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Archive for the ‘Financial competency’ Category

Reason why CPF Life so mean?

In CPF, Financial competency on 01/11/2017 at 1:13 pm

Many moons ago after one Chris K wrote this about the meanness of CPF life because of the triple redundancy, I emailed his piece to an actuary and asked him if the piece made sense (there were some things that I couldn’t quite follow). He said it did, but added “Nothing wrong in being prudent”.

This PAPpy answer got me and, when I told him, Chris K annoyed.

But reading this one can understand the logic even if one disagrees with it.

IN 1965 ANDRÉ-FRANÇOIS RAFFRAY, a 47-year-old lawyer in southern France, made the deal of a lifetime. Charmed by an apartment in Arles, he persuaded the widow living there that if he paid her 2,500 francs (then about $500) a month until she died, she would leave it to him in her will. Since she was already 90, it seemed like a safe bet. Thirty years later Mr Raffray was dead and the widow, Jeanne Louise Calment, was still going strong. When she eventually passed away at 122, having become the world’s oldest person, the Raffray family had paid her more than twice the value of the house.

Underestimating how long someone will live can be costly, as overgenerous governments and indebted private pension schemes have been discovering. They are struggling to meet promises made in easier times. Public pensions are still the main source of income for the over-65s across the OECD, but there are big differences between countries (see chart). In both America and Britain public provision replaces around 40% of previous earnings, but in some European countries it can be 80% or more. Where it makes up a big share of total pension income, as in Italy, Portugal and Greece, a shrinking workforce will increasingly struggle to finance a bulging group of pensioners.

http://www.economist.com/news/special-report/21724751-lives-get-longer-financial-models-will-have-change-financing-longevity

When it comes to the future, it’s all about probabilities i.e. throwing dice. Even with all with the help of AI, data and acturial science, the future is still guess-work, not certainity.

The more “certainity” is asked for, the higher the cost. Here’s something I wrote in 2009: What price income protection? Or the cost of an annuity

So if one wants “certainty”, there’s a price to be paid. CPF Standard Plan offers that “certainity”. As I told someone sometime back, if you know you are going to live to 150, then opt for the Standard Plan , even if by conventional wisdom yardsticks it “sucks”. But remember even then if the plan dies, you also die: Diabetes: The real reason PM is worried?

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Worth of analyst report? Worthless?

In Financial competency on 26/07/2017 at 4:25 pm

Can’t stop laughing.

The EU is introducing some very complex fund mgt regulations in Jan 2018 that among other things affects reseach reports because they are considered to be “an inducement” and fund mgrs must account and quantify them as such to clients.

In the UK (still in EU) the authorities “will treat research paid for by the company raising capital as a “minor non-monetary benefit”, presumably in the same category as sandwiches at the AGM” reports the FT.

China got point that Temask model “undesirable”?

In Financial competency, GIC, Temasek on 25/07/2017 at 4:51 pm

FT reports that China has tot about and now rejects the S’pore model for state-owned enterprise reform. FT says, China “turns away from Temasek-style effort to insulate state companies from politics.”

Seems the State Assets Supervision and Administration Commission thinks that

promoting the Temasek model would reinforce an undesirable trend in China’s economy towards “fake” investment that generates profits by shifting money between existing assets without generating new economic activity, Caixin reported.

What can I say?

— Given that according to the Bocconi University, Sovereign Investment Lab, our  GIC and Temasek together carried out last year 62 deals globally worth US$17.9bn, accounting for 39% of total deals and 45% of investment value.

— But as Chris K points out GIC’s and Temasek’s risk adjusted returns are in line with other SWFs.

So does the hyperactivity benefit anyone except the counterparties anf our SWFs’ advisers?

What do u think?

 

 

 

Truth about cars from car maker

In Financial competency, Financial planning on 12/07/2017 at 5:15 am

FT reports GM as saying when city dwellers buy a car, it depreciates “fairly rapidly, you use it 3 per cent of the time, and you pay a vast amount of money to park it for the other 97 per cent of the time”.

Related post

Words of wisdom from top hedgie

In Financial competency on 12/06/2017 at 1:34 pm

On “risk” and the “perception of risk”/

“When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high,” Klarman wrote. “By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated.”
Read more at http://www.businessinsider.sg/baupost-groups-seth-klarman-on-market-risk-post-trump-trade-2017-5/#WuKyJzlYuqwcGixg.99

Head of research paid peanuts?

In Financial competency on 31/05/2017 at 5:20 am

He took a $3000 bribe. What a cheapskate.

MAS also served notice of its intention to issue POs against the Chief Executive Officer of NRA Capital (NRA), Mr Kevin Scully, and its former Head of Research, Mr Lee Chee Waiy.

Through Mr Ang*’s introduction, NRA was appointed to perform the valuation of PetroSaudi Oil Services Limited (PSOSL). On 24 May 2017, Mr Ang was convicted of an offence under the Prevention of Corruption Act for bribing Mr Lee with S$3,000 to expedite the preparation of the valuation report on PSOSL.

MAS said Mr Lee had been the primary person in NRA working on the valuation. Apart from accepting the bribe, he was also found to have applied inappropriate methodology and assumptions in the valuation of PSOSL. As CEO of NRA, Mr Scully had failed to ensure that his analyst, Mr Lee, had exercised sufficient care, judgment and objectivity in the valuation of PSOSL, MAS added.
Read more at http://www.channelnewsasia.com/news/singapore/financial-penalties-imposed-on-credit-suisse-and-uob-for-1mdb-8894194

*Mr Ang Wee Keng Kelvin, a former remiser at Maybank Kim Eng Securities.

Related post on financial people doing risky but unluctative things that have negative consequences for their careers. 

Why own an asset that is not utilised 96% of the time?

In Financial competency, Financial planning on 30/05/2017 at 6:10 am

Especially in S’pore unless u are paid like a PAP minister.

According to the financial-ratings agency Fitch, the average car spends 96% of its usable life parked in a garage or on the street. When maintenance, depreciation, insurance and running costs are totted up, cars are the most underutilised asset most consumers own.

Economist blog

Why People Persist in Risky Trading

In Financial competency on 19/05/2017 at 1:28 pm

I remember the “peanuts” made by the S’pore MD of Rothschilds here who got into trouble in the late 80s or 90s with the law over a risky trade.

Lost a cushy job and his reputation for “peanuts”.

From NYT Dealbook

WHITE COLLAR WATCH

Why People Persist in Risky Trading

By PETER J. HENNING

When they have good careers, and their questionable deals don’t even make that much, why do they do it? Perhaps it’s hubris, mixed with the lure of easy money.

Old private flats’ value can also fall off a cliff

In CPF, Financial competency, Financial planning, Property on 10/05/2017 at 4:41 am

It’s all about using CPF to pay off the bank mortgage. And don’t count on an en bloc sale to keep the value of flat up. The older the group of flats, the more the developer has to pay to govt to top up to 99 years. He’ll bid accordingly. He’s not like Bill Ng, the ATM (or one-armed bandit that keeps on paying and paying.

Sometime back I featured this great graphic from ST on how the value of a HDB flat will fall over a cliff after the first 35 years. Extracted from http://www.straitstimes.com/opinion/will-you-still-love-your-hdb-flat-when-its-over-64.

No automatic alt text available.

But private 99 year old properties are different right?

The reasoning of the salesmen is that banks usually finance leaseholds if the property to have a remaining lease of 30 years on the maturity of the loan

According to OCBC, when it comes to financing of leasehold properties, the requirement is for the property to have a remaining lease of 30 years on the maturity of the loan. “The quantum of loan to be granted is dependent on the bank’s credit assessment, which includes assessment of debt servicing capacity,” says a spokesman in an email response.

https://www.theedgeproperty.com.sg/content/perils-owning-ageing-leasehold-properties

But what these people don’t say is that banks only do this if borrowers can use CPF monies.Banks generally provide financing for the purchase of a leasehold property if home buyers are able to use their CPF.

This is the tricky bit because according to the article I linked to above

CPF has several ways to calculate this [eligibility]…

The first formula is based on the sum of the age of the applicant and the remaining lease on the property. The total must be equal to or exceed 80 years, says Huang. For instance, if the buyer is 40 and the remaining lease on the property is also 40 years, the total is 80 years. This means that the buyer is eligible to use his CPF contribution for the purchase of the leasehold property.

If the buyer is only 30, however, and the remaining lease on the property is 40 years, the total equals 70 years. In this case, the buyer will not be eligible to use his CPF contribution towards the purchase of the leasehold property. “This implies that young people cannot use their CPF to buy old leasehold properties,” says Huang.

And

CPF also requires that a property have a remaining lease of at least 60 years. If the lease on a property is below 60 years, but more than 30 years, a valuation limit is set on the amount of CPF contribution that can go towards the payment of the property.

… the numerator in the ratio will be the remaining lease on the property when the purchaser turns 55. Assuming the buyer is 40 today and the remaining lease on the property he wants to buy is also 40 years, when he turns 55, the remaining lease will be 25 years. The denominator will be the remaining lease today, which is 40 years. The ratio of 25 years/40 years is equivalent to 62.5%.

This means if the property purchase price is $1 million, the buyer can withdraw from his CPF up to a limit of 62.5% of the value, that is, $625,000, explains Huang. “And that percentage is the valuation limit.”

What all this means is that there’s a restricted pool of buyers for older flats if there are problems using CPF monies.

So what? Can always have collective sale right? The article helpfully disabuses

JLL’s Tan advises owners of private residential projects on leasehold sites to be aware that, as the lease gets shorter, the differential premium that developers have to pay gets higher. “This will eat into their sale price,” he says.

Using a recent HUDC enbloc sale

For Rio Casa, if the differential premiums were included, the total land cost would amount to $649.8 million, according to SLP Research (see chart). SLP’s Mak points out that the differential premiums account for about 30% of the total land cost for some of these HUDC estates.

So don’t play, play. Think.

 

CPF Life: False alarm that Std is now better than Basic

In CPF, Financial competency, Financial planning on 08/05/2017 at 5:19 am

Here I reported that a far cat rentier (once a doctor) says that the Standard could now be better given “tweaks” over the yrs that were not made public

I said I’d asked an expert to check.

He hasn’t responded but Chris Kuan while no financial planner but a now an ex-capital markets guy who I quoted here a few yrs ago as saying that punters should opt for the Basic not the Standard plan did some calculations.

Juz spreadsheet up the present MS of 166k compounding at 4% with 1st 60k extra 1% and 1st 30k additional 1%. Then use the 1.28k per month payout from 65 onwards on a ror of 4.25%. The Standard Plan break even age remains at 89 where it was when I did the same calc a couple of years back. So I was wrong – nothing has changed. The difficulty in assessing the Basic and Standard Plan is while we know that at age 85 there is no more bequest under the Standard Plan and there is under the Basic Plan but what we don’t know is at what age does the bequest actually cease under both plans.

So “Basic good, Standard bad” still stands.

Achtung: Default Standard CPF Life might be the better one

In CPF, Financial competency, Financial planning on 05/05/2017 at 11:30 am

Not the Basic one.

But really who knows, if the PAP administration decides to make “tweaks” that are not made public?

This blog and others has alwats argued that punters should opt for the Basic not the Standard plan. 

A reader (smart guy, trained as MD) now says that the Standard could now be better given “tweaks” over the yrsthat were not made public. I’ve asked an expert to try to confirm or deny the validity of the claim.

Meanwhile what this doctor (now fat cat rentier) says is the truth, the absolute truth: the PAP can suka suka “tweak” things in private and change the facts:

[Lease Buyback Scheme]  suffers from the same problem as CPF Life — opaque internal workings & computations and subject to unannounced changes in computations & internal assumptions. E.g. CPF Life internal annuity calculations have changed a couple of times since it launched — the monthly payouts as calculated by the CPF Life calculator has changed even with same parameters in just a few short years. Previously, the Basic CPF Life option was the better no-brainer choice. Now the default Standard CPF Life is arguably better with a significantly higher quantum in monthly payouts. Imagine those old folks that took up the Basic plan earlier…

So rather focus on the “Marxist detainees” and their unhappiness, those opposed to the PAP should focus on rice-and-veggies issues. But then they look down on those who can afford only these basic Asian foods.

Hilary’s newspaper trying hard to talk market down

In Financial competency on 03/03/2017 at 2:08 pm

And failing.

Sad ))

From NYT’s Dealbook

the stock market surged to another high, helped by expectations of tax cuts, looser regulations and higher interest rates under the Trump administration. The optimism on Wall Street has also been helped by sunnier economic data.
But there are some things to keep in mind about the rally and the so-called Trump bump, Neil Irwin notes. The economy is closing in on its full productive capacity. And if the government tries to increase deficits at a time of full employment, it could lead to higher inflation and higher interest rates, crowding out investment.
The signs point to the increasing likelihood of higher interest rates.
William C. Dudley, the president of the New York Fed, said in a CNN interview that it would be fair to assume that the central bank would raise interest rates sooner rather than later because the economy was improving. The Wall Street Journal reported that Lael Brainard, a Fed governor, had said in a speech at Harvard University that, “We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing and risks to the outlook are as close to balanced as they have been in some time.”

Paying peanuts pays-off for college

In Financial competency, Financial planning on 20/02/2017 at 1:57 pm

Houghton College uses low-cost index funds and mutual funds and its returns beat Harvard with its millionaire in-house managers and external filthy rich hedgies. Btw, after ten years of lagging investment returns, Harvard’s US$35.7 billion endowment is planning to cut its current staff of 230 in half by the end of 2017.

From NYT Dealbook

COMMON SENSE
By JAMES B. STEWART

Houghton College outperformed colleges with the biggest endowments by getting out of hedge funds and moving to a mix of low-cost index funds and mutual funds.

Think of our PAP ministers’ pretentions on why they deserve their millions in salaries.

Investment advice for 2017

In Financial competency on 10/01/2017 at 4:49 pm

If u attend investment seminars in S’pore, u’ll see a lot of oldies dozing off but waking up to write down stock market tips. That they are still fishing for tips at their age show that tips don’t work. But then these are ah peks are like the anti-PAP cybernuts.

From NYT Dealbbok:

LAW OF AVERAGES

It’s Time to Ignore Advice About Which Stocks to Buy in 2017

The temptation for financial experts to offer stock tips is almost irresistible, but history shows why taking them is a bad idea.

But

COMMON SENSE
A dump truck unloading ore into a crusher at Freeport McMoRan’s Grasberg copper and gold mining complex in Indonesia in 2015. The copper producer was a contrarian bet in 2016, but finished the year with its stock price more than doubled.

2016’s Winning Investors Talk About 2017, and Donald Trump

Investors who made the correct — and often bold — calls of last year see opportunities in the uncharted waters of the year ahead

PAPpy Grinch strikes? Or is it Scrooge?

In Financial competency, Infrastructure on 29/12/2016 at 6:43 am

And “Heads or tails, we get screwed”, and “The rule is, jam to-morrow and jam yesterday – but never jam to-day.” were the tots that crossed my mind when I read that the Public Transport Council (PTC) may recommend standardising fares for all MRT lines and bus routes here.

