 am

Someone claiming to be a civil servant (and ex-reporter) replied to an article of mine on the above, As he has some good points, I tot I’d share it. My comments follow.

I’ll answer briefly the two questions you posed.

Firstly, why we need a larger population if each individual saves for his own retirement. Strictly speaking, we don’t. What we need is a larger *working* population because only those who have active incomes pay taxes. The taxes collected is used to run the country. It is simply not tenable nor sustainable to run a country with *both* a shrinking pool of tax revenue and a growing proportion of retirees.

For instance, even with steady population numbers, we expect the size of our law enforcement to maintain its strength (if already adequate). Our law enforcement staff is mainly supported by tax payers. Retirees generally enjoy their services but do not pay for the police. With waning tax revenues, it would be reasonable to cut funding and strength of our law enforcement agencies. And it stands to reason that crime rates would go up.

The same reasoning can be applied to health care, defense, or education expenses. Retirees don’t pay for these (other than a token co-payment).

Secondly, why the need for minimum sum and CPF Life. In my opinion, the Government is trying to be tactful in stating their reasons. I’d be more blunt here. Simply stated, the minimum sum is a proxy for your financial acuity throughout your working life. Financially savvy individuals would, by the time they retire, have a nest egg many times the minimum sum. Folks like you would be in that category. The Government does not have to worry for these folks.

Conversely, if you hadn’t even been able to save the minimum sum, what basis does the Government have to believe that you will be able to manage your own money to sustain you till death and not burden the rest of the population? If someone hadn’t been financially successful during their most productive years, would you believe that he is more likely to multiply his retirement account, or if given a chance, misspend or “mis-invest” his money. What then? What if they have no children or their children couldn’t support them or are themselves retired. Are you willing to support these folks for the rest of their life?

You yourself mentioned that life expectancy is much greater than before. That means whatever savings a retiree has would have to last for a longer time. If someone hadn’t sufficiently planned for his own retirement, what makes you think he could plan for his sustenance till death?

The views expressed here are mine and mine alone.

Whatever it is, it ain’t brief. So there goes his/her “briefly”.

Absolutely correct on first point though. My question was aimed at hopefully drawing out this answer.

This answer shows the BS (OK “incompleteness”, “economy with the truth”) that is the govt’s explanation here:

..a pension system. They collect taxes or get citizens to contribute to a social security fund. This pooled monies is then paid out to citizens who reach a certain age. However, many of these systems are facing challenges, because those who are young are now paying for the old. As most countries age, there are fewer and fewer young people paying for more and more aged people …
In Singapore, we have the CPF. Rather than pool all our monies together, every individual saves for his own retirement via his personal individual CPF account.
(Emphasis is mine)
Whether the Western system or ours, there is a need for “shared services’, MOM conveniently ignores.
It’s this kind of “answer” that gets me annoyed. S’poreans deserve better explanations.
On the second point, chap’s very cocksure: I’d be more blunt here. Simply stated, the minimum sum is a proxy for your financial acuity throughout your working life. Ever heard of the fickle finger of fate? “The Moving Finger writes; and, having writ,
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it.”
Seriously, he has a point. Recently FT reported
Behavioural economist Dan Ariely, meanwhile, says it is “illusory” to expect education to lead to better financial outcomes. He points to a 2014 meta-analysis of 201 prior studies on the subject that found financial education had virtually no effect on subsequent financial behaviour. This is largely because most people forget what they have learnt within 20 months.

Mr Ariely therefore recommends a degree of compulsion. People should have to buy some insurance against longevity risks just as they are required to buy a basic level of car insurance, he says.

The problem is the govt’s solution, CPF Life. We juz don’t know if it’s any gd: black box calculations and no protection against default (yr CPF Life, it dies, you die). Sometime soon I’ll give blog further on these points.

As to Kee Chui’s *Population figures – nobody knows” comments last week: This is what the moderator at the event where he spoke (and a respected economist) posted on Facebook Chan Chun Sing, this is what

As an economist all I can say is that it’s not a very helpful answer.

A final population of below 4 million implies a drastic collapse of the economy not seen even in the Great Depression

10 million implies an impossibly crowded, highly unequal, socially divided society.

That we want to look after our citizens, or provide good jobs for our young is an independent truism.

No comment on an issue that is a key determinant of long term well being for future generations?

Gau Siam!

 

 

 

If MOM correct about CPF, why need FTs, growing population?