In a blog post on Monday (Oct 10) PTC chairman Richard Magnus said that “it is clear that commuters prefer a simple fare structure”.

True but we prefer lower prices too. And the plan to standandise the fare structure sounds like an excuse not to pass on the benefits of lower costs to us.

Mr Magnus added that while the large negative quantum of 5.7 per cent may have commuters hoping for a corresponding drop in fares,trade-offs may be necessary to balance the various interests of commuters, the need for operators to sustain a viable public transport system, and the “financial burden” of Government expenditure on public transport infrastructure and assets.

ST

Stop the BS about “financial burden” of Government expenditure on public transport infrastructure and assets**. Hey we got budget surpluses that need recycling. And recycling doesn’t juz mean giving Temasek and GIC money to gamble invest.

So long as there are humongous budget surpluses, we can have our cake and eat it. Now if the budget is neutral, then fair enough to raise fares.


*“The rule is, jam to-morrow and jam yesterday – but never jam to-day.”

Jam tomorrow or jam to-morrow (older spelling) is an expression for a never-fulfilled promise. It originates from Lewis Carroll’s 1871 book Through the Looking Glass and What Alice Found There.[1] In the book the White Queen offers Alice “jam every other day” as an inducement to work for her:
“I’m sure I’ll take you with pleasure!” the Queen said. “Two pence a week, and jam every other day.”
Alice couldn’t help laughing, as she said, “I don’t want you to hire me – and I don’t care for jam.”
“It’s very good jam,” said the Queen.
“Well, I don’t want any to-day, at any rate.”
“You couldn’t have it if you did want it,” the Queen said. “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!”

Wikipedia

**ST reported him as saying:

He noted that $4 billion would be spent to subsidise bus services over next five years under the bus contracting model.

Other considerations include the reliability of the expanding rail line and the manpower crunch in the sector.

“Realistically, it is not sustainable to keep imposing higher standards on our operators while fares remain unchanged, or to keep increasing the level of subsidies from the Government. The experts’ view is to avoid large fluctuations in fares which may create adverse impact to industry stakeholders; and to have small and gradual fare adjustments instead,” he said.

“A fine balance is therefore necessary to ensure that our public transport system remains viable and sustainable in the long run.”

So long as there are humongous budget surpluses, we can have our cake and eat it. Now if the budget is neutral, then fair enough to raise fares.

Christmas present for a hedge fund

In Financial competency on 25/12/2016 at 10:46 am
Calvera (the bandit chief “farming” Mexican peasants in The Magnificent 7 :

If God didn’t want them sheared, he would not have made them sheep.

Hedge Fund Math as described by NYT’s Dealbook

When do 1.5 and 16 add up to 72?
That’s the riddle confronting investors in Pershing Square Holdings Ltd., the closed-end fund run by Bill Ackman.
The fund has gained 20.5 percent during the four years since it began. After deductions — a 1.5 percent management fee and Pershing Square Holdings taking 16 percent of any gains — investors were up just 5.7 percent. Pershing Square kept about 72 percent of the fund’s gains for itself.
How does that work? Many hedge funds reap far higher percentages of their gains than that stated in their fee structure because when they experience substantial losses, as Pershing Square did, they don’t have to give anything back.
And investors are catching on to the fact that most hedge fund managers share generously in the good times, but are exposed to none of the losses in the bad.

Fintech app that will kill off second hand car salesmen

In Financial competency on 14/12/2016 at 1:48 pm
Financial Assistants Inspired by Science Fiction
Plenty of software programs can help you with your finances, but the start-up Digit and its competitors are aiming for something more comprehensive: a full-service financial assistant.
When he founded Digit, Ethan Bloch had in mind the “Ender’s Game” character Jane, who uses her artificial intelligence to prepare taxes for the hero Ender and ends up taking over his financial life.
For companies like Digit, Credit Karma and Mint, the goal is to create an assistant that will use machine learning and artificial intelligence to provide proactive analysis and advice.

Trump is bad news for S’porean mortgagors and property prices

In Economy, Financial competency, Property on 08/12/2016 at 4:36 am

As stated here, The Donald’s warning to US companies to manufacture in the US will only help accentuate two interconnected secular trends that are no good for S’pore’s growth prospects: slower global trade caused in part by onshoring (companies making more products locally).

Slow growth not good for property prices.

Next, Trump wants US cos to repatriate their money overseas (US$1trn is a conservative estimate) to make America Great Again. He’ll offer tax concessions in return.

According to a FT report, the repatriation of billions of dollars of overseas corporate deposits could rattle the global money market, where they constitute an important part of the offshore funding base: think Libor and Sibor.

This will affect S$ interest rates, causiing them to rise further then expected because of Fed actions.

Finally, with a fiscal stimulus in the US, Fed be more prepared to raise US rates. This will affect S$ interest rates, causiing them to rise.

So the vultures are circling and the Singkies with housing loans up to their eyeballs (if car loans and personal loans are included, up to their eyebrows) had better watch out. We’ll be joining Perth.

Will the 70% still vote PAP?

S’pore stock mkt is value for money?

In Corporate governance, Financial competency on 07/11/2016 at 12:01 pm

Article talks of activist investors KPKBing

http://www.bloomberg.com/news/articles/2016-11-03/activist-investors-take-aim-at-singapore-buy-pray-hope-model

Funny the article doesn’t mention that lots of cos have a controlling shareholder that has more than 51% of the shares. Some of the riny ones even have a controlling shareholder with 75%. So there’s naturally a big discount to account for liquidity and governance issues.

 

Financial planning: Ever heard of “phi”?

In Financial competency, Financial planning on 31/10/2016 at 2:51 pm

From NYT’s Dealbook

WEALTH MATTERS
Suzanne Duncan led a team that started out researching incentives in investment decisions, but switched over to studying motivation.

Aligning Your Investments With What Motivates You

In finance, phi is a way for investors to quantify how their motivations, or the motivations of their money managers, will affect long-term returns.

 

What monkeys, bears and squirrels do differently

In Financial competency, Financial planning on 31/10/2016 at 5:44 am

The squirrels are natural PAP supporters, the bears are the swing voters and natural WP voters, and the monkeys are the cybernuts and SDP supporters.

Let me explain:

The monkeys eat up all the bananas they possess.

The bears eat most of their berries, and store up those left over.

But the squirrels do something different entirely. Before eating any of their acorns, they save 20% of them, and learn to live on those that remain.

Those saved acorns grow into oak trees, with more acorns.

Seriously, the story is about saving voting PAP.

“The point is that saving doesn’t mean you can’t enjoy things in life,” says Mr Gardner.

“But it’s about budgeting. You get 10 and bank two. That two is what will help you in the future.”

So how does this acorn philosophy work in practice?

Stop buying, for example, one cup of takeaway coffee every day, he recommends.

http://www.bbc.com/news/business-37798513

Beginners’ Guide to Financial Planning and Insurance

In Financial competency, Financial planning on 22/10/2016 at 5:16 am

From the desk of Tan Kin Lian, retired CEO of NTUC Income, and an actuary.

Financial Services Consumer Association

I have updated a few articles on financial planning and insurance in the FISCA website. They answered questions that were sent to me by ordinary people. You may find these articles to be useful and relevant.

Click here to view these articles. 

I have also produced about 10 videos covering different topics on financial planning and insurance. Each video is about 5 to 10 minutes. One video is longer.

Click here to view these videos.

I invite you to view to vote on the issues listed here. You will win a book prize – Financial Planning for Young People.

If you are tired of receiving my messages, you can click on the link below to unsubscribe from all future mailings. 

Click here to unsubscribe from all future mailings.

Tan Kin Lian

Not not sponsored. But public service announcement.

Medishield: Expert on whether to buy integrated plans

In Financial competency, Financial planning, Uncategorized on 19/10/2016 at 4:58 am

 

Younger S’poreans who can’t afford to misspend money on useless, unnecessary stuff should heed the wise words of Tan Kin Lian the ex-CEO of NTUC Income who was sadly persuaded by the likes of Goh Meng Seng to stand for president.

The message basically is “Don’t buy Integrated Plans. Juz rely on Medishield for all its flaws”:

When you buy an integrated plan, or go to a non-subsidized ward*, you are helping the government to reduce its subsidy. You get a ward with 4 patients** instead of 6 patients*** and have the chance to choose your doctor. In most cases, these differences do not really matter to the quality of the care. But you are paying a much bigger bill (due to lower government subsidy) and you have to pay a much higher premium (maybe 2 or 3 times) to cover this difference. Is this really necessary?

http://tankinlian.blogspot.sg/2016/10/bad-design-for-medishield-life.html

(Emphasis mine.)

Someone who realised the folly of an integrated plan and wanted to revert was told

It is easy for you to convert back to Medishield Life. Call the insurance company and ask them if they will give you a pro-rata refund for the premium that you have paid for the integrated plan. If they can, you can convert immediately. If no, you can convert to Medishield Life at the next renewal date.

http://tankinlian.blogspot.sg/2016/10/move-back-to-medishield-life.html

———————————————

Healthcare for cheapskates

Older S’poreans who are well-off but cheapskates (otherwise known as “value for money” folks of which I’m one) use SingHealth, go to B2 wards and only have Medishield. The really hard-core try for C class but get found out and are whipped publicly.

Now their secrets on B2 and Medishield is public knowledge.

For those who voted against the PAP using SingHealth, B2 and only Medishield has another advantage. U can give the PAP the finger and have your cake and eat it. Eat yr heart out Queen Jos: us peasants (plebs) can be like millionaire ministers too. Have cake and eat it. And give the PAP the finger.


More on TKL

He lost his deposit in the PE, and thus indirectly helped the PAP’s prefered candidate to win. Bad advice and personal quirks made him look like a clown. He’s eccentric but no clown. I should know. I helped him help the mini-bonders (though sadly we didn’t help them that much) so I should know. But I fell out with him when he listened to “bad” advice. But to be fair, I’m not an easy person to work with.

Since the PE, he’s focused on his core competency of dishing out financial advice, Example

Financial Services Consumer Association

I have updated a few articles on financial planning and insurance in the FISCA website. They answered questions that were sent to me by ordinary people. You may find these articles to be useful and relevant.

Click here to view these articles. 

I have also produced about 10 videos covering different topics on financial planning and insurance. Each video is about 5 to 10 minutes. One video is longer.

Click here to view these videos.

I invite you to view to vote on the issues listed here. You will win a book prize – Financial Planning for Young People.

If you are tired of receiving my messages, you can click on the link below to unsubscribe from all future mailings. 

Click here to unsubscribe from all future mailings.

Tan Kin Lian
——————————

*The real challenge is in dealing with treatment in a non-subsidized ward, i.e. B1 and A ward. The term “non-subsidized” is not a proper description. There is a small subsidy in B1 wards. TKL

**B1 has four patients to a room and has aircon.

***B2 has six patients to a room and has no aircon. C (“Cattle”?) class has nine to a room.

Unique Selling Point of Swiber junk bonds?

In Banks, Energy, Financial competency on 07/10/2016 at 3:31 pm

DBS’s private banking clients were told Swiber bonds were safe ’cause DBS was a big lender?

This wicked, evil tot crossed my mind when I was reminded that DBS

had a S$700 million ($522 million) exposure to the Swiber group of companies and expected to recover roughly half, given some was secured by assets. That amount represents 92 percent of Swiber’s $567 million in total equity at the end of the first quarter, the last time it reported its financial position. It also probably means that just over half of all the leases, borrowings and notes payable reported by Swiber were owed to DBS.

Any credit officer should balk at a lender being in charge of more than half the debt of an entire company. It gets worse, however, because on top of that, Swiber’s debt had already become much larger than its equity, a sign the bank should have considered scaling back its exposure.

https://www.bloomberg.com/gadfly/articles/2016-08-03/how-deep-into-oil-rigs-is-dbs

I mean DBS wouldn’t lend money to any dog, let alone a dying dog with maggots festering in it, would it? And persuade its private banking clients snd accredited investors to join in, would it?

Impoortance of humility in personal finance

In Financial competency on 06/10/2016 at 2:58 pm

Reading about all those accredited investors who got burnt because they bot junk bonds,when they should have known better (http://www.bloomberg.com/news/articles/2016-10-03/singapore-millionaire-77-joins-bondholders-uniting-in-workouts and http://www.bloomberg.com/news/articles/2016-09-19/bond-losses-show-vulnerability-of-singapore-s-not-really-rich) one can only agree with the u/m from NYT Dealbook

SKETCH GUY

One of the Smartest Money Strategies Is Asking When You Don’t Know

Humility, in personal finance, is knowing how to ask for help when you don’t know something, even when you think you should know it.

This is a dumb ass remark from a SMU finance professor: “For financially-savvy investors, they need to know what they’re buying into and not just look at the yields,” said Benedict Koh, a professor of finance at Singapore Management University.

I mean how he can anyone “financially-savvy” who buys only for yields?

Perils of being an “atas” investor

In Banks, Financial competency on 20/09/2016 at 1:27 pm

Mom was “medium risk” investor but junk bond sold to her 

When Elaine Tham signed an “accredited investor” form with her bank in Singapore two years ago, she took a fateful step toward losing all the money she had set aside for her children’s education.

Based on her financial profile and investment priorities — her need for S$150,000 ($110,000) to pay university fees — a local branch of HSBC Holdings Plc had initially categorized her as a “medium risk” investor. But because the value of her property and car entitled her to “accredited” status, a category reserved for wealthy investors, Tham says she was persuaded to take a riskier path. She agreed to invest S$250,000 in the bonds of a small Singapore energy-services company, Swiber Holdings Ltd., which said in August that it won’t be able to repay its bondholders.

Tham is one of many Singaporeans who lost money by investing in Swiber, which sold an unusually high proportion of its bonds to the wealthy clients of banks in Singapore. Amid signs last week that more local energy-services companies are being dragged down by the prolonged slump in global oil prices, some are urging quick action to plug loopholes in Singapore’s investor-protection rules.

Man didn’t know he was “accredited investor”

The revisions to the law proposed by the MAS might have helped another Singaporean bondholder, Sandeep Kapoor, who says he is facing losses after buying S$250,000 of Swiber bonds in 2014. The 50-year-old engineer said he only found out he was an accredited investor last month, some two years after the purchase, via his relationship manager at DBS Group Holdings Ltd. 

Under the proposed revisions, he would have been given the chance to opt in to accredited investor status, rather than being automatically assigned to the category because of his wealth.

http://www.bloomberg.com/news/articles/2016-09-19/bond-losses-show-vulnerability-of-singapore-s-not-really-rich

“Don’t be a cheapskate”, Buffett says

In Financial competency, Financial planning on 15/09/2016 at 2:38 pm

The trouble is that there are very few people who knows what is a “wonderful co.” and what is a “fair price”.

So being a cheapskate may be a better option for most of us (self included).

Gold and EM Funds are cheong

In Emerging markets, ETFs, Financial competency, Gold, Other Precious Metals on 08/09/2016 at 5:03 pm

The Oppenheimer gold fund (run by guy with Chinese name) invests in mainly small- and mid-cap gold mining stocks, to magnify the impact of changes in the gold price, which has risen 9.3 per cent over the summer. With rates staying low, the lack of yield on precious metals is less of a deterrent to investors, some of whom also see gold as a hedge against any inflation generated by loose monetary policy.

But Bank of America Merrill Lynch warns that fundamentals in emerging markets were so strong that, given extremely loose monetary policy in the developed world, a “bubble” is “highly possible” in EMs in 2017.

“Dollars and Sense” of a Hawker Stall

In Financial competency on 02/09/2016 at 2:34 pm

Here’s a really good post on the economics of starting a hawker stall and then running it http://dollarsandsense.sg/how-much-does-it-cost-to-run-a-hawker-stall-in-singapore/

But does the “Estimated Monthly Cost” include the “wages” that the two entrepreneurs pay themselves? If they had employees, the employees’ wages would be included under this heading. But as they are both bosses and workers, it isn’t clear if “Cost” includes their “wages”.

Makes a big difference on the real bottom line.

Initial Cost Of Starting Hawker Stall (Inclusive Of Opportunity Cost)

(Excluding Apprenticeship Fee)

$40,000

Monthly Operating Cost$11,000 – $15,000

Estimated Daily Revenue $1,000 Based on assumption of 200 Customers, average spending of $5
Estimated Monthly Revenue $22,000 22 working days per month
Estimated Monthly Cost $13,000  
Estimated Monthly Gross Profit $9,000

 

 

Day traders v DIY quant traders

In Financial competency on 24/08/2016 at 4:28 pm

 

Illustrarions from FT

The Hedge Fund Robot that Outsmarted Its Human Master

Yoshinori Nomura, a 43-year-old money manager, is setting his software loose in Japan, one of the most turbulent markets in the world. If he succeeds, it would offer hope for AI traders around the world.

NYT Dealbook

Everything u need to know about investing in Reits

In Financial competency, Property, Reits on 23/08/2016 at 1:34 pm

REITs: The 3 Main Considerations when Picking REITs to Purchase for Buy and Hold or Speculation

Writer goes into great detail about his three points especially on how to judge The Competency and Integrity of the Managers of the REIT

1. The Competency and Integrity of the Managers of the REIT

2. Jobs, Business and the Economy

3. Valuation of the REIT

 

Who is riskier risk?

In Financial competency, Insurance on 19/08/2016 at 4:25 pm

“A 22-year-old driver who parties a lot and drives 10,000 miles a year, or a 40-year-old teetotaling mom who drives 40,000 miles? I might think the mom is riskier.”
Dan Preston, the chief executive of Metromile, on how insurers calculate risk.

Search for yield is getting exotic

In Currencies, Emerging markets, Financial competency on 15/08/2016 at 11:35 am
From NYT Dealnook (Look at charts from FT below also)

Investors Turn to Risky Regions for Rewards Yield-starved investors are so desperate for returns that they have been willing to take on the risk of investing in a country that recently underwent a failed coup and an attack on its main airport. Turkish stocks and bonds have been rising, in spite of the country’s debt being downgraded. It seems a 10-year bond offering a 9 percent reward is too tempting to turn down, even if the inflation rate is 8.7 percent and the currency is heading south.

Stocks and bonds in developing markets have been on a tear as investors scoop up discounted stocks and hunt for returns in a world of super-low interest rates. They are rooting around in places like Brazil and South Africa, while markets more broadly appeared to be in a lull.
The turbulence that followed Britain’s vote to leave the European Union has dissipated and left behind only an uneasy calm. But there are still events that could rouse investors, as Bloomberg reports. As one fund manager put it: “At some point, the jaws must snap.”

EM markets

EM markets

TISG and readers need protection from TISG misinformation

In Financial competency on 12/08/2016 at 5:47 am

“DBS helped sell junk Swiber bonds to public” was the headline to an article from TISG.

The article went on to describe three bond sales of Swibber bonds by DBS. It then went on to compare the sale of these bonds to another DBS product (akin to mini-bonds) where retail investors lost money.

There is a problem though with this analysis and comparison. The Swiber bonds were never sold to the public. As a ST article put it, “The Swiber bonds were available only to accredited investors – with net personal assets of more than $2 million – or those investing a minimum of $250,000.”

The TISG article never reported out that these bonds were only available to accredited investors – with net personal assets of more than $2 million – or those investing a minimum of $250,000. Its headline said the bonds were sold to the public, and this was repeated a few more times in the article.

Given that TISG is proud that it operates as a commercial site not a socio-political site, one can only wonder at the lack of editorial supervision given that the author “Eternal Vagabond” usually writes stuff that is against PAP administration, one would have tot that editorial supervision would not be so lax. Here the failure of editorial supervision led to misform. In fact the headline and article are defamatory. DBS could sue TISG for claiming that it sold these bonds to the public.

In the course of a row with critics of TISG, Ravi Philemon made it clear that there were writers that TISG never edited, juz published. See the bit towards the end juz before Ravi’s photo http://www.theonlinecitizen.com/2016/08/09/tisg-lashes-out-in-response-to-ncmp-daniel-gohs-remarks-on-its-article/.

I can only guess Eternal Vagabond is one of these untouchables.

Update at 6.50am: Given that the writer does not even know that the other DBS product (DBS High Notes 5) is not related to junk bonds ( “This is not the first time DBS is linked to junk bonds”), my constructive, nation-building advice to TISG is to make sure the Eternal Vagabond’s financial pieces are vetted throughly. And if this commercial website can’t pay for such editorial expertise, don’t publish this writer’s financial pieces.

But maybe defaming DBS is part of the “eyeballs” plan?

 

Tips to avoid falling victim to fraudsters

In Financial competency on 01/08/2016 at 3:18 pm

There’s been a fair bit of news about S’poreans especially the elderly falling victim to fraudsrwes. The tips are from the UK’s Guardian (There’s a similar problem there) but useful all the same. Maybe the more responsible new media outlets like Terry’s Online Channel, TRE, SGDaily, TMG and mothership can find “experts” to localise the contents of the Guardian article?

If you take a call at home or receive any communication from your bank, assume it is fraudulent until you have established it is not. Fraudsters will claim to be from the bank and have spotted unusual or fraudulent transactions on your account. Their aim is to make you fear for your savings, and act illogically.

Never say where you bank, or give any personal information to callers, whoever they claim to be. If you think it could really be the bank, ask for the person’s name and say you will call them back. Note, the scammers may also claim to be the local police investigating staff at your local bank branch.

Tell the elderly about the tricks used.

More at

https://www.theguardian.com/money/2016/jul/30/how-to-avoid-falling-victim-to-fraudsters

Expecting us to feel sorry for him?

In Financial competency, Financial planning on 31/07/2016 at 1:55 pm

Someone wrote to Gilbert Goh saying that he lost his 150k a year job to a FT prepared to accept 40% less. Losing my job was brutal for me financially since I am paying for 2 properties and a car.

I also have a S$100K unsecured loan debt which I took on to pay the deposit for my second home. My wife isn’t working and I have school going children. The first thing I did was to adjust my salary expectations up to 50%. Within 1 week I have applied to almost 500 jobs but none of them successful or called for an interview.

http://www.transitioning.org/2016/07/28/fourth-generation-singaporean-lost-his-150000-salary-job-to-his-foreign-subordinate/

Sorry leh. In my book. someone only earning $150,000 a year, whose wife is not working,, with a car loan (presumably), kids, and having to borrow to finance his second property deposit, should not be tempting fate by “owning” two properties. At the very least, his wife should be earning $75,000 a year, and the deposit financed by savings before he and his wife even think of a second property.

But I feel sorry for him for having a S’porean wife (I assume she’s not a FT). If she’s the typical S’porean woman, she’ll be telling the world that she has a useless husband. I’ve seen too many cases of unemployed husbands being dissed by their S’porean wives. It’s a blood sport.

 

 

SMRT: Taxpayers get screwed

In Financial competency, Temasek on 25/07/2016 at 6:08 am

Temasek is offering $1.68 per share or $1.18bn to buy out the minority shareholders of SMRT, a 9% premium over the last traded share price of $1.545.

Usually an acquirer pays a premium of up to 30% to gain full control of the target. So the question is why just a 9% premium, shareholders and anti-PAP paper warriors are screaming? “Temasek trying screw minority shareholder isit?” screams Philip Ang financial guru to the cybernuts in TRELand, and Terry’s Online Channel (TOC). Shareholders are saying their shares are worth $2, a 30% premium to $1,545.

Good luck to these greedy people if the takeover is blocked by their greed. In few yrs time, they’ll be complaining of oppression of minorities if SMRT remains listed.

DBS put a value of $1,28 per SMRT share (albeit before the LTA deal but which value it later reiterated after the deal). So at $1.68 (31% premium), it would seem taxpayers are being screwed for the benefit of non-Temasek shareholders. And the greedy sods think they should screw more from us, the taxpayer. Who they think they are? PAP ministers isit?

It would have been better (not necessarily ethically or morally though and it may be illegal) if Temasek had let the market react to the deal before making a bid. As it is one can only look forward to the documents that will be sent to shareholders to see if the price of 1.68 makes sense from taxpayers’ point of view.

At the moment, this doesn’t seem to be the case. The greedy renters are getting 0,40 cents above $1.28, a 31% premium. $280m will be shelled out unnecessarily by Temasek to people who have enjoyed good dividends in times past. Taxpayers’ money is being wasted while the greedy shareholders scream for even more.

And note that the TRE cybernuts want $280m of taxpayers’ money to be wasted on greedy people? In fact they want even more money to be squandered who think they are more entitled than PAP ministers.

 

Tech depresses value of land

In Financial competency on 18/07/2016 at 4:33 pm

Why Land May Not Be the Smartest Place to Put Your Nest Egg

It’s true, as the adage goes, that they’re not making land anymore, but technology that allows more intensive use of land has held down values in the long term.

NYT Dealbook

Uber raises money to subsidide users

In China, Financial competency, India on 15/07/2016 at 1:28 pm

NYT Dealbook explains Uber’s biz model of sunsidising the rides of Chinese and Indian customers to starve its competitors of biz:

WHY UBER KEEPS RAISING MILLIONS It feels like almost every other week there is a new headline about Uber raising more money, Andrew Ross Sorkin writes in the DealBook column.

If you add up all the money the company has raised since it started in 2009,it is on its way to amassing $15 billion and has a valuation of $68 billion – all while remaining a private company.

When Amazon went public in 1997, it had raised $54 million and was valued at $438 million.

Uber has to finance its efforts to grab market share in China and India, butit is also trying to mark its territory. Every time Uber raises another $1 billion, investors find it less attractive to back one of Uber’s rivals: Didi Chuxing, Lyft, Gett, Halo, Juno. It is a war of attrition, to starve the competition of cash.

Uber’s efforts seem to have had the opposite effect so far, spawning a long list of rivals, but as the smaller competitors run out of cash, venture capitalists should be less inclined to put up more money.

This arms race comes against the backdrop of falling valuations and there is a rush to take the money while it is still available. Bill Gurley, a venture capitalist who has a stake in Uber and sits on its board, warned investors about unicorns seeking funds: “You are not being invited to a special dance, you are being approached because you are the lender of last resort.”

The question is whether investors will look at Uber’s balance sheet and throw up the white flag. It still has formidable competition from Didi, the market leader in China, which just raised $7 billion. And some of the same investors that have backed Uber are also backing Didi, including BlackRock and Tiger Global. (Some may be hoping that Uber might one day merge its Chinese operation with Didi.)

Uber’s most recent fund-raising effort – focused on the leveraged loan market – aims to avoid diluting the current base of shareholders and having to sell itself at an even higher valuation. It will have to pay up for the financing, but if its valuation continues to grow, it would be a bargain compared with the value of the equity. Uber is hoping to sell debt with a yield of 4 or 4.5 percent.

The question between now and the probable initial public offering in a few years is whether it will have starved all of its competitors along the way.

Wnat price shareholder value?

In Corporate governance, Financial competency on 04/07/2016 at 1:36 pm

FT reported that Microsoft had to pay US46bn more than it planned to because of a competing bid.

The high price that Microsoft ended up paying could now lead to deeper cost-cutting at LinkedIn after the deal is completed. Microsoft chief executive Satya Nadella warned Jeff Weiner, his counterpart at LinkedIn, during the bidding that “a discussion of cost synergies in the transaction would be necessary” as Microsoft pushed its offer higher.

Well hopefully those who lose their jobs have share options to cushion the loss of their jobs.

Hedgies face unhappy clients

In Financial competency on 17/06/2016 at 1:34 pm

From NYT Dealbook

HEDGE FUND MANAGERS TRY TO STANCH LOSS OF INVESTORS Hedge fund titans may be used to running their firms like elite clubs, but years of poor performance have forced them to open up admission, Alexandra Stevenson reports in DealBook.

More big-name investors like MetLife and American International Group have begun to withdraw their money from hedge funds and the investors who stay get a chance to sit dictate lower fees and better terms.

Hedge funds can no longer just operate on a “2 and 20” model, where investors pay fees of 2 percent of assets under management and 20 percent of any gain in any year. Managers are offering lower fees for investors to keep their money in funds and setting performance targets where investors would pay a fee only if they were exceeded. And the favorable terms are not just offered to longtime loyal clients.

The industry argued that a hedge fund manager’s job was to protect in down years and not outperform in good years, but when hedge fund returns fell with the markets last summer, the point was moot. Some of the best-known managers, including William A. Ackman of Pershing Square Capital Management and Larry Robbins of Glenview Capital Management, have lost money.

And for some investors, acknowledgement of poor performance is not enough. In September 2014, the California Public Employees’ Retirement System announced plans to liquidate its $4 billion hedge fund holdings because of concerns that the investment were too expensive and complicated. In April, the pension fund for New York City civil employees voted to exit its portfolio of $1.5 billion in hedge fund investments. Altogether, investors pulled $15.1 billion from the industry in the first quarter of the year – still a drop in the ocean compared with the $2.9 trillion the industry managers, but the pressure is mounting.

Mr. Robbins apologized to investors recently in an effort to stem the outflow of investor money from his firm. He pledged to “right the ship as quickly as possible” and offered the opportunity to put more money into a new fund that would waive fees. He has continued to lose money – investors in his flagship fund had lost 6.5 percent at the end of May – so he is now offering more favorable redemption terms, allowing existing investors that add more money into the fund to step into the shoes of investors who have left.

Truth about wealth managers

In Financial competency on 13/06/2016 at 2:44 pm

Parasite

From FT

Big breasts like triple A status and budget surpluses have a downside

In Financial competency on 25/05/2016 at 1:53 pm

(I’ve juz binned the piece I did this morning and rewritten it.)

When a PAPpy boasts about S’pore’s Triple A rating, e-mail to that PAPpy or post a comment asking: “What benefits do the issuer get for a triple A rating versus a double A and what benefits do they give up?”. A bond strategist at BlackRock quoted by the FT asked this question in the another context. He was talking about corporations issuing bonds, but the reasoning applies to countries too.

Triple A status is a virility symbol like extra-big breasts or muscles. Btw, a UK celebrity (She was the partner of Dwight Yorke — Remember him?) with extra-large breasts had to undergo surgery to make them smaller. She was suffering from backache from her frontal heavy load.