In CPF, Financial competency on 05/08/2014 at 4:53 am
One message we always get from the govt and the constructive, nation-building media is that an aging population and the refusal of married S’poreans to do NS when having sex means we need FTs to grow the population so that S’pore can finance the needs of an aging population.
But another message is that in our CPF system, we finance our personal retirement needs (see yesterdays ad in ST),
unlike the ang mohs who have a pay-as-you-go system. The Manpower Blog from MOM describes it thus, ... a pension system. They collect taxes or get citizens to contribute to a social security fund. This pooled monies is then paid out to citizens who reach a certain age. However, many of these systems are facing challenges, because those who are young are now paying for the old. As most countries age, there are fewer and fewer young people paying for more and more aged people …
In Singapore, we have the CPF. Rather than pool all our monies together, every individual saves for his own retirement via his personal individual CPF account.
(Emphasis is mine)
So my question is why do we need to worry about an aging population? MOM says that we oldies don’t depend on younger S’poreans to pay for our pensions? It’s our money that is funding ourselves.
So why need population 6.9m by 2030? Or is it now 10m? Juz excuse to import FTs by the A380 cattle-class?
But then MOM also says CPF monies is S’poreans money, even when govt tells us how we can spend it: sounds like
“War is peace.
Freedom is slavery.
Ignorance is strength.” .
“All animals are equal, but some animals are more equal than others.”
And then there is this rubbish
When the British introduced the CPF scheme in 1955, we could withdraw all our savings at 55. Do we remember what our retirement age was then? It was 55. What was the life expectancy in 1955? It was about 60. Hence, what you withdrew at age 55 would have to last you for just a few years.
Today, the retirement age is at 62 and we could be re-employed until 65.And life expectancy is at least 82 and rising fast. For those turning 65 years old today, 1 in 2 will live beyond 85, and 1 in 3 beyond 90. What would happen if we withdrew everything at age 55? Or even 65? Would we ourselves be able to manage our monies for two decades or more? 
Well there are many other solutions other than forcing Minimum Sum and CPF Life down our throats at age 55. Ask the SDP about one possible solution. and the ang mohs too have ideas. Related post on ang moh view supporting PAP’s stance  

Why financial research is “noise” not value add

In Financial competency on 04/08/2014 at 5:30 am

It’s not every day that an analyst concedes that the bulk of financial research in existence is merely “noise”, with not much intrinsic value. But Stefano Natella, Credit Suisse’s head of equity research, is not your typical analyst.
With a penchant for existential questions – “I like that philosophical question (about) why research exists” – Mr Natella is keen to change the way clients view, seek out, and pay for financial analysis.
“I’m very candid (about this) – I don’t think there’s a lot of value in making comments on earnings. Or the value (expires) two minutes after it has been reported,”  …
He uses an example from the telco sector: “If you give me the press release of SingTel’s quarterly earnings, I can write you two pages of a research report saying (its performance was) slightly ahead of market (expectations), and it looked very good in this area, and clients paid (this amount) of fees, and so on. I may know very little about SingTel, but I (could do it reasonably well).

This appeared in BT few months ago

Desperately seeking “core plus” or “value add” Reits

In Financial competency, Property, Reits on 29/07/2014 at 5:37 am

When it comes to Reits, I’m almost like Pussy Lim saying the PAP is doomed (since 1990s), though she recently nuanced her remarks and Roy on the govt “stealing” (my take on what he is claiming, not his word) CPF. Same old messages.

Here’s a variation on my Reits tale. I’m looking at a Reits’ strategy to guard against the effects of likely interest rate rises*. I’m looking at a“core plus” or “value add” strategy: Reits that buy underperforming assets, for example a building with empty space, and focuses on improving returns, for instance by increasing occupancy.

Or Reits outside traditional core commercial real estate include student housing, medical offices, storage and even social housing. I’ll be looking at the Jap Golf Reit.

If I find Reits that are executing this “core plus” or “value add” strategy competently, I’ll switch to them even if their yields are lower. Let you know my conclusions after I do the switches.

BTW, Bank of S’pore, OCBC’s private bank, is recommending Reits and other income plays.

Sounds like what I’ve been doing, suggesting the last few yrs. Maybe I can be Bank of Singapore’s strategist?

Singapore equities will remain range-bound for the short term, but dividend plays will continue to attract interest, said BoS’s CIO on July 3.

“… certain interesting themes in the Singapore market, and one of which … there are many opportunities in the dividend yielding sector, ‘REITs’, some of those Temasek-linked companies** do give you a very nice yield in the context of a very low yielding environment in the world,” said Chief Investment Officer Hou Wey Fook.

BOS says the impact of a slowing Chinese economy on Singapore’s growth will likely be offset by the pick-up in the developed economies. This combined with the steady performance of emerging economies will deliver the best global economic outlook in 2014, since three years ago. (BT report)

BoS, like me, says it prefers equities to fixed income due to falling bond yields and soaring stock market indices. It also expects the improving growth momentum to spur companies into increasing their capital expenditure and M&A activities.

——-

*Keep an eie on the junk bond market. It’s going through a serious correction that could turn into a collapse given that many say the junk bond is a bubble.

**https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Medishield: Totful tots on loss ratio to determine premiums

In Financial competency on 14/07/2014 at 5:26 am

With regards to the use of  incurred loss ratio to determine the level of premiums, I don’t like it for a few reasons:

  • A lot of premiums is collected upfront and Medishield ends up having a lot of money to invest, which might not be its core expertise.
  • It is not easy to determine future liabilities and brings another uncertainty to the calculation of the loss ratio.
  • With Medishield Life going to be a compulsory scheme, there is even less of a need to collect too much surplus as it is possible to adjust the premiums accordingly whenever overall claims go on a sustained uptrend. As a nationwide scheme, the pool is also huge and total claims will be less volatile and predictable.
  • Private health insurance that has a smaller pool will have claims that are more volatile and cannot easily raise their premiums without the risk of their customers leaving and making their pool even smaller.

http://www.martinlee.sg/medishield-reserves-loss-ratio/

From an honest financial planner. Feel safe to buy second-hand car from him. Smart guy too. Given that he has a masters in engr from NUS, I once asked him why was he wasting his time selling insurance. Never got a gd reply.