Here’s two FB posts from Chris K who was a capital markets man, and self-confessed geek on the impacts of macroeconomic policies on capital markets that explain why triple A status and budget surpluses are not good for S’poreans. (Emphasis mine)

Minister in the Prime Minister’s Office Chan Chun Sing also said at the rally that Dr Chee wanted to give the impression that “we are cheating Singaporeans”. But the market was not stupid, he said.

“Why is Singapore one of 11 countries in world that has triple-A ratings from all three credit rating agencies?” he pointed out.

I’ll answer it for Chan Chun Sing even if he avoided the essential truths of the triple-A rating. That rating is mainly based on

1. The constitution rule that forbids the government from running deficits over the parliamentary term.

2. The massive year-on-year budget surpluses ran by the government, amounting to an average of nearly 10% of GDP per year over the past 15 years alone.

Those budget surpluses that underpins the government finances do not appear out of the blue and they certainly do not result from some magical fiscal policy formula. Those surpluses results from selling land at ever increasing prices, excess returns from investing debt proceeds which includes CPF and low social expenditures.

In other words, those triple-A ratings are paid for by the people and by denying them financial security in retirement and healthcare.

And just to be clear, Norway and Singapore are the only ones among the 11 triple-A rated countries that have long term budget surpluses. That means countries do not need to have budget surpluses to be rated triple-A, sustainable deficits will be enough. Norway’s long term surpluses are from natural endowments, Singapore’s…… let’s put it this way, a transfer of wealth from households to the state.

And

Despite being backed by the nearly 10% of GDP a year long term budget surpluses, the triple A ratings have little direct to benefit to households. The surpluses are not without consequences to households since they are derived from land sales at increasing prices and denial of social benefits both leading to inadequate retirement and healthcare funding, and to an acceptance of high levels of inequality.

Do read the full post

https://www.facebook.com/notes/chris-kuan/tax-benefits-and-singapores-barely-useful-triple-a-rating/481998245323602

To conclude,  triple A status and budget surpluses, like big breasts can be a problem.

What are the biggest risks to financial markets?

In China, Commodities, Financial competency on 23/05/2016 at 10:52 am

Or “China kua kee”. See that deflation is also a major concern. Commodity price movements are “peanuts”

But notice was missing? Nothing on that gorilla in eoom? The Fed.

Lesson for Kong Hee and friends

In Financial competency, Uncategorized on 19/05/2016 at 1:28 pm

Eat yr hearts out Kong Hee, Sun Ho and CHC members for nor seeling the Kingdom of Heaven but lucre.

God loves the Church of England, not you people who believe in the gospel of prosperity. He helps them make serious money while Kong Hee still has to finance his Sentisa Cove penthouse that is less worth than its purchase price.

The church commissioners, who manage the C of E’s £7bn investment fund, said they enjoyed market-beating returns of 8.2% last year but warned they would struggle to keep up that pace in future. Over the past 30 years the fund’s average annual return has been 9.7%.

The commissioners’ private equity managers returned 20.2% during 2015 and the value of the church’s £2bn property portfolio was up by more than 14%. The commissioners continued to invest in forestry with two new holdings in Australia, bringing the total to nearly 120,000 acres, they said. The timberland and forestry portfolio delivered a return of 13% last year.

https://www.theguardian.com/business/2016/may/16/church-of-england-sells-investments-fearing-market-slowdown.

There’s another report that CoE is a big buyer of Google’s parent.

The real aristocrats

In Financial competency, Financial planning on 11/05/2016 at 7:37 am

Beats S&P which in tirn brats hedge funds

Chart: S&P Dividend Aristocrats Index and Total Return index

 

Gem of an investment insight

In Financial competency, Financial planning on 10/05/2016 at 7:59 am

“There is one vital difference between gambling and investing. You cannot logically explain why, for example, a given set of cards turned out in a game of poker, but you can work backwards and explain why a stock had to fall. And I think here there is a trap is for unwitting investors. Because the past can be analysed and explained, we think the future can be too.
By Trutheludes on Betting and investment both require skill and luck

FT reader

Unicorns will turn into unicorpses

In Financial competency on 30/04/2016 at 6:43 am

And cockroaches are the new model

When projects like this raise serious money, u know unicorns are history Ftom NYT Dealbook:

A $700 Juice Box for the Kitchen That Caught Silicon Valley’s Eye Juicero, a contraption that requires Wi-Fi to make an eight-ounce glass of juice, has raised $120 million from Google and others.

Also from NYT Dealbook

Cockroach’ Model Gaining Favor Over Unicorns If 2015 was the year of the unicorn, or start-ups that reached a valuation of $1 billion or more, this year is likely to be defined by a very different beast – the cockroach, the creature that can survive a nuclear war, Business Insider reports.

Feeling sea-sick?

In Emerging markets, Financial competency on 12/04/2016 at 10:12 am

Chart: emerging markets data

Value in dog sectors?

In Financial competency on 31/03/2016 at 10:55 am

Banks, oil & gas and basic resources are currently trading at unusually large discounts to book value

But could get cheaper  another way looking at a low price-to-book ratio, is that the market does not see something as being under valued, rather that the company and its sector face bigger problems

 

Roy’s case Four questions

In CPF, Financial competency on 23/03/2016 at 2:17 pm

And possible answers

Since Roy had further bouts of verbal diarrhea, after a long spell of good health the noise from cyberspace was supportive of his verbal diarrhea.

Here are four questions that I’ve not heard any anti-PAP warrior, nut or rational ask.

— Why has PM given Roy until 2033 to pay up?

— If PM had not sued, what would have happened in GE?

— If PM had not asked for damages, what would happen in future?

— Why are S’poreans only aroused  when there are allegations of wrong-doing?

Why has PM given Roy until 2033 to pay up?Why has PM given Roy until 2033 to pay up?

In other words, why is PM making payments affordable?

To pay the S$150,000 in damages owed to Prime Minister Lee Hsien Loong for defamation, blogger Roy Ngerng will start with payments of S$100 a month for five years, his lawyer said on Monday (Mar 14).

These instalments will start from Apr 1, 2016. After five years – from Apr 1, 2021 – Ngerng will have to pay S$1,000 a month until the full sum is paid, lawyer Eugene Thuraisingam said.

In addition, Ngerng will have to pay S$30,000 by Wednesday, Mar 16 for the costs of the Assessment of Damages hearing.

If he pays all the instalments on time, Ngerng will complete paying by 2033.

Why is PM liddat? Answers please given that the “noise” is not giving him any credit for putting Roy on a “never-never: payment scheme, because to give him credit for making defamation ‘affordable” would imply that Ah Loong’s a really nice guy.

If PM had not sued, what would have happened in GE?

If PM had not sued, Roy and M Ravi, as Oppo candidates in AMK GRC would have been entitled to claim that PM did not sue because Roy’s allegations that he stole our CPF money were true.  And this was a good reason as any other not to vote for PM.

And the other Oppo candidates in other wards could also claim that the allegations “must be true” otherwise PM would sue. And this would be a good reason to vote Oppo, even if that Oppo were members of the NSP, a party led by someone who never told us about his criminal conviction and bankrupty.

As it is, almost as soon as PM sued, Roy apologised to PM, claiming that the allegations were untrue giving the lie that he had done research in the issue. Research? What research?

Related post: In 1959, the PAP alleged wrongdoing by a minister. He sat down and kept quiet. He lost his seat and the PAP thrashed his party.

If PM had not asked for damages, what would happen in future?

“… The International Commission of Jurists (ICJ) reiterates that we deplore this practice by the Singapore government of using exorbitant and punitive civil defamation suits to silence its critics”

The problem with not pressing for damages is that it than makes defaming the PM a cheap, effective way of becoming a political “celebrity”. Today, Roy, tom Goh Meng Seng, then New Citizen Han Hui Hui, then s/o JBJ. There’ll be no end of those lining up to defame PM or other ministers because there’s no cost to defaming them. And we know how S’poreans love free things, don’t we?

Why are S’poreans only aroused  when there are allegations of wrong-doing?

Seriously, I think that there’s a more important issue than whether PM should have sued or the quantum of damages.

We all know that people* like Uncle Leong etc (self included) have been posting on the relationship of CPF funds and the monies managed by GIC etc for a long time. But the public never took an interest on a matter that should concern them :their retirement and mortgage payment money.

It took Roy’s allegations that PM stole the CPF monies that made the public aware that they could and should better returns than the average of about 3.3% on their balances**.

Surely shumething is wrong, very wrong with the way S’poreans behave? Only when there is an allegation of wrong-doing, do people get aroused and interested.

When my Facebook avatar posted something like the above, he received this totful response from a leading economist and critic of many a govt policy:

What this indicates is that first there is widespread public confusion and mistrust about the CPF, second the CPF system needs careful examination and reform and third until Roy made crazy allegations the government has not seen fit to respond adequately to these issues

I think it’s not just something wrong with Singaporeans but that it shows poor management of policy and public opinion by the government.

More importantly it indicates that in our polity, there are insufficient real channels of feedback on key areas of policy concern that government is genuinely responsive to.

————————————–

*Even one Harry Lee talked about it in the early noughties when he explained that the govt issued a special bond to CPF and the proceeds of the bond went into the govt’s Consolidated Fund.

*You know when an issue is safe to talk about when an NUS academic is reported in the constructive, nation building ST talking about a topic. Such a topic is the link between our CPF monies and the monies managed by GIC.

As the report on 12 January 2016 is pretty short, here’s almost the full monty from BT:

The government can consider partially pegging returns on the Central Provident Fund (CPF) Ordinary Account (OA) to returns generated by sovereign wealth fund GIC, suggested an academic.

National University of Singapore (NUS) economics professor Chia Ngee Choon acknowledged that GIC returns are already distributed to Singaporeans indirectly through, for example, Budget top-ups to CPF accounts.

But linking GIC to the CPF OA interest rate allows for a more direct channel for Singaporeans to enjoy GIC returns should it do well, she noted. “We don’t want to miss the opportunity of having a higher rate.”

Assoc Prof Chia made the suggestion at an academic symposium on social security at NUS on Tuesday.

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Reminders

OA monies earn either the legislated minimum interest of 2.%  per annum, or the three-month average of major local banks’ interest rates, whichever is higher. 2.5% is currently paid out as bank interest rates have been “peanuts”, with the relevant three-month average at 0.21% from August to October 2015.

An extra 1% is payable on the first S$60,000 of a member’s combined balances, with up to S$20,000 from the OA able to attract the extra interest.
GIC achieved a 20-year annualised real rate of return of 4.9 per cent for the financial year ended March 31, 2015. In US dollar terms, including the effect of inflation, GIC’s portfolio generated an annualised return of 6.1 per cent over the 20 years ended March 31, 2015.

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To get higher returns on CPF, Assoc Prof Chia also suggested that Singaporeans can transfer excess money from the OA, which is used for housing, to the Special Account (SA), which is used for retirement and which generally pays a higher interest rate of 4-5 per cent a year. The CPF Board can encourage Singaporeans to monitor their OA and SA account balances more actively through sending text message or e-mail reminders, she pointed out.

However, people mightbe wary of transferring OA monies to SA, because the transfer is irreversible. Those who transferred might want to use the money to purchase a more expensive house, she added. She suggested an option to transfer money from the SA back to the OA, perhaps with a penalty or administrative fee.

 

 

“A high yield often indicates operating problems”

In Financial competency, Financial planning on 11/03/2016 at 1:42 pm

“A high yield often indicates operating problems. One should look for companies that have a long record of dividend growth, but which at the same time have reinvested into their businesses. This is essential for growth in earnings,” fund mgr quoted in FT.

Remember Reits are different, They are leveraged and must pay out most of their profits. If you own Reits like me, you’ll have to pay the devil’s price eventually: rights issues. And thaz assuming things go well.

What regions have outperformed

In Emerging markets, Financial competency on 11/03/2016 at 6:41 am

Chart: stock market returns data

FT reports

Capital Economics notes the recent outperformance of EM equities in Latin America and in emerging Europe, the Middle East and Africa, and expects emerging Asia to join the party soon. Valuations there are not high, it notes, and many economies in the region have relatively bright growth prospects.

Doctor Wealth loves CPF/ Invests in STI ETF

In CPF, ETFs, Financial competency, Financial planning on 26/02/2016 at 2:28 pm

Here’s something that I dug up from my archives of unused stuff. This praise of CPF appeared in 2014 at https://www.drwealth.com/2014/10/20/3-steps-retire-singapore-like-bogle/?utm_medium=DISPLAY&utm_source=OUTBRAIN&utm_campaign=NOV2014&utm_content=ARTICLE7_RETIRE

“I have been blessed with a fabulous defined retirement plan”

Like all working Singaporeans, I contribute to CPF (Central Provident Fund), our mandatory national social security plan. CPF is made up of 3 separate accounts: Ordinary (OA), Special (SA) and Medisave (MA). Each month when I am working, I make the maximum possible contribution to CPF and eventually when I retire, CPF will pay me back a monthly annuity income. My OA had been used to pay for my housing mortgage, but SA remains untouched, and my MA pays for medical insurances.

Each year, I also contribute the maximum $12750 into my SRS (Supplementary Retirement Scheme) account. This voluntary contribution must be done with cash and provides a tax relief that reduces my tax bill. SRS is a form of forced savings as early withdrawal from the account attracts penalties.

Unlike the CPF that pays a risk free 2.5% to 5%, the SRS pay a very low interest, so I invest my SRS funds for higher yields. I sink my SRS money, using a RSP (regular savings plan), into the STI ETF (Straits Time Index exchange traded fund). What happens is that by the end of each year, I will contribute the maximum $12750 into my SRS account, and in the following year after my contribution, $1000 will be deducted every month automatically and bought into the low cost index fund, the STI ETF. In this way, the process is automated and I avoid timing the market too.

I treat my CPF as a form of bond, as it pays a decent risk free rate. The OA pays 2.5%, while the SA and MA pays 4%. There is an additional 1% paid to the first 60000 dollars. In the long run, with the magic of compounding interest, the amount in my retirement account can be significant. Contributing to my SRS gives me a tax saving and I do not actively manage my investment of the SRS money, as I feed them into the Singapore stock market automatically and regularly with a RSP. Together, my CPF and SRS plans will ensure that I will have 2 strong pillars for my retirement planning.

Re his faith in STI ETF, it’s clear that  Dr Wealth does not subscribe to the Econoist and FT (Too poor isit?). There have been some articles quoting research that indicates that shares may not be the best long term. Example: investment http://www.economist.com/blogs/buttonwood/2016/01/investing

As of February 2013, the longest period of negative real returns from US equities was 16 years. But it was 19 years for global equities (and 37 for world ex-US), 22 for Britain, 51 for Japan, 55 for Germany and 66 for France. Such periods are much longer than most small investors would have the patience to wait.

Another way of looking at the same issue is whether equities beat bonds over the long term; whether the risk premium is really delivered.

The answer is not really.

 

Equities: Where we are tops in Asia

In Financial competency on 18/02/2016 at 7:34 am

Chart: Comparable valuations for major indices

Best payouts, Middking ROEs. But who cares, payouts matter in this environment, nothing else does )))

Keeping your head while all around you are losing theirs

In Financial competency on 17/02/2016 at 7:43 am

What does a rational man do when mkts are in free fall?

Here’s a very interesting tot from an FT reader.

The FT here takes seriously rather than trashing the line ‘rational people lose rationality in fast moving markets’. On the contrary rational people are hyper-rational in such situations. If the herd is running and you stand still, it is you the wolves will catch. There is a rationality to herding, and any multi-agent model will predict it. It is only the time-and-again discredited practice of peering obsessively at bell curves which is irrational.
The point of the game is not to lose money, not to have the cleverest portfolio if prices move as your models show they are supposed to do. If prices show that your portfolio is no good, then you are the irrational one!
Complexity theory has shown that market movements do not correlate to simple narratives, I know it is the pink sheets’ journos job to peddle such simple narratives, but it is nothing less than BS 99% of the time.

Coming back to the headline, keeping yr head means losing money if you are leveraged. But wait, keeping yr head means selling.

 

Asset values can fall, debt remains eternal

In Financial competency on 16/02/2016 at 7:04 am

Further to this on the debts of S’poreans, where I mocked the idea that juz because assets exceed debt, “No worries”, I juz read in FT, “At the end of its last financial year, it was so highly leveraged that its assets had only to fall in value by 3.6 per cent for the bank to be wiped out.”: “it” refers to Lehman.

Asset values can rise or fall, but debts must be repaid*: thaz a truth not a LKY Hard Truth.

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*If one defaults, one can be made bankrupt. Whatever it is, one is crushed.

Perspective on S’poreans’ Debt, Leverage

In Economy, Financial competency on 13/02/2016 at 2:45 pm

PAPpies will say no worries, as assets cover debts. But that sounds like what the highly leveraged tycoons said before 1997, 2008 and the credit crunches in the 60s, and 70s and 80s.

And in a deflationary world, the notion of “safe as houses” doesn’t work as an investment thesis. You will pay and pay while the property value depreciates.

Update on 16 Feb at 7’ooam: Debt is eternal.

Why markets are panicking

In Financial competency on 12/02/2016 at 12:24 pm

They now assume that central banks don’t have a clue on how to save the world

What we are seeing, I think, are safe-haven flows. What is causing them, I believe, are central bank actions that undermine market confidence in the belief that central banks will do “whatever it takes”, in Mario Draghi’s phrase, to prevent economic collapse. The loss of faith is clearest in Europe, where Mr Draghi felt pressure to speak publicly on several occasions after the December meeting, in order to clarify that it did not represent a step in a less interventionist or more hawkish direction, and was not an indication of internal dissent over the course of policy. Crucially, those statements did not reverse the damage done by the December meeting. …

The Fed seems to have done something similar to its own standing, through the simple act of moving to tighten while both inflation and inflation expectations remained well below target. Just as Mr Draghi’s saying “whatever it takes” again cannot generate the same boost to confidence as it did the first time around, a simple reversal of the Fed’s December rate increase would not restore the market’s faith in the Fed to where it was a year ago. The Fed would need to do more, just as other central banks that raised rates away from zero prematurely found themselves subsequently cutting rates to levels below where they had stood before. Likewise, the Bank of Japan’s sudden pivot to negative rates raises the possibility that the central bank doesn’t actually know what it is doing.

Faith in central banks is of critical importance now because conventional policy is exhausted. To provide additional monetary stimulus, central banks can only turn to negative rates, to quantitative easing, or to jawboning of markets. It seems to me that, as a result of central-bank missteps, markets are losing confidence that central banks know what they’re doing, and are losing confidence that central banks are prepared to do what it takes to convince sceptical investors otherwise. Unless and until there are adequate demonstrations, it is possible this market panic will continue.

What is especially worrying is that not too much needs to go wrong in the real economy for things to begin breaking …

http://www.economist.com/blogs/freeexchange/2016/02/markets-lose-faith

Why banks sell-off is worrying

In Banks, Financial competency on 12/02/2016 at 6:00 am

This NYT Dealbook piece  appeared on Tuesday morning NY time. Relevant given what keeps happening since then. Gd description of the worries

INVESTOR NERVOUSNESS OVER BANKING GIANTS Worries about the world’s biggest banks have already played out in the stock markets as their shares have plunged, but there are also ominous signs in markets used to bet on the creditworthiness of large financial firms, Peter Eavis reports in DealBook.

The KBW Nasdaq Bank Index, a benchmark for the banking sector, was down more than 3 percent on Monday and had lost nearly 20 percent of its value this year.

Investors are rushing into benchmark government bonds, too. The yield on the 10-year Treasury note has declined, while the price of gold is rising. TheVix volatility index, also known as Wall Street’s fear gauge, has risen.

When investors sell bank shares or bet against the banks in credit markets, it can be a signal of more serious turbulence. It suggests that banks – usually the gears of an economy, transmitting credit to firms and households – are becoming more vulnerable to market volatility and underlying economic weaknesses.

The declines in bank shares may not indicate that banks are particularly fragile, but that investors are skeptical about their abilities to earn solid profits in the future, partly because of ultralow interest rates around the world.

Still, it doesn’t look too optimistic with Citigroup’s stock trading at nearly half the bank’s book value and European banks grappling with their own problems, which have contributed to the recent deep declines in their stock.

Fears about the health of the world’s banks continued to drag stocks down in Asia and Europe on Tuesday, Reuters reports. The Nikkei plunged more than 5 percent and investors stampeded for haven assets like the yen and gold.

Fears about the global economy also pushed the yield on Japanese 10-year bonds, the benchmark of government borrowing, down to zero for the first time, as Jonathan Soble reports in The New York Times. They quickly fell into negative territory, meaning some investors were buying bonds despite knowing that if they held them until maturity, they would come away with less money than they paid.

The Devil has the best returns

In Financial competency on 01/02/2016 at 1:35 pm

From FTEthical funding

And

“Companies misaligned with sharia law, such as beer brewers and cigarette producers, may be unethical, but these are companies that often offer stable, dividend-paying returns,” says an analyst from Morningstarcovering sharia products.

Related post: UK MPs subject to sharia law

 

Bear mkts are gd news?

In Financial competency on 27/01/2016 at 5:30 am

bear market

FT also reports that London and Tokyo bear mkts have also resulted in the main of favouring the brave.

Bear mkt? Don’t panic yet

In Financial competency on 23/01/2016 at 1:41 pm

Does a bear market inevitably mean recession? No. The 23% one-day decline in American equities in October 1987 (Black Monday) was not followed by an economic downturn. The dotcom boom, and the surge in house prices in America and elsewhere, showed that prices can lose track with fundamentals. The recent decline may merely indicate that share prices were overvalued, and are now coming back to earth, or even a sign that investors have become too pessimistic. More economic news, and more company results, will be needed to tell whether this market signal is the real thing, or just a fake.

http://www.economist.com/blogs/economist-explains/2016/01/economist-explains-14

S&P 500 Double top?

In Financial competency, Uncategorized on 21/01/2016 at 5:05 am

Longview

On mkt turmoil: Pearls from FT’s Lex and others

In Financial competency on 20/01/2016 at 5:52 am

From FT’s latest Letter from Lex

On the list of books that everyone in finance should read, Benoit Mandelbrot’s The (Mis) Behaviour of Markets sits near the very top. For those who have made the questionable decision to earn an MBA or a CFA (your correspondent is guilty on the second count) it is an essential curative to the large quantities of pernicious nonsense consumed thereby. Against the classical finance theory, Mandelbrot points out that price changes (unlike coin flips) have “memory”: prior changes have effects on future ones. Stocks demonstrate momentum – until they don’t. The basic pattern of all markets (seen at any scale, from the intraday to the multiyear) is periods of identifiable trend, broken up by sharp periods of volatility, after which a new trend takes hold. Once this fractal picture of market dynamics takes hold, one sees it everywhere.

We have undoubtedly entered one of these liminal periods of volatility that separate longstanding trends. The long bull market is over. That does not mean, however, that it will not be followed by yet another bull market. Lex has no idea how one would know what the next trend will be, except to say that current high valuations of stocks and bonds make high future returns a bit less likely. There is, however, widespread belief that the next trend will be down. We hear talk of deflation, overcapacity, slowing trade and industrial activity, higher interest rates, emerging market debt crises, and various other flavours of economic distress.
In retrospect, it is clear that Lex made its own contributions to the atmosphere of gloom this week.

And

This is all pretty dour, and we may all need to take a step back. Because bearishness is en vogue, and everyone (Lex included) seems to be particularly aware that bearish data do not mean that the next market is especially likely to be a bear. On the contrary, in fact. Groundless optimism, rather than paranoid pessimism, is the most fertile ground for a bitter harvest. And the week ended with some reassuringly calm words from Jamie Dimon on JPMorgan’s earnings call. As far as he can see, the economy is holding up. Cheap oil prices are not the end of the world. The market’s mood is not a reliable indicator.

And

“You have a big change in the world out there – people are getting adjusted to China slowing down.”
Jamie Dimon, chief executive of JPMorgan Chase, on the bakn’s fourth-quarter earnings.

“Technically we are in a bear market. … There is just a broad reassessment of risk right now.”
Laurence D. Fink, the chief executive of BlackRock, the world’s largest money management company.

(NYT Dealbook)

My favourites

As a colleague pointed out, it is tempting to believe the markets only when they are sending a message that coincides with your pre-existing views.

And

Given that the Fed took the first step in withdrawing the stimulus last month, are market movements an indicator of economic activity or a sign that investors are worried that Daddy is about to cut off their allowance?

(Economist’s Buttonwood)

Buy Keppel, SembCorp Marine & Sapura?

In Energy, Financial competency, Malaysia, Temasek on 15/01/2016 at 11:48 am

Continuing the theme of buying dogs, commodities and energy …

Forget what the financial equivalent of Goh Meng Seng says (reported here), and buy the two fallen Fab 5 stocks? And M’sian Sapurakencana Petroleum? One of Asia’s leading oilfield services groups, if you don’t know. 

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He’s the journalist equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the about same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

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There’s deep despair about the oil price as this report from NYT’s Dealbook recounts. But there’s two swallows in the sky:

–Premier Oil has finally agreed to buy all of German utility E.On’s UK North Sea assets in a deal worth $120m (£83m) despite oil trading below US$30,

— Statoil ASA, Norway’s biggest energy company, snapped up a 12% stake in Lundin Petroleum AB to increase its access to the giant Johan Sverdrup field.

The acquisition corresponds to a price per share of about 124 kronor, in line with Lundin’s average price over the past 30 days, according to data compiled by Bloomberg. Lundin shares have dropped about 20 percent since crude started to tumble in mid-2014. Brent oil, the global benchmark, is now trading near $30 a barrel.

“The market situation made it possible for us to secure this position at an attractive price,” Baard Glad Pedersen, a spokesman at Statoil, said by phone. The Stavanger-based company won’t seek representation on Lundin’s board, he said. Bloomberg

At current prices, extracting oil from the North Sea is theoratically the equivalent of burning dollar notes.. Its oil is expensive to extract.

Back to the gloom and doom painted by Dealbook bearing in mind that Monkey is a trickster

NO BOTTOM IN SIGHT FOR OIL PRICES The collapse in commodity prices pushed oil futures even lower on Monday and analysts predicted that the slide was far from over, Jad Mouawad reports in The New York Times.

Oil prices were at a 12-year low on Tuesday, with West Texas Intermediate near $30 a barrel after a decline of more than 5 percent overnight. Brent crude was just under $31 a barrel by the Asian afternoon, as The Wall Street Journal reports.

The drop in commodities prices is being felt throughout the energy sector and beyond. Saudi Arabia said it was considering selling shares in its state-run oil company. Arch Coal, one of the biggest oil producers in the United States, filed for bankruptcy protection to cut its debt. Russia’s main stock indexes plummeted on Monday as oil prices cast a pall over its energy-dependent economy, Andrew E. Kramer reports in The New York Times.

Oil’s decline in the last year was caused in part by Saudi Arabia’s decision not to reduce production. The change, intended to force out high-cost energy producers, backfired on the kingdom and other producers, which now have to consider how to finance their oil-dependent economies.

The slump in oil prices had gained momentum last week on renewed concerns about China’s economy.

Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said that everything indicated a continued oil glut. “Iran is about to re-enter the market, demand numbers and economic indicators look relatively weak, U.S. supply is holding up in a low-price environment much better than people though and global inventories are growing.”

Many analysts expect more declines. Goldman Sachs and Morgan Stanley have both said that oil could drop to $20 a barrel.

Bowie: Pioneer on internet and in finance

In Financial competency, Internet on 14/01/2016 at 4:22 am

David Bowie was also groundbreaking in his use of technology, not least his internet service, BowieNet, which launched in September 1998.

In a time before Instagram, YouTube, Twitter or even MySpace, most artists provided little if any online material to their followers.

But Bowie’s platform not only offered a wide variety of exclusive content, but also several ways to interact with the singer himself.

“In my view, BowieNet had to be the most groundbreaking reachout to fans that I have ever seen any artist ever do,” Craig Carrington, one of its users, says.

“He just had the attitude that if he was going to do it, he was going to do it right.”

BowieNet also operated as a full internet service provider (ISP) in the US and UK, competing with AOL, Claranet and others.

http://www.bbc.com/news/technology-35279234

And NYT’s dealbook trports

HOW DAVID BOWIE INSPIRED CHANGES ON WALL STREETDavid Bowie was known for his ability to reinvent himself, but he also inspired a pocket of Wall Street that tries to create money from weird things like billboard rental income and film libraries, Liz Moyer writes in DealBook.

In 1997, Mr. Bowie bundled up nearly 300 of his existing recordings and copyrights into a $55 million security that paid the buyer, Prudential Insurance Company of America, an annual rate of 7.9 percent over 10 years. It was backed by income from royalties, record sales and the licensing of songs.

The Bowie bonds were among the first in a wave of esoteric asset-backed securities deals based on intellectual property. The buyers in these deals tend to be specialized hedge funds or big institutions. Individual investors never got their hands on a Bowie bond because Prudential never sold any of its stake.

It was a good deal for Mr. Bowie at the time. He received upfront cash without having to give up ownership of his songs.

Originally rated A3 by Moody’s Investors Service, the bonds were later downgraded to just above junk status as Internet file-sharing cut into income from album sales.

But others followed in his steps with similar deals. James Brown and Rod Stewart made deals and DreamWorks SKG entered a $1 billion deal involving its film catalog.

Deals backed by unusual assets now make up about a tenth of the asset-backed security market, appealing to investors who want higher yields and are willing to take on more risk.

How much is a “private” degree worth? / Skipping JCs & polys

In Financial competency, Financial planning, Uncategorized on 13/01/2016 at 12:00 pm

“Finally”, “Why nothing before?” and “Why so long-delayed?” was what I tot when I read in early January that students who graduated from nine private schools in 2014 are being surveyed to find out what jobs they went into and what their wages are*. I tot of the survey again when I learnt that the O-Level results were released on Monday. And today when I went yo VJC’s Open House (I finally crossed the road to see how a JC works.).