Check out his other articles explaining Medishield. Under insurance, healthcare.

Daft Sinkies? Dishonest insc agents? Or Medisave sucks?

In CPF, Financial competency, Financial planning on 08/07/2014 at 4:29 am

I was shocked to read in BT on Saturday that the MediShield Life Review Committee highlighted something that should never have been allowed to happen by a truly nanny govt or a govt that cares for its people:

 [O]ne issue has stuck out like a sore thumb: the overbuying of Integrated Shield Plans (IPs).

In the clearest indication that something is amiss, the committee’s report released last Friday stated that about three in five Singaporeans covered under MediShield purchased IPs.

But seven in 10 armed with IPs that target Class A wards in public hospitals chose to stay in lower ward classes when hospitalised. Only one in 10 from the same group chose private hospitals.

Echoing a similar trend were those with IPs that target private hospitals – six in 10 chose lower ward classes in public hospitals. The committee noted twice in its report that many Singaporeans want medical treatment beyond that provided in Class B2/C wards but have “over-stretched themselves to buy the most expensive product for higher protection”. (Emphasis mine)

So S’poreans fork out premiums to stay in the best (OK most expensive) wards, but then don’t use them ’cause no money? Presumably the insurers are laughing when they see their bank statements.They pay out less than what they are prepared to pay for.

Shumething is clearly wrong.

BT as part of the constructive, nation-building media tries to avoid blaming S’poreans. insurers and their agents, or Medisave.

Having said that, it qualified that this typically happens during the working years, when premiums can be paid entirely or mostly through Medisave, the national medical savings scheme used to foot hospital bills, among other things.

A quick comparison of the IPs offered by the five insurers – AIA, Prudential, Aviva, NTUC Income and Great Eastern – showed that premiums for the first 40 years of an individual’s life were priced suitably low to gain market share.

For example, existing private IPs for Class B1 in public hospitals range between $78 and $207 annually, according to the comparison provided by the Ministry of Health’s website. The amount payable doubles to about $297 to $410 when the consumer is between the age of 41 and 50. It rises to between $425 and $921 for those aged 51 to 65, and for those who are 66 to 90, the yearly costs go up to between $888 and $4,245.

It calls for more education rather than pointing out that Medisave nudges S’poreans towards over-insuring despite describing the process of nudging (for the daft: the last three preceding paras).

While information is relatively accessible and most people understand that they have to pay more as they get older, only a small number of people truly realise the exponential spike in IP premiums from age 60 onwards, not to mention the accumulated lifetime costs.

All these point towards a poor comprehension of the workings of IPs – a point that the committee also made sure to reiterate throughout its report. This is why there is a pressing need for the government to educate the wider public of its entire healthcare financing system, as well as the things to look out for in choosing an IP if required, so that the individual can make an informed decision.

But it ignores the T Rex in the ward, Medisave: this typically happens during the working years, when premiums can be paid entirely or mostly through Medisave, the national medical savings scheme used to foot hospital bills,

The answer to the title of this rant?

All three with Medisave the catalyst. It worsens the stupidity (or financial incompetency) of many S’poreans and the dishonesty of agents, by nudging via skewed incentives money in Medisave cannot be touched except for illnesses and medical insc premiums, so might as well buy the more expensive coverage)). It’s our money in MediSave, but we can only spend it in the right ways, one of which leads to bigger profits for insurers..

Update: Follow-up https://atans1.wordpress.com/2014/08/19/integrated-shield-plans-waste-of-money-contd/

 

Time to sell? New, inexperienced punters rushing in?

In Financial competency, Property on 03/07/2014 at 6:28 am

(Or “The bull SGX is spinning?”)

Serious mkt correction on the cards based on SGX’s boast that more than 68,000 new Central Depository accounts were opened last year as the largest number of new retail investors in the past five years “ventured into the stock market in the face of an uncertain property sector”? (For those seriously challenged for time, skip right to the end for my take.)

The number of accounts is a big jump from the year before, when about 51,000 new accounts were created. At a press briefing last week on Singapore Exchange’s ongoing retail initiatives, SGX’s senior vice-president for retail investors, Lynn Gaspar, said that about half of all CDP accounts or a record-high 844,000 actually held some shares.

BT reported earlier this week:

“Subscription to SGX’s My Gateway’s e-newsletter over the past 12 months has risen 21 per cent to 187,000 and the increase in unique visitors to our website has been 45 per cent over the same period,” she said.

However, she added that, notwithstanding the increase in interest, the proportion of Singaporeans who invested in the stock market is still low when compared with other markets.