Last year, around this time, I learnt that there are kids who decide to skip JC or poly to enroll in private schools like Kaplan in the expectation of getting degrees earlier and faster than their contemporaries who follow the traditional routes. Given that this is a really more expensive option than going to JC or poly (before going to uni); and given the stories we know of adults disappointed with the qualifications they have gotten, I wondered if these kids and their parents are really making informed decisions.

We all know of working people trying to upgrade themselves by attending  part-time degree courses and then finding out that the degrees that they spent so much money, on and effort, on don’t impress existing or potential employers. Their degrees are often equated with “diplomas”.

====================================================

Shume degrees are more equal than others, meh?

This is what ST reported in early January when telling us about the survey:

Among those being surveyed is Mr Daniel Ng, 30, who got his first degree in logistics management from Kaplan here in 2014.

The former logistics specialist will soon take on a managerial role in another supply chain firm. The job, which requires candidates to possess at least a degree, comes with a salary increase of about 50 per cent.

The former Temasek Polytechnic student ,who started working seven years ago, said getting a degree has created “more opportunities”.

He paid about $20,000 in all for his part-time degree and completed it in 18 months. “Having a degree makes a difference, especially when you are working in a multinational company. Degree holders start at a higher pay grade.”

But Mr Ng knows he is luckier than his peers. “I have friends who also went for a degree, but it made no difference to their work. It’s quite common and is partly why I didn’t pursue a degree earlier.”

Human resource expert David Leong, who runs PeopleWorldwide Consulting, said the survey is part of a long-term move to “align the different education pathways”.

“There are many who quit their jobs to focus full-time on getting their first degree, but they realise after graduating that they are marked against fresh grads who are just 22 or 23 years old,” he said, adding that in most cases, a private degree would translate to just a 5 to 10 per cent increase in pay for mid-career types.

========================================================

Well the survey results will help inform kids, their parents and adults of the facts on the ground.

 

———————————————

*The Council for Private Education (CPE), which regulates the private education sector, is leading the initiative, supported by the Ministry of Manpower and Ministry of Education (MOE).

The CPE told The Straits Times that the information collected will “help to guide future policy formulation for matters related to private education, manpower and graduate employment outcomes”.

A sample of the survey questionnaire  asked respondents for their employment status in the year before they started their private studies and six months after completing their last exams at the private school.

They were also asked for their basic and gross monthly salaries before and after getting their degrees.

One question asked the graduates if they wished they had not furthered their studies at a private institute. If they answered yes, they would be asked to select the reason from a list of options, such as their qualification being not as well recognised by employers when compared to those of public institutions, or that the career prospects and wages associated with the degree were below expectations.

The nine schools are: Curtin Education Centre; ITC School of Laws; James Cook Australia Institute of Higher Learning; Kaplan Higher Education Institute; Management Development Institute of Singapore; Ngee Ann-Adelaide Education Centre; Singapore Institute of Management; SMF Institute of Higher Learning and Trent Global College of Technology and Management.

[Update at 3,30pm: U/m is an honest mistake. UmiSIM has done in 2014 survey]

What I find surprising is that graduates SIM University (UniSIM) are not being surveyed: The university is synonymous here with part-time degrees. It also recently started offering full-time programmes in accountancy, finance and marketing. It will introduce a fourth full-time degree in human resource management this year.

As I understand it, its fees of around $30,000 for a undergrauate degree are in line (if not more expensive) with those of the private schools taking part in the survey.

 

 

2 of Temasek’s Fab 5 looking sickly?/ Meng Seng’s financial counterpart

In Energy, Financial competency, Temasek on 13/01/2016 at 5:14 am

In 2013, I recommended investing in Temasek’s Fab 5 for KS types. Last June I pointed out problems at two of them Keppel  and SembCorp Marine because of lower oil prices.

The rot continues as Bloomberg reports

The last time Singapore’s marine services industry was staring at what would eventually turn out to be an 18-year drought in demand for oil rigs, Mr Ronald Reagan was starting his second term as US President.

Jack-up rigs, used to drill for oil in shallow waters, saw orders evaporate between 1985 and 2003. As Macquarie notes, rampant overcapacity means such a prolonged slump could well occur again. That definitely would not be good news for the rig-building industry’s two Singaporean leaders – Keppel Corp and Sembcorp Marine.

After a decade-long boom, there were zero new orders globally for jack-up rigs last year. With oil prices swooning, and rigs’ daily rental rates having crashed to US$92,000 (S$132,000) from US$130,000 in 2014, there’s a risk that 70 per cent of Keppel and SembMarine’s order book might get cancelled, especially if the Petrobras bribery scandal in Brazil deepens, Macquarie analysts Somesh Kumar Agarwal and Justin Chiam wrote this week.

… rig-builders’ shares may have to give back much of the China-induced exuberance of the past decade. That could be quite painful for investors, including Temasek.
… owns a little less than half of SembMarine’s parent, Sembcorp Industries, and 21 per cent of Keppel, Bloomberg data shows. It can’t be feeling very chuffed about the 47 per cent slump in SembMarine over the past year, or Keppel’s 26 per cent slide.  

And there might be more trouble ahead. Since early 2004, the two stocks have returned about 300 per cent, thanks primarily to hefty dividends. Those might now start thinning out. According to analyst estimates compiled by Bloomberg, Keppel’s dividends will shrink by as much as 11 per cent over the next three years, compared with annualised growth of 3 per cent over the past three.

No orders coming in doesn’t augur well for shareholders, who will be far behind debtholders in getting paid, and the latter will have substantial claims. Oil- and gas- linked companies with outstanding Singdollar-denominated bonds have to refinance or repay some $625 million of notes this year, a further $390 million in 2017 and $700 million in 2018, Bloomberg-compiled data shows.

The other big risk comes from the duo’s Brazilian yards. Japanese shipbuilders like Mitsubishi Heavy are cutting their losses and exiting as the Petrobras saga drags on. 

Stock in Ensco, the London-based owner of shallow and deepwater rigs, has been hit after Petrobras said it was scrapping a contract in the US Gulf of Mexico because, it claims, Ensco knew about improper payments between a shipbuilder and a consultant when the drillship was constructed, a charge Ensco denies.

Analysts are being predictably slow in sounding the alert. Their median price estimate predicts a 25 per cent jump over the next year in Keppel shares, and a 15 per cent climb in SembMarine.

So far factual or fair comment. But I think the Indian FT* writing for Bloomberg is talking rubbish when he talks of Temasek selling out. Our rig-builders are market leaders, not has-beens like NOL And the oil sector is a cyclical sector, not a declining sector.

Were that triumph of hope over experience to prove elusive, what might Temasek do? It recently decided to sell shipping company Neptune Orient Lines to CMA CGM at $1.30 a share, after having paid as much as $2.80 in 2004 to acquire a part of its 67 per cent stake.

If the Macquarie analysts are right about Keppel and SembMarine eventually trading below book value, like South Korean yards do, then there may not be much point in Temasek’s hanging on to the rig-builders either.

http://www.bloomberg.com/gadfly/articles/2016-01-07/keppel-and-sembcorp-marine-may-bear-the-brunt-of-vanishing-demand

What strholders of SembCorp Marine should be concerned is that SembCorp privates Marine. About 15 yrs ago Keppel did that to FELS.

———

*He’s the analyst equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

 

Teachers kanna pap and pay

In Financial competency, Public Administration, Uncategorized on 10/01/2016 at 8:34 am

Folloing reports that teachers* may soon have to pay for parking in school premises (Is the assumption that these lots will be made available to the public if not used by teachers? I mean schools are not supposed to be public areas, I tot?), a post by an-ex school teacher is going viral on Facebook. I’m sharing it as not everyone will be able to read it otherwise. As all good writing it entertains us, and makes us reflect on the absurdities it reports.

A message from an ex-teacher (which is not me):

Teachers,

you don’t have to feel so upset over the impending parking fees. It’s a good move to be transparent to the public. Since the ministry wants to ensure that it doesn’t give unsubsidized parking to ensure transparency, it’s good to let MOE know that you should also stop paying for stuff out of your own pocket to ensure ‘transparency’ too. Some example of fees that you have been paying out of your own pocket:
1. Classroom deco, charts, notice board materials(excluding manpower and labour fees):$100 at least
2. Coming CNY, Hari Raya and Deepavali deco:$100-$300
3. Resources for teaching:$300(conservative estimate)
4. Remedials/supplementary/enrichment classes:$50 per hr(market rate for MOE tutors).
5. Prizes/gifts/McDonald/pizzahut/KFC treats to motivate students(varies from teacher)
6. Children’s day gifts:$100-$200
7. OT pay for staying overnight at camps, Meet-the-parents sessions at night, meetings during school holidays, learning festivals on Saturdays and Sundays, organizing events for community/MP :$50 per hour
8. Premium fees for last minute instructions from MOE for example, calling parents from 10pm-12am on a Sunday night to inform them of school closure due to haze. $100per hour.
9. Other miscellaneous fees such as home internet or using your personal hp talk time/mobile data to conference with parents/HODs(not including OT pay for doing these after 6pm): $110 per month.
10. Transport fees to attend courses that you are ‘nominated’ to attend. You can’t claim them currently as MOE have already SUBSIDIZED you to attend them.(not that you have any choice)
11. Labour fees for moving cupboards,tables and shelves in classroom/staffroom, cleaning students up after they poo/vomit:$20 per hour.
12. All the money you paid to replace faulty PE/music/art/ICT equipment on your own. Too lecheh to do AOR, ITQ, and then go through Gebiz and evaluation plus endless meetings with KP/AM/P just to get a pair of soccer gloves for your student.smile emoticon
13. Last but not least, fees for marking after 5pm each day, as no marking can be done before that due to meetings/CCAs/meeting parents/meeting vendors/meeting P: $50 per hour.

At the end of the day, is that season parking so difficult to afford? I don’t think so. But the message that the sacrifices of teachers are not appreciated by MOE will have a greater cost than the revenue that it can collect from the season parking. Kudos to my ex-colleagues who are still believing in making a difference to the next generation.

‪#‎justsaying‬ ‪#‎moedoesnotcherishteachers‬

From a (currently much happier) ex-teacher.smile emoticon

Update at 11.20am:

A prominent social activist whose wife teaches posted on FB: Bean counters need to understand, that not all beans can be counted by them.

To which my Facebook avatar ponted out

—   Ownself count ownself? )))

— Seriously one of the legtimate complaints that govt depts, ministries have against the AGO is that it can be very selective in what it quantifies. Quantification is not a science, it’s a tool of manipulation. Can justify anything.

=====

*To be fair, it’s not MoE but the Auditor-General’s Office who is behind this piece of nonsense.

Soros is v. gloomy/ 2008 or 1998

In China, Financial competency on 09/01/2016 at 2:25 pm

George Soros is more gloomy, telling an economic forum in Sri Lanka:

“China has a major adjustment problem. I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

BBC Online

More like 1998 than 2008

If China devalues, then other Asian nations will come under pressure to follow suit, for fear of losing competitive position. That will trigger worries about those Asian companies that have borrowed in dollars. there could be banking issues in Asia.

This is a potentially worrying scenario. Whether 2008 is the right parallel is another matter. If the bearish case does come true, then it sounds more like 1998 when a round of Asian devaluations was triggered by the realisation that growth had been fuelled by speculation. Western economies did manage to overcome that crisis. The real worry is that emerging countries are a lot more important for the global economy than they were back then.

Economist’s Buttonwood

Take yr pick.

M’sian soverign risk: 30 yrs on

In Financial competency, Malaysia on 05/01/2016 at 4:59 pm

In 1986 when I was taught the basics of investing in M’sia, there were M’sian govt US$ floating rate bonds that were really cheap because of a problem in the floatung rates bond mkt that was in addition to Dr M’s antics (e.g. he was alleged to tryto corner the tin market) and a recession which affected M’sia’s soverign rating.

Today The $3 billion debenture is a glaring reminder of the distrust around the fund. The instrument carries a letter of support from the Malaysian government but trades at just 86 cents on the dollar, indicating financial distress. That stands in stark contrast to two Abu Dhabi-backed 1MDB bonds, which have always traded above par.
Early redemption would also draw a line under the fund’s controversial relationship with Goldman Sachs.

1MDB hasn’t decided yet whether to buy back the bonds. Either way, if Kanda succeeds in his ambitious cleanup by completing the deals he has now agreed, 1MDB’s problems will not weigh as heavily directly on the finances of the government as many investors, analysts and politicians had feared.

http://blogs.reuters.com/breakingviews/2015/12/31/malaysia-scrubs-out-half-its-sovereign-fund-stain/

One thing remains the same, no money to buy those bonds then, and now. Would have made killing then and now.

“Prudent banker” is an oxymoron

In Banks, Financial competency on 04/01/2016 at 2:29 pm

Here’s a comment from an FT reader which promoted the above headline.

Where do we find bankers that understand prudent lending?

“What is wrong with lending more money into the Chinese stock market?” Chinese banker recently

“What is wrong with lending more money into real estate?” Chinese banker last year

“What is wrong with lending more money to Greece?” European banker pre-2010

“What is wrong with a NINA (no income no asset) mortgage?” US banker pre-2008

“What is wrong with lending more money into real estate?” US banker pre-2008

“What is wrong with lending more money into real estate?” Irish banker pre-2008

“What is wrong with lending more money into real estate?” Spanish banker pre-2008

“What is wrong with lending more money into real estate?” Japanese banker pre-1989

“What is wrong with lending more money into real estate?” UK banker pre-1989

“What is wrong with lending more money into the US stock market?” US banker pre-1929

It’s a global problem.

Tiger shareholders related to scholar Eng & ministers?

In Airlines, Financial competency on 23/12/2015 at 1:15 pm

Remember scholar Eng and that blind gal with a guide dog?

Some Tiger shareholders feel that they are entitled as these spoled brats isit? They think they like PAP ministers isit?

The Securities Investors Association Singapore (SIAS) said in the open letter dated Dec 18 that some Tigerair minority shareholders felt SIA’s offer was “not reasonable”.

The reason for this, Mr Gerald, president of SIAS, was that shareholders who bought Tigerair shares during its initial public offering in 2010 at S$1.50 a share and subscribed to all three rights issues since then would have paid an average of S$0.67 a share. The takeover price is 0,41

Maybank Kim Eng Securities, the independent financial adviser appointed by Tigerair’s independent directors, advised shareholders to accept SIA’s offer, saying the deal is “fair and reasonable”

But because they’hh lose money, these shareholders think that the offer is “unreasonable”.

WTF.

 

HoHoHo, StanChart’s rights issue is juz first-aid

In Banks, Financial competency, Temasek on 18/12/2015 at 12:59 pm

Temasek is willing to give Standard Chartered (STAN.L) time to work on its turnaround before deciding on the fate of its underperforming $4 billion (3 billion pounds) stake in the UK bank as part of a portfolio reshuffle, people familiar with the matter said.

“Temasek is giving them time. They’ve had a lot of engagement with the board, and Bill has sort of managed expectations in terms of turning this ship around,” said one of the people familiar with Temasek’s thinking.

Temasek declined to comment.

It was not clear how long Temasek will wait to see the results of the restructuring.

By subscribing this month to its allotted portion of Standard Chartered’s $5 billion share sale, the Singapore investor has buttressed that position for now. But Temasek may become increasingly uncomfortable with the investment if shares in the bank do not recover.

Its paper loss on the Standard Chartered investment was $1.2 billion, excluding dividends, just on the 12 percent stake it bought in 2006, according to calculations by Reuters. Temasek raised its stake to 18 percent in December 2007. Since then Standard Chartered’s shares have lost about two-thirds of their value.

http://uk.reuters.com/article/uk-temasek-strategy-idUKKBN0U003N20151217

StanChart completed its rights issue late last week. What the local MSM doesn’t tell us

StanChart .. has suffered because of poor peer-market conditions since it priced its shares. But investors, even though they took up almost all of their rights, are also giving a vote of diminished confidence. After StanChart old shares were shorn of the right to buy new shares on Nov. 23, the stock fell to 15 percent below its theoretical settling price. And the 9.8 percent further fall since then is worse than the decline in the Euro Stoxx Banks index.

That’s perhaps not surprising. StanChart, under new boss Bill Winters, is years from earning a return above its cost of equity. Since the new money will mostly go to bolstering the balance sheet rather than promoting productive lending, the return on the new money may be even lower. That might explain why, while Lonmin seemingly faces graver challenges, it’s StanChart to whom the market has blown a bigger raspberry.

 

 

Wage growth: three “myths” are true

In Economy, Financial competency on 10/12/2015 at 5:19 pm

Dollars & Sense a usually financial literate site, published the following PAP administration propoganda on wage growth http://dollarsandsense.sg/debunking-3-myths-about-singapores-wage-growth/?fb_action_ids=429056360617791&fb_action_types=og.comments. Has the site become part of Fabrications About the PAP? Money that good meh? Seriously, a little knowledge (especially of stats) is a dangerous thing.

Myth 1: Wage Growth Has Been Lower Than Inflation

Picture 1

Myth 2: The Lowest Income Families Are Worst Off Because Of Inflation

Picture 2

Myth 3: The Rich Benefitted The Most Compared To The Rest Of Us

Picture 3

Well the myths are not Hard Truths but facts. And the rebuttals rubbish. They are not based on economics.

My friend Chris K*(a retired financial enginner and rocket scientist, once based in London) writes:

Myths 1 and 2 completely failed to account for what is commonly known as hedonic price adjustments. Hedonic adjustments are marginal variations to the inflation rate in advanced, matured economies but are significantly higher for developing nations or those who have transit from developing to developed status like Singapore. Hedonic price adjustments are the increase in prices due to qualitiative and esthetic changes in a product or service. An example is the difference in prices between a hawker centre and a food court. The increase in prices when one transit to the other is NOT included in the inflation rate.

Once you understand the effect of hedonic price adjustments, you can then understand why the increase in the CPF Minimum Sum to account for cost of living runs significantly higher than the inflation rate.

Same with Myth 3 which also failed to account for the role of investable income in relation to total income. The top percentile has a much higher proportion of investable income because of the cap in CPF contributions. In an era of elevated real estate prices, those who can invest in a 2nd or 3rd property are those in the top percentile and they earned outsize returns om their investable income. This is why the labour policies of the present government favours the top percentile because the rate of return on investment exceeds wage growth for the rest of the income distribution.

————————————–

*Chris K describes himself thus: Chris is a retired executive director in the financial industry who had mostly worked in London and Tokyo. 

 

 

 

Why high property prices are good for S’poreans

In Financial competency, Property on 08/12/2015 at 5:26 am

 

 

 

 

They force S’poreans to be pretty financial literate. Look at our ranking.

Buffett’s grandson invests too

In Financial competency on 25/11/2015 at 5:29 pm

BUFFETT’S GRANDSON SEEKS A DIFFERENT INVESTMENT ROUTE Howard Warren Buffett, the grandson of Warren E. Buffett, had until recently steered clear of the private sector investing that made his family’s fortune. Now that is changing – Mr. Buffett has helped found a permanently capitalized operating company with big ambitions, mimicking the structure of Berkshire Hathaway, David Gelles writes in DealBook.

Although his grandfather bought companies with timeless appeal, Mr. Buffett’s new company, i(x) Investments, plans to invest in early-stage and undervalued companies working on issues such as clean energy, sustainable agriculture and water scarcity.

But like Berkshire Hathaway, i(x) will buy and hold companies. “A fund structure, with its finite life cycle and investors wanting to see returns, is not the right model for impact investing,” said Trevor Neilson, a co-founder of i(x).

The company is just getting started but the founders are already talking a big game. Mr. Neilson said that friends and strategic partners were investing $2 million to $5 million this year.

Next year, i(x) will accept $200 million from family offices, institutional investors and big companies. Mr. Neilson is pitching to firms like Kleiner Perkins, Andreessen Horowitz and Google.

Mr. Neilson said he hoped that the firm would eventually make investments worth $100 million each year and file for an initial public offering by 2020.

So far, i(x) has not made any investments, though Mr. Neilson said the firm was close to taking its first two stakes.

One possible addition to its portfolio breeds crickets to feed to chickens and fish – an ecological alternative to traditional feedstock. Another makes machines to turn natural humidity into drinking water.

Mr. Neilson and Mr. Buffett say there is a growing market for such futuristic products as investors increasingly take ethics into account. In the meantime, Berkshire Hathaway is under scrutiny for investing in companies that have been criticized over social issues.

Mr. Buffett said he had not asked his grandfather for advice or money.

(NYT Dealbook)

Reits are not bonds/ S-Reits

In Economy, Financial competency, Property, Reits on 24/11/2015 at 1:25 pm

“Real estate is TIPS (Treasury Inflation Protected Securities) on steroids,” adds Mr Steers. “Reits are not bonds. The most certain thing is that if rates are rising and you are in fixed income you will lose money.” FT 

Mr Steers is  from real estate investment firm Cohen & Steers in New York and he’s bullish on US real estate.

Meanwhile in S’pore, CNA reported on 18 November

‘GOOD DEMAND’ FOR SINGAPORE-LISTED REITS

“With the lower leverage threshold, there might be more Singapore REITs who will look to tap this source of funding, given it is still treated as equity instead of debt,” said Mr Tim Gibson, co-head of global property equities at Henderson Global Investors in Singapore. His firm manages about US$123 billion (S$175 billion) worldwide. “Investors continue to seek yield in this environment,” he added.

Mr Neel Gopalakrishnan, an emerging-markets fixed income analyst at Credit Suisse’s private banking and wealth management unit in Singapore, said: “Most Singapore-listed REITs have good credit quality. Hence, there is likely to be good demand (for their perpetuals*).”

Singapore’s listed REITs had an average debt-to-asset ratio of 34.6 per cent at the end of September, versus 32.8 per cent from a year earlier, according to data compiled by Bloomberg.

The new cap on borrowings takes effect from Jan 1 and the REITs could issue as much as S$12.5 billion of traditional debt without breaching the new threshold, said Mr Hasira De Silva, a Singapore-based analyst at Fitch Ratings.

That leeway narrows to S$7.5 billion if their S$110 billion of assets suffer a 10 per cent depreciation, he said.

http://www.channelnewsasia.com/news/singapore/perpetual-debt-the-new/2270948.html?cx_tag=undefined&cid=tg:recos:undefined:standard#cxrecs_s

CNA also reports:

Falling values, rents and occupancies for debt-backed properties could tip Singapore’s economy into further trouble amid the slowest growth in three years.

Office rents may fall as much as 7 per cent this year and another 8 per cent next year as demand slows, according to property consultancy DTZ, while home prices keep declining as a result of cooling measures and loan curbs.

On Oct 26, office landlord Keppel REIT sold S$150 million of perpetual debt without a so-called step-up coupon, a gradually rising interest rate that is usually a feature of such bonds. It sold the notes at 4.98 per cent, 183 basis points more than seven-year debt it sold in February.

In the same month, business park owner Ascendas REIT raised S$300 million issuing similar notes, while serviced apartments specialist Ascott Residence Trust issued S$250 million of them in June.

The value of Singapore’s office buildings fell 0.1 per cent in the quarter ending Sept 30 from the previous three months, while shop prices declined 0.3 per cent, according to data from the Urban Redevelopment Authority.

Home prices dropped 1.3 per cent, the most since the second quarter of 2009, according to data compiled by Bloomberg.

The FTSE Straits Times Real Estate Investment Trust Index has dropped 11.4 per cent this year, on course for its worst annual performance since 2011.

Meanwhile risks for Reits here will increase in 2016 because weak economic fundamentals will weigh on demand while new supply is added into most sectors, Fitch Ratings said in a report released on 23 Nov.

Fitch expects S-Reits with stronger balance sheets to become more acquisitive in 2016 as they try to boost earnings growth by capitalising on lower asset valuations. Sector leverage – as measured by debt to total assets – is likely to increase in 2016.

On hotel ones, earnings will likely continue declining next year, but at a slower pace, as visitor arrivals into Singapore is expected to recover. Nevertheless growth in hotel room supply in Singapore will continue to outpace demand, leaving operating conditions challenging for the sector.

“We expect ratings of CDL Hospitality Trust (BBB-) and Far East Hospitality Trust (FEHT, BBB-) to remain stable, supported by strong balance sheets, and around 40-50 per cent of income stemming from fixed rent.”

Other hospitality Reits considered in the report include Ascendas Hospitality Trust and OUE Hospitality Trust.

On industrial Reits, pressure on earnings will increase in 2016: the world economy is weak”We expect lower-specification industrial assets, such as warehouses and multi-user factories, to see weaker rental reversions than for higher-specification assets, such as business parks. The demand for business parks is stronger, and a significant part of the new supply is pre-leased,” it said. Ascendas REIT, Mapletree Industrial Trust and VIVA Industrial Trust are among the industrial REITs covered

The strong performance of healthcare Reits is likely to continue in 2016, supported by robust demand for medical services and an ageing population in Asia. Healthcare SREITs’ long-term lease structures with a high degree of rental protection and their high proportion of fixed-rate debt will also support earnings growth.

—–

*Landlords in Singapore are planning to issue perprtual bonds which are treated as equity to get around new rules curbing their debt amid a property slump. Data from Fitch Ratings showing Reits having issued a record S$700 million of perpetual notes with no set maturity date thus far this year.

The Monetary Authority of Singapore is capping borrowings of Reits at 45% of assets from next year, and debt that can be considered equity (Perpetuals) offers landlords a way out.

Under global accounting rules, bonds with no fixed maturity that allow the deferral of coupon payments can be treated as equity.

 

Tighten yr belts mortgagors

In Economy, Financial competency on 05/11/2015 at 1:20 pm

Enjoy Deepavali but be prepared to suffer during Christmas, New Year and CNY. Interest rates are likely to go up.

Just over a week ago when I wrote this,  interest rate futures implied less than a 3o% chance of a tise by the Fed in December (markets didn’t think the Fed would raise), whereas the odds were close to even (could go either way) yesterday morning our time. Then in NY time, interest rate futures moved to price in a 58% possibility of rate “lift-off” occurring in December, up from 50% earlier in the day. Chairman of Fed said December would be a “live possibility” for a rate rise if incoming data supported that expectation.

Hedgies too play fiollow the leader

In Financial competency on 02/11/2015 at 1:15 pm

Despite charging such high fees, they too behave like retail investors. From Dealbook

VALEANT SHOWS THE RISK OF FOLLOW THE LEADER The recent plunge in Valeant shares has revealed the dangerous tendency for hedge funds to plunge in and out of stocks in a herdlike fashion, Steven Davidoff Solomon writes in the Deal Professor column.

The hedge funds invested in Valeant, which includes names like William A. Ackman and John Paulson, took a hit. ValueAct Capital has beenenormously invested in Valeant. Although it sold 4.2 million shares a month ago, the fund still owns 4.4 percent of the company and had made a return of more than 2,100 percent as of September.

Herd investing is common among hedge funds. Goldman Sachs runs an index of the 50 stocks most widely held by hedge funds. At the top of the list is Allergan – there are 67 hedge funds that count it as one of their top 10 holdings. It is followed by Apple and Facebook. Valeant makes No. 10 with 22 percent of its shares held by hedge funds.

“Looking at the list, one has to shake one’s head,” Mr. Solomon writes. “After all, I, too, can do this trick of investing in big and well-known tech and pharmaceutical companies, for much less than the fee of 20 percent of the profits that hedge funds charge.”

Mr. Solomon wonders whether many hedge funds are simply playing follow the leader. With thousands of stocks, hedge funds seem to be concentrating their bets on larger caps and certain industries, like tech and pharmaceuticals. This may work in a rising market, but a decline would be painful.

If hedge funds are all about alpha – finding investments that are undervalued and that can outperform the broader market – then migrating to smaller stocks might bear more fruit and make their research the most useful.

CPF: Roy and H3 would concur

In Financial competency, Humour on 01/11/2015 at 6:16 pm

Other people’s money: A financier’s plaything. “The goose that lays golden eggs has been considered a most valuable possession. But even more profitable is the privilege of taking the golden eggs laid by somebody else’s goose. The investment bankers and their associates now enjoy that privilege. They control the people through the people’s own money.” (Louis Brandeis, U.S. Supreme Court justice.)

[Err Substitute the words “PAP administration” for A financier’s plaything and The investment bankers and their associates and you see that the young hooligans of “Free Our CPF” are onto something.

Pension plan: A collection of unpayable corporate promises backed by inadequate funds and managed on the assumption of unrealistic returns.

http://blogs.reuters.com/breakingviews/2015/10/16/the-devils-dictionary-of-post-crisis-finance-2/

Markets don’t listen to economists

In Financial competency on 24/10/2015 at 4:49 am

 

Economists still forecast rise in Fed rate before year’s end. Despite a tempering in the US labour market, 65% of the 46 economists from leading banks polled by the FT said the central bank would increase the federal funds rate at its December meeting.

Contrast this to market expectations, where observers have played down the chance of tighter monetary policy before next year. Putting their money where their mouths are, futures markets predict a 32.3% chance of a rise by December, with March currently given an even chance of a Fed move.

 

Trading ETFs can be dangerous

In ETFs, Financial competency on 12/10/2015 at 1:24 pm

Fronm NYT Dealbook

RISKY STRATEGY SINKS SMALL HEDGE FUND At the height of the 2008 financial crisis, investors would have had a gain of more than 600 percent, according to projections in investor documents for the new hedge fund, Spruce Alpha. But the fund, which started in April 2014, has failed to turn recent market turmoil to its advantage and has lost investors 48 percent of their money, Alexandra Stevenson and Matthew Goldstein report in DealBook.

The under-$100 million fund, which was managed by the $1.5 billion Spruce Investment Advisors, has moved its positions into cash, a person with knowledge of the fund said. The fund has told investors that they can redeem what remains of their money.

This sudden reversal of fortune at Spruce has highlighted the way hedge funds rely heavily on exchange-traded funds and derivatives to profit from short-term turmoil in the stock markets, and the way some use back-tested data to market to their investors.

Back-tested results in hedge fund marketing materials have long drawn scorn from some in the hedge fund world. They are typically recreated with the benefit of hindsight, making it easier for a fund to post hypothetical good results.