“Only about 8-10 per cent of the population is in stocks, compared with 20-25 per cent in Hong Kong and 15-20 per cent in Australia,” said Ms Gaspar. “If you assume the potential retail investor population to be about three million people, only about one third has some direct involvement in stocks while 62 per cent has never been in the market. Of these people, about 400,000 are interested in getting into the market. Based on a survey we conducted in 2012, we found that the barriers to entry for these people are they don’t know how to start, don’t know where to start and don’t have the time or money.”


To help interested but inexperiened retail players gain some insights into the stock market, SGX has partnered local firm TradeHero, which offers a mobile market trading application that can be downloaded onto phones.

The exchange is also offering up to $198,000 in prize money in its StockWhiz contest which is open to Singapore residents aged 18 years and above, the aim of which is to allow the public to learn to trade with virtual money.

“TradeHero allows investors to trade using real-time prices,” said Ms Gaspar. “We feel this is a great chance for the public to gain risk-free experience on how to trade.”

Bull on stocks vis-a-vis property?

Today reported her as saying:“In an emergency, the ability for you to liquidate property takes a longer time. So, the stock market is a good alternative for people to be able to come in and invest in a higher-yielding asset, not without risk … But you can see the value of the asset you are investing in, you can make those decisions and there’s also liquidity,”

Whatever, given that SGX’s CEO and COO are FTs, and so are many of its senior executives, it’s ironic that SGX is boasting that it’s attracting local punters back. It’s the same Mgt that drove them away.

Now the solution to regenerate a dying, irrelevant regional mkt is to grow the retail mkt? Takes FTs to do this?

“T” stands for “Trash”? Juz look at the IPO mkt and the secondary listing of Gazprom, a dog with fleas if ever there was one.

Coming back to whether market is set for serious correction? Well volumes remain depressed*, so the accout-opening and education, doesn’t translate into activity. The little people are inactive. So the rush to open accounts is not a sign of trouble yet. Watch the volume (not $ value but shares traded).

The only reason to be wary is that with residential property prices expected to fall another 20% next yr, the prices of developers may not yet reflect this expectation. As UBS pointed out recently, the stock mkt is influenced by property prices and it affects more weakness in that sector.

——

*Update at 9.30am: Figures juz reported show that in June daily average value of securities traded on the SGX fell by 40% on the same month last year, to just S$978m.

 

Linking why staple food agribiz is a gd bet & why the 2.5% CPF rate sucks & a constructive, nation-building suggestion

In CPF, Financial competency on 26/06/2014 at 4:32 am

Change in price

So investing in agribiz that are connected with stapled foods makes gd sense and why recent inflation rates should not have surprised

  • 2010 – 2.8%
  • 2011 – 5.2%
  • 2012 – 4.6%
  • 2013 – 2.4%

It’s largely about the rising cost of staples (and oil at around US$100). Tuesday’s BT reported

Last month’s moderation in core inflation was due to lower contributions from food items and services. Food inflation came in slightly lower at 3 per cent in May compared with 3.1 per cent in the previous month, reflecting a smaller increase in non-cooked food prices.

Services inflation edged down to 2.5 per cent from 2.7 per cent in April, as holiday travel costs and health insurance premiums rose more moderately.

But Barclays and CIMB economists believe the reprieve will be short-lived. Said CIMB economist Song Seng Wun: “Services inflation is going to go up as a result of domestic cost pressures – and firms are likely to pass these on to consumers.”

MAS and MTI reiterated that core inflation is projected to “stay elevated” at 2-3 per cent in 2014, while headline inflation is expected to come in at 1.5-2.5 per cent.

So time for govt to increase the basic CPF rate? After all in the not so distant past, one reason it gave for the rate, was that it was above inflation of around 1%.

As to the excuse of low the yield on govt bonds are, well the govt is already paying more than the yield on govt bonds. It knows that cutting the rate would seriously damage its credibility with the 35% swing voters. So increasing the yield by another 0.5% should be considered.

After all Temasek and GIC, as savvy investors, should have been buying agricultural land in the West. The govt can use the profits from these investments to fund an increase to 3%.

 

CPF: The cock that Swee Say talks

In CPF, Financial competency, Financial planning on 25/06/2014 at 4:43 am

The best way for Singaporeans to prepare for retirement is to use less of their Central Provident Fund (CPF) money when they are young. Mr Lim Swee Say, Minister in the Prime Minister’s Office, said this will ensure the current level of CPF payout can be maintained over time and not be eroded by inflation.

Mr Lim, who is also the labour chief, made that point when speaking to reporters on the sidelines of the closing of the Singapore Model Parliament yesterday. (23 Jan 2014). He later issued a clarification saying “that housing, healthcare and education for the children” were excluded from his spending comments, saying the constructive, nation-building media had misreported him.

Even with the clarification, he was talking rubbish, showing how clueless the nTUC minister was with the life of his ordinary members.

For starters, as TRE pointed out

Using less CPF money means leaving the money with CPF board, which in the case of OA, will earn only 2.5%. Inflation rate for the last few years already exceeded 2.5% (except last year, which barely covered the 2.4% inflation rate) [Link]:

  • 2010 – 2.8%
  • 2011 – 5.2%
  • 2012 – 4.6%
  • 2013 – 2.4%

Next after his clarification that he was talking of CPF spending other than for “housing, healthcare and education for the children”, one is left wondering if he doesn’t realise that other than for these things, CPF cannot be used for other than retirement. Is he so out of touch? Or another example of his special status, like once a month CPF statement?

The more impt issue, if no use CPF, how to afford “affordable” public housing? Public housing is only “affordable” because of 20-yr mortgages that use CPF monies to finance the loans.

At the moment 36% of a S’porean’s wages are locked up in the CPF because of this Hard Truth

[Without the CPF], Singaporeans would buy enormous quantities of clothes, shoes, furniture, television sets, radio, tape recorders, hi-fis, washing machines, motor cars. They would have no substantial or permanent asset to show for it.

  • Asian Wall Street Journal, Oct 21 1985 quoting one LKY.

Our money, but can only be spent on the “right” things: uniquely S’porean.

But it was an ang moh’s idea in the first place: In February 1940, one Keynes published How to Pay for the War. He advocated that interest rates should be kept low and that compulsory saving (thereby deferring pay) should be used as a mechanism to prevent the inflation that occurred during World War One. A portion of everyone’s income would be automatically invested in government bonds. Then, when the war was over, and the economy was in dire need of savings, the money would be released. The plan was too revolutionary for the British government.

In the S’pore version, the payout got deferred and deferred.

“The rule is, jam to-morrow and jam yesterday – but never jam to-day.”
“It must come sometimes to ‘jam to-day’,” Alice objected.
“No, it can’t,” said the Queen. “It’s jam every other day: to-day isn’t any other day, you know.”
“I don’t understand you,” said Alice. “It’s dreadfully confusing!”

(Through the Looking Glass and What Alice Found There)

CPF Life: Shumething for “Free my CPF” protestors, anti-PAP cyber warriors to reflect on

In CPF, Financial competency, Financial planning on 24/06/2014 at 4:50 am

The OECD has criticised the UK government’s recently announced plans to end the obligation to buy an annuity at retirement.
Anyone aged 55 or over will be able to take their entire pensions savings pot as cash from next April instead of buying an annuity that would guarantee an income for life.

Pablo Antolin, chief economist and head of the OECD’s private pensions unit, said he was concerned the UK government’s proposals would lead to pensioners running out of money in old age.
“An annuity is the only instrument that provides complete protection in retirement and which safeguards individuals against the danger that they exhaust their savings before death,” he said.

Mr Antolin said the proposed UK reforms were driven by the high costs of buying an annuity, but he argued that savers were unlikely to achieve better incomes in retirement simply as a result of scrapping mandatory annuitisation.
Mr Antolin is expected to say at the Investment Innovation & the Global Future of Retirement conference in New York on Monday that partial annuitisation should be encouraged as an integral part of direct contribution retirement plans offered to savers across the OECD.

 With investors likely to be faced with an environment of low yields and low investment returns for some time, the only way to ensure adequate income in retirement is for workers to save more for longer, said Mr Antolin.

He also criticised private pension providers for marketing annuities as investments, rather than insurance products.

“Buying fire insurance is not an investment. That is how an annuity needs to be looked at, as insurance against outliving one’s resources,” he said.

The above was reported by FT on Monday. Apologies to FT for such a long extract. But it’s for a noble cause, educating S’poreans and showing that the PAP govt has conventional wisdom on its side, on this issue as on the immigration and growth issues.

But as one totful reader pointed out, the ministers expect million-dollar salaries to follow conventional wisdom?

Related article: https://atans1.wordpress.com/2014/06/03/cpf-life-what-sucks-which-is-closest-to-minimum-sum-scheme/

I’ll end with a constructive suggestion to those TRE posters who keep posting there that I’m a PAP, WP, ISD mole whenever TRE republishes something of mine (got three pieces there now). Rather than getting frus and abusive, why don’t they start a petition asking TRE not republish me. I have no issues about not appearing there. Let the readers decide.

Not damaged CD like Cat Lim: Still holding Reits and dividend stocks

In Financial competency, Reits on 23/06/2014 at 4:53 am

Yes but saying I’m still invested in reits and dividend paying stocks, I know I’m sounding like Msian Cina New Citizen Pussy Lim playing her broken record or CD  of “The PAP are doomed” (first version 199o something) and repeated at regular intervals. BTW she’s the best ad for the Malay ultras and their slogan “Apa lagi Cina mahu?”. The PAP govt gave her citizenship and a cushy job teaching teachers (She bitched or catted at fellow lecturers: once asked students if fellow lecturer, a scholar, was gay. This was in the 80s and could have ruined his career: it didn’t as students reported her actions, and she was warned to stop) and she see how she repaid the PAP: sliming PAP.

Sorry, back to reits and dividend paying shares.

Defensive leh. No-one knows why things are the way they are

The world of finance is ensnared in a triple mystery: falling bond yields, falling inflation and rising debt. The ignorance is dangerous.

(The first two implies deflation, the last implies inflation as defaltion increases the debt durden: ask the Japs)

Investors and lenders are equally at a loss. They might want to prepare for deflation. But it is always possible that they should be preparing for a new mystery: the long-delayed return of inflation.

http://blogs.reuters.com/breakingviews/2014/06/17/triple-financial-mystery-remains-unsolved/

Or as the chief investment strategist at BofA-Merrill Lynch puts it. “The ‘fire’ of zero interest rates and central bank liquidity continues to be doused by the ‘ice’ of deleveraging, regulation and deflationary technology innovation.”

Or is possible that financial markets are simply adjusting to reflect this new economic reality, rather than being complacent?

Edward Hadas, economics editor at the commentary website Breakingviews, believes that the world economy is in unchartered territory – so no one really knows what might happen.

“We are dealing with something we have never seen before: very low volatility in such uncertain economic times,” he says.

Low volatility is supposed to imply calm and confidence. But he sees no evidence that investors are not aware of the global economic risks. In the media and among the commentariat in the City, there are plenty of warnings that challenges remain.

Mr Hadas wonders if the low volatility is due to more mundane factors: the banks that provide most of the funding for traders are under capital pressure.

“The result is less activity, less volatility and a greater correspondence of markets with reality,” he said.

But he warns: “Sadly, the calm is probably temporary. Traders will re-group and become more active once they adjust to the new funding environment. And whenever economic reality does change sharply, investors can be counted on to overreact.”

http://www.bbc.com/news/business-27920419

A clue I do not have.

So I’m playing safe. I avoid bonds and buy shares and reits that I think can continue paying decent payouts, and I bank the payouts, not reinvest them. And I keep my spare cash in CPF. At this point in time, CPF pays the best risk adjusted S$ returns. Not saying much, though.

BTW experts were saying last Dec and in Jan that bonds and reits were history. They outperformed.

 

Tot S’poreans are honest, honour honesty? Think again

In Corporate governance, Financial competency on 18/06/2014 at 4:29 am

I was shocked as a user of financial statements to read this in BT last week:

More than one-fourth of senior executives in Singapore feel it is justifiable to misstate financial performance in order to survive an economic downturn. The staggering statistic was one of many in EY’s 13th and latest Global Fraud Survey.

The exercise, which involved 2,719 interviews with senior decision-makers in the largest companies in 59 countries – conducted between November 2013 and February 2014 – looked at the perceived levels of fraud, bribery and corruption across the world in current times.

It found that financial statement fraud risk is still prevalent. Aside from Singapore’s response, EY’s survey found that – across the globe – 6 per cent of respondents said that misstating financial performance is justifiable in order to survive an economic downturn. This is an increase from 5 per cent two years ago.

EY noted that this is driven by responses from emerging markets where, in some jurisdictions, a significantly higher proportion of respondents stated that they could justify such actions. Compared with Singapore (28 per cent), 24 per cent in India and 10 per cent in South Africa felt misstating financial performance was justifiable.

(BT 12 June: Emphasis is mine)

We are miles away from the global benchmark (6%) and worse than India (where few yrs ago there was a major accounting scandal at a giant Indian IT co), a country where corruption is so common.

How to trust any co’s financial statements? Blame education system, PAP govt or S’pore society?

Wrong to blame our society?

Juz think about it. Roy Ngerng who claimed his research into the CPF system showed that the govt had stolen the monies, and who when sued by the PM for defamation, readily and cheerfully admits that the govt didn’t steal the monies but like a true blue S’poreans wants to avoid coughing up money (BS is cheap, money is another thing) is a heloo among the chattering classes.(think Maruah) and the born losers.

This is what his lawyer released yesterday: “The defendant …  had publicly apologised to the Plaintiff and acknowledged that the allegation about which the Plaintiff complained was false (in wording, and in a manner, required by the Plaintiff), who had given undertakings not to publish such an allegation, and who had agreed to remove material to which the Plaintiff had objected. 

My take has been that the the only original thing about his CPF articles is the accusation that the govt steals our CPF monies. https://atans1.wordpress.com/2014/06/11/roy-missed-his-calling-in-life/

As long ago as 2007, the intricacies of CPF were spelled out by an NMP in parly http://siewkumhong.blogspot.sg/2007/09/speech-on-ministerial-statement-on-cpf.html. Check out the references in speech. And Uncle Leong, Roy’s sifu has been active too.

So what has Roy added to the debate? Juz the accusation (now retracted) that govt stole the monies: an accusation he now readily admits is BS.

And he is a heloo to Maruah etc?

And nothing is wrong with the moral and ethical value of at least some highly paid, professional S’poreans?

Something is very wrong with us when a significant number of S’porean professionals are prepared to lie for their employers, paymasters, or when a self-declared liar is a hero to many S’poreans (number unknown).

BTW, I make no comment on whether PM is right morally, ethically, PRwise to sue because the issues are not as clear cut as the PAPpies, anti-PAP activists and ordinary, decent-minded S’poreans who dislike bullying think. It’s a complex problem that even game theory cannot help find an answer. I don’t know whether PM was right or wrong to sue.

Coming back to the issue of the willingness to lying, the PAP govt must take a lot of the blame for this. It has been in power, micro-managing and social engineering S’poreans since 1959, and has put collective responsibility and duty (calls it constructive nation-building) above all else, especially the conscience of the individual. Surely, some could have taken this to mean that it’s OK to lie for employer, paymaster?

Benchmark performance against peanut eaters?

In Financial competency on 16/06/2014 at 5:45 am

Gd performance in managing money is a matter of luck. So whether Ho Ching is qualified to run Temasek or not is irrelevant: is she lucky? And paying peanuts or millions of $ is irrelevant, at least in managing wealth.

[C]omputer programs run by Cass Business School that have randomly picked stocks using data from the past 43 years. Their performance was then compared to stock market index trackers, and in every decade bar the 1990s the “monkeys” won out.

Cass professor Andrew Clare – co-chief executive of “Simian Asset Management” alongside the monkeys – says: “We programmed a computer to randomly pick and weight each of the 1,000 stocks in the sample; we effectively simulated the stock-picking abilities of a monkey. We found that nearly every one of the 10m monkey fund managers beat the performance of the market-cap-weighted indices. One of the implications of our work is that we should perhaps be benchmarking our fund managers against monkeys rather than against a cap-weighted index.” (From Observer)

This too …

“A BLINDFOLDED monkey throwing darts at a newspaper’s financial pages,” wrote Burton Malkiel in “A Random Walk Down Wall Street”, his 1973 bestseller, “could select a portfolio that would do just as well as one carefully selected by experts”. Many investors took issue with Mr Malkiel, an economics professor at Princeton University. Some researchers have also contested his prediction, but not because they think that he exaggerated the power of randomly picking stocks; rather that he was too modest. Simulating a dart-throwing monkey has resulted in portfolios that would not just beat many investors, but also outperform the market.

In a study Robert Arnott and his co-authors picked 100 portfolios, each with 30 equally-weighted stocks from the 1,000 largest American stocks by market capitalisation. 94 of the 100 “dartboard portfolios” did better than a market cap-weighted portfolio of all the 1,000 stocks. Similarly, in another study Andrew Clare, Nick Motson and Steve Thomas randomly picked American stocks to construct ten million indices. An additional twist to their experiment was that the stocks were also randomly weighted. Nearly all of the ten million “monkey indices” delivered “vastly superior returns” compared to a cap-weighted index.

But

“financial knowledge does appear to help people invest more profitably” and that this may be a reason to “enhance financial knowledge in the population at large”.

This study, while compelling, does not necessarily contradict the superior performance of dartboard-equipped monkeys. The most knowledgeable respondents in the survey were found to hold 11.5% more stock in their portfolios than their least knowledgeable peers. It could thus simply be the case that more financially literate individuals hold more stocks rather than being better at picking them. While the authors speculate that the estimated positive effect of financial knowledge on returns could be even stronger if investors face a more complex set of choices (the particular institution in this study offered a menu of mostly index funds), the opposite is also plausible if financially illiterate individuals were to be found to make more random stock selections.

http://www.economist.com/blogs/freeexchange/2014/06/financial-knowledge-and-investment-performance

 

GIC, Temasek laughing all the way from Alibaba’s cave

In Financial competency, GIC, Private Equity, Temasek on 10/06/2014 at 4:47 am
FT reported a few moons ago on how Alibaba is likely to be valued in a coming US IPO:
Would-be buyers of Alibaba’s unlisted shares and convertible bonds have recently been making offers that value the group at $120bn-$150bn*, according to bondholders and others involved in the market …

That is a sharp contrast with 2012, when Alibaba issued the $1.6bn convertible bond to a small group of investors including Singapore’s Temasek and GIC.

At the time, Alibaba was valued at less than $40bn, two people with direct knowledge of the situation said. Under the terms of the deal, the bond will convert into equity upon completion of an IPO.

($= US$)

Temasek haters like Chris Balding and Heart Truths must be feeling sick. The bonds are worth 3 times the price that Temasek, GIC paid for them. Even at the low end valuation valuation of US$80bn, the bonds would have doubled in value. Keep on cursing Heart Truths and Chris Balding (and TRE posters). GIC, Temasek are like Sith Lords, they do well when you keep cursing them. LOL

Never mind, these rabid haters can bitch about the failure of an IPO where Temasek among other shareholders were trying to flip less than a yr after they went in. http://www.reuters.com/article/2014/04/30/wh-group-ipo-idUSL3N0NL2OL20140430. Investors tot they were too piggy in a pig farming IPO.

*Another view: Alibaba’s valuation, which a Breakingviews calculator estimates at $113 billion

 

HPL: More than “fair and reasonable”?

In Corporate governance, Financial competency, Property on 09/06/2014 at 4:38 am

The second revised buyout offer for Hotel Properties Limited (HPL) is considered to be “fair and reasonable” by the independent financial adviser to HPL. 68 Holdings, a consortium led by tycoon Ong Beng Seng and Wheelock Properties, had raised its bid a second time to $4.05 per share last month.

CIMB’s opinion on the offer is unchanged from its earlier report issued after the consortium first raised its offer price from $3.50 a share to $4. The updated report by CIMB was released in a supplementary letter to shareholders by HPL’s board of directors yesterday.

On the second revised offer of $4.05 a share, CIMB’s recommendations to HPL shareholders are also unchanged. (BT last Fri)

Given that the first offer was already “fair and reasonable”, shouldn’t this be an offer that is “more than fair and reasonable”?

Or the first one should have been “neither fair nor reasonable”? It was a low ball bid?

In 2002, the independent adviser to the board of Optus had come out with the opinion that far from paying too much, the offer is actually “unfair”.Independent adviser, Grant Samuel said the SingTel offer was “unfair”, but recommended the offer and says “while it is not fair, it is reasonable”. As a result, the directors of Optus recommended the deal to shareholders.

The M&A boutique said the deal was unfair based on valuation techniques, but said it was  reasonable because if there wasn’t an offer, Optus’ share price would be trading at lower levels: “In assessing the fairness of the offer, Grant Samuel indicates that its judgement of fairness is at the margin, and that while the Singtel offer is not fair, it’s only just not fair.”

Well, many S’poreans tot, at the time, that that the price paid was unfair and unreasonable to SingTel investors (self included0). Turns out we are right even today, it seem. If it wants to float Optus today, there would be a small gap of a bn or so A$ between its purchase p-rice and valuation of Optus today: small change leh.

Coming back to the HPL offer, CNA reported last week in relation to another takeover offer, “Minority shareholders are becoming increasingly disillusioned with boilerplate advice from independent financial advisers (IFAs) and are questioning their usefulness, the head of the Securities Investors Association of Singapore (SIAS) said on Friday (June 6).”*

To which the retort from bidders and IFAs would be, “They would say that wouldn’t they? They want unfair and unreasonable prices to be paid for their shares.”

*Cont’d

The remarks by SIAS President & CEO David Gerald came in a statement noting the dissatisfaction on the part of minority shareholders over a buyout offer for LCD Global, a hospitality and investment company, at S$0.17 a share.

“SIAS notes that while the IFA report has indicated that the offer is fair, based on a historical perspective, the offer does represent a discount to NAV at S$0.27,” …

 

CPF Life: What SunTimes left out

In Financial competency, Financial planning, Media on 05/06/2014 at 4:37 am

One merit about CPF Life is that it is run by the Government. That removes the big worry of retirees as to whether their insurer is financially strong enough to withstand the next global financial crisis in order to keep making the monthly payouts, is what a SPH reporter wrote last Sunday http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={838399526-20200-2041240930}.

Those who read this blog a few days ago will know that he is being constructive, and nation-building.

There is a provision in the law governing the CPF Life Plans which states that payouts are contingent on the Plans being solvent. This is because premiums that are paid in to get the annuities are pooled and collectively invested. If the plan you chose doesn’t have enough money to pay out, you die. This is unlike the [Minimum Sum] scheme, where account holders are legally entitled to the monies in their CPF accounts …

(https://atans1.wordpress.com/2011/12/03/best-cpf-life-plan/)

The government has said the provision on solvency is only a precaution unlikely ever  to be used. If so, why have it? This is a peace of mind issue. It was Gan who made this assurance when he was MoM.

He should have told us the fact that the govt refuses to “protect” CPF Lifers from fund failure, despite CPF Lifers having to participate.

If one cannot trust a SPH journalist to give us the relevant facts on a non-political issue, how can we rely on any SPH (and MediaCorp journalist, for that matter) to analyse or report political issues? After all our local media is proudly constructive and nation-building?

BTW, how does this refusal to “protect” CPF Lifers square with what PM said last week? “We want to enhance [the CPF’s retirement-annuity scheme] so that the payouts can keep pace with the cost of living,” and “We also want to provide stronger assurance in retirement for the lower-income groups.”

But the article made one gd point, The Standard plan offers an annuity scheme similar to what retirees in Britain opt for. The Basic plan is commonly adopted by US retirees. Reminder, the Basic plan is closer to the Minimum Sum scheme that is no longer available. For more: https://atans1.wordpress.com/2011/12/03/best-cpf-life-plan/

Swiss cost of living in S$ terms

In Financial competency, Financial planning on 04/06/2014 at 5:39 am

A few weeks ago the BBC published

Swiss monthly living costs

  • One-bed city centre flat: 1,800 francs                                     S$2520
  • Utilities: 100-200 francs                                                              S$140- 280
  • Health insurance: 300-400 francs                                           S$420- 560
  • Public transport: 50-70 francs                                                    S$70- 98
  • Restaurant meal for two: 100-150 francs                               S$140- 210

(http://www.bbc.com/news/business-27459178)

As you can see I’ve put the S$ equivalent beside the Swiss amounts.

Now you have an idea of the Swiss cost of living. As to their wages, the median wage there is the equivalent of S$8574 a momth.  Ours is S$4358 or S$2789 after deducting CPF.

 

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