It is not clear exactly what caused the big losses in August. Spruce Alpha used a sophisticated strategy that involved derivatives to amplify returns from trading in E.T.F.s. The strategy seeks to make money off stock market volatility.

Trading in E.T.F.s has become controversial with big-name investors blaming them for the violent swings in the market and Laurence D. Fink, the chief executive of BlackRock, which sells more traditional E.T.F.s, warning that E.T.F. strategies that rely on derivatives could blow up.

The tests at Spruce Alpha had apparently not simulated a situation like Aug. 24, when some E.T.F.s seized up in the first few minutes of trading.

Todd Rosenbluth, director of E.T.F. research for Standard & Poor’s Capital IQ, said leveraged E.T.F.s were an inherently risky strategy that is more akin to “gambling than investing.”

Three cheers for MoE for this googly

In Financial competency on 08/10/2015 at 3:28 am

Googly, for the uninitiated is a really wicked, evil  bowling movement where a cricket ball bowled as if to go  one way that actually breaks in the opposite way. It’s even more wicked, evil than the curveball in baseball or softball.

Below is the kind of question that should be included (and was) in a nation where tuition for one’s kids accepted fact of life as a means of keeping themahead of the rabble: the problem is that almost every kid tutored.

“Thinking cannot be taught” is a comment on this.

And it’s so hilarious that someone grumbled that the coins could be of different weights. Or that it’s an IQ question, not a maths question. “They can’t handle the possibility that their children are not smart enough, even though they themselves only have half the intellect.”

FYI, MOE justifies it by saying pupils are taught to estimate as part of their primary school education.

Bro, S’poreans not Temasek, GIC

In Financial competency on 30/09/2015 at 11:56 am

No got so much money, unlike you.

I tot the above when I read this [T]hose with a bigger appetite for risk can consider picking up counters selectively, said Mr Roger Tan, chief executive of Voyage Research.

“Investing is about taking risk and individual stock picking, whether based on fundamentals or technicals, is a risky business. I would say that if they have kept sufficient cash in their bank account, that is their insurance,” he said.

“The market is actually offering brave investors a good deal. At current prices, the price-to-earnings ratio is 12.6 and price-to-book ratio is 1.12. If investors have excess funds, they can consider buying into the market, but do it slowly. Cost average downwards,” he added.

Today

In this type of market, what I want to know is yield.

Who are attracted by buy-backs, dividends?

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

Here’s something interesting from Fidelty on the share buyback versus dividend debate. (Via FT):

The two are often treated as if they were the same thing, when there are quite different financial transactions.

Share buybacks are an acquisition of an asset, with a price to earnings multiple. They are not a risk-free investment, indeed they are very risky. A dividend is a long-term commitment to shareholders to distribute excess returns. It is not an acquisition.

Therefore, a company will attract very different shareholders depending upon which route it takes. Buybacks will attract activist and event-driven shareholders, while dividends will attract a more stable shareholder base.

Dominic Rossi is global chief investment officer of equities at Fidelity

 

Hedgies caught with their pants down

In China, Financial competency on 28/08/2015 at 1:03 pm

From NYT Dealbook

ROUGH AND TUMBLE FOR HEDGE FUNDS The fallout from the global sell-off has few limits. Many on Wall Street have been caught off guard and money managers at some of the biggest hedge funds in the United States have had their vacation plans interrupted, Alexandra Stevenson and Matthew Goldstein report in DealBook.

One adviser had to hop around on conference calls from his cabin in the woods. Another said investors had requested play-by-play commentary and performance figures. With the reason for the plunge so unclear, many have not been willing to stick their necks out and speak publicly.

It is clear, however, that August numbers are not looking good for them. Hedge funds went into the sell-off bullish, with $1.5 trillion in long positions – bets that stocks will rise in price – compared with $684 billion in short positions, bets that stocks will decline in price, according to an analysis of the industry by Goldman Sachs.

The 10 stocks that Goldman said were the most widely held by hedge funds – stocks like Apple, Citigroup, Facebook and Amazon – were down from 5 to 10 percent over the last three trading days.

Leon G. Cooperman, founder of the $9 billion hedge fund Omega Advisors and a longtime market bull, is emerging as a big loser in the chaos. As of Friday, his fund was said to have lost 11 percent this month, according to people briefed on the matter. The firm was hit hard by big declines in the share prices of Allergan, AerCap, Citigroup and the American International Group.

One hedge fund manager who invests mainly in United States stocks, speaking on the condition of anonymity, said he would not be surprised if the average fund lost from 3 to 7 percent in August. He said the last week had been brutal and the losses had come far faster than most would have anticipated.

Even the world’s biggest hedge fund, Bridgewater Associates, led by Ray Dalio, was not spared. The $162 billion firm told investors on Friday that its Pure Alpha fund was down 4.7 percent for the month. Going into August, the Pure Alpha portfolio had been up 11.8 percent for the year.

After six years of a bull market run, few hedge fund managers have been brave enough to short stocks with much conviction. To take a short position, a trader sells borrowed stock in a company that he or she thinks is overvalued in anticipation of buying it back at a cheap price. Those that have taken short positions have not been hit as hard by the sell-off.

Hedge funds that scoop up distressed assets at bottomed-out prices also began to eye opportunities. “What I have told investors is the economy is fine but now is a great time to be buying some things when they get hit,” said Marc Lasry, a co-founder of the $13.9 billion hedge fund Avenue Capital Group. “Other people may be having issues,” Mr. Lasry said. “For us, that is an opportunity as opposed to a problem.”

What to do in falling markets?/ Negative-eight

In China, Financial competency on 26/08/2015 at 1:30 pm

How Emotion Hurts Stock Returns People feel losses more sharply than gains. So watch ESPN or do anything to avoid looking at your sinking portfolio.

Two consecutive days of 8% losses (Mon and Tues), the Chinese stockmarket’s biggest two-day plunge in nearly two decades

China Markets new

Auntie, good accounting is a national issue/ TOC bans avatar again

In Accounting, Financial competency, Political governance on 18/08/2015 at 4:43 am

People are interested in national issues, not just town council matters, Sylvia Lim says (TOC). Well the need for a town council to have an accounting system that is fit for purpose is also a national issue. OK I exaggerate. It’s an issue at least in areas where the WP is contesting, is a fairer statement.

Auntie Lim*, Gilbert Goh**, TOC (As SPH and MediaCorp are to the PAP, so TOC** is to the WP) and TRE are trying to equate the lapses at PA and other government entities and departments identified by the Auditor-General with that of the the lapses at AHPETC identified by the Auditor-General.

The big difference is that the while the Auditor-General  says nasty things about the way the govt bodies like the PA does things, he doesn’t say that they don’t have an accounting system that is not fit for purpose. He is able to pick out lapses in the PA and other govt bodies because they have proper accounting systems. The accounting systems allow the lapses to be noticed.

But he says that the AHPETC accounting system sucks so badly that no proper records are kept.

The Auditor-General pointed out, inter alia, that AHPTEC did not “a system to monitor arrears of conservancy and service charges accurately and hence there is no assurance that arrears are properly managed”.and “No proper system to ensure … proper accounts and records were kept as required by the Town Councils Act.” (Related post https://atans1.wordpress.com/2015/02/10/conflicts-of-interest-what-conflicts/

Because proper records are not kept, no-one knows if there are irregularities.  There may be none but there may be some or many: who knows? And what if there are major irregularities?

The way things are going, only a PAP win in Aljunied will ensure that the truth comes out on whether anything is wrong. WP is dragging its feet on setting the system right. It is moving to the Bishan/ Toa Payoh model of directly managing the cleaning etc, which will allow it to say it has “moved on” without resolving the issue of irregular accounts.

Someone posted this analysis on Facebook

Having read the full report, the responses by APHTEC and AGO and PWC’s responses I would say the following.

1. That management and supervision for the first two years were sorely lacking , to the extent that corporate governance is needed , FMSS and FMSI was allowed both management powers, payment powers without supervision.

2. Whether current WP members accept it or not. There is a difference between Management Companies appointing their own people to the TC as GM’s when the management companies are owned by the GOV or GLCs and hence there is no direct pecuniary interests and when in the case of FMSS everything is owned and attributed to Miss How and her Husband and there is a direct pecuniary interests.

3. I could accept the need to appoint FMSS. I cannot accept the need to appoint FMIS whereby the shareholders were both the deputy GMS for lift EMS services. To the extent that there are only a few TC management companies and they refused to help , can the same be said of lift management companies ?

4. To an extent the problem can be laid at the head of the Sec Gen and Low. The people under his leadership trusted low and low I believe trusted miss how.

5. The trust was built over her management of the TC in Hougang for many years and it just seems that when faced with the problem of integrating seven town councils which in itself will be the largest town council in SINGAPORE, she lacked both the management and accounting expertise necessary to integrate all the bits and pieces.

6. FMSS at the end of the day seems to have bitten of more than they could handle, likewise FMSS was not adequately supervised by all the MPs and the leadership within the party for whatever reason.

He could have added, but didn’t, that the WP TC Chair and Vice are lawyers, albeit one was from SMU law school. And there is another MP that is a lawyer, a former partner is a top US law firm. Btw, one, M Ravi called these lawyers three,”cow dung” in another context.

One wonders why they didn’t draw up better conflict of interest mgt rules for the TC’s consideration. And if they did, why were these not implemented? Because Low trusted the Ms How?

Let’s be very clear, the PAP administration didn’t bully or fix the WP on this issue of bad record keeping. This was self-inflicted.The managing agent bears a lot of responsibility for the state of affairs. It didn’t keep proper records of who it was paying, and for what purpose. The AHPETC failed in its duty to monitor what the managing agent was doing.

The inability of the AHPETC to keep proper records is now personal.

I now live in Marine Parade GRC (Joo Chiat kanna rezoned). I’ve voted for the WP since I was able to vote (bicyle thieves, an ex-Woodbridge patient) because I believe that a one-party state is bad for S’pore; but do I want to live in a GRC managed by the WP, a party that couldn’t keep proper records, and is in denial over this fact? And which throws smoke on the issue. It can’t bluff me because I was a Hon Treasurer of a club https://atans1.wordpress.com/2014/11/23/ahpetc-sadly-pap-ib-gets-it-right/.

And I’m not alone: the neighbours (they are accountants, lawyers etc), and the really real Marine Parade residents I talk to, are wondering if the bad record keeping will continue. We know WP can keep the area clean and tidy, but can it keep proper financial records? https://atans1.wordpress.com/2015/08/16/pap-wp-dont-do-accouting/

 

—–

*Ms Sylvia Lim says the Aljunied-Hougang-Punggol East Town Council (AHPETC), has been singled out for “exemplary treatment” by the government.
She also called on the govt to “act with similar vigour, by withholding grants and commencing legal proceedings”, against gov’t depts and stat boards which have been found with financial irregularities in the Auditor-General’s Report.
Ms Lim made the call in her court affidavit on the hearing on the MND’s application on Monday.

(TOC)

**A statement seeking support from the public has been posted online as a petition calling for the government to investigate fully the recent slew of financial and accounting irregularities unearthed in the Auditor-General’s Office (AGO) Report.

“We… hope our government will investigate thoroughly the AGO audit lapses and come up with a official statement to address the concerns of the people,” the statement, posted on change.org, said.

“The lapses are both glaring and shocking as Singaporeans have all along place their trust in a government that has enjoyed above-board corruption-free governance for a very long time,” the statement by Gilbert Goh said.

(TOC again)

***TOC has again banned my Facebook avatar from commenting on TOC’s Facebook posts. It’s TOC’s right. But so like the PAP. But then WP is nothing more than PAP Lite and TOC is its poodle. And let’s see if a TOC founder stands as a WP candidate this GE.

Wah Lan, PAP MP is more stupid than I tot/ Haw Par

In Financial competency, Political governance on 15/08/2015 at 11:39 am

In https://atans1.wordpress.com/2015/08/10/pm-aiming-left-to-hit-the-centre-axed-pap-mps-who-dont-get-it/ I pointed out that MP Liang Eng Wah didn’t have a clue about financial sustainability. Turns out

Liang Eng Wah in his day job is an MD at DBS it appears and he is also chairing the Parliamentary committee on finance and trade. If this is the kind of talent we have in banking and politics……. jeez! 

Chris K

I didn’t realise that DBS would employ as a MD someone who doesn’t know finance.

Thank God I don’t own DBS shares. Btw, I have Haw Paw shares which has a stake in UOB. Depending on the relative share prices, I get a big discount on the operating biz of Haw Par. The Wees also control Haw Par.

Gold price chart (annotated) from 1998 till July 2015

In Financial competency, Gold, Uncategorized on 06/08/2015 at 1:13 pm

Dividend stocks: new approach

In Financial competency on 29/07/2015 at 2:11 pm

Find a a small company with good revenue growth, very little debt, good margins and low valuations, Miton’s Gervais Williams says, and you can expect good income to follow, he tells the FT. He’s a UK fund manager who has juz started ian income investment trust to invest in small cap UK cos. His existing funds (including an income fund) have a bias towards this sector

When is holding Reits and dividend stocks is wrong

In Currencies, Financial competency, Reits on 28/07/2015 at 3:03 pm

Those buying bonds, growth and quality stocks and the US dollar will be exposed if the world economy starts going well, for a change.

The thesis secular stagnation has been good for “conservative” investors like me.

But

“The old order changeth, yielding place to new,
And God fulfils himself in many ways,
Lest one good custom should corrupt the world.

Tharman also from Bizarro S’pore?

In Currencies, Economy, Financial competency, Political governance on 24/07/2015 at 5:26 am

(Or “Weakening economy? Uniquely PAP solution: reverse quantitative easing”)

Let me explain.

The US had a massive quantitative easing (QE, a respectable form of printing money to stimulate the economy) exercise to save the US (and the world from recession) and is now easing back on QE and planning interest rate hikes soon because the US economic is doing But Japan, the Eurozone and China have some form of QE because of worries about their economies.

Our economy is not looking good. S’pore’s economy contracted sharply in the second quarter as manufacturing slumped and is at risk of tipping into technical recession. Price pressures are subdued and expectations are building for the central bank to ease policy once again at a twice-yearly review in October. As S’pore focuses on the exchange rate, not monetary policy. an easing of S$ is called for.

But if anything the S$ could strengthen. S’pore’s plan to launch a savings bond* to encourage long-term retail savings is worrying domestic banks and those like Citi, HSBC, MayBank and StanChart who have big retail operations here, and economists who fear this bond will push interest rates up and suck cash out from an already anaemic economy.

This could cause a flight of cash from bank deposits into these bonds and force interest rates higher as banks compete to attract savers. Higher S$ rates will attract money, strengthening S$.

“Launching a retail savings bond now is almost like reverse QE,” said Chua Hak Bin, an economist with BofA Merrill Lynch here, Reuters reports.

He points to the already slowing deposit growth in the banking system, with just S$3.8 billion (US$2.8 billion) of deposits being added in the first five months of 2015, just 20 percent of the total growth last year.

He suspects the government would invest the savings bond flows overseas** (more money for HoHoHo to double down her bets at the casino***). That would further pressure loan growth, by tightening available cash and triggering a rise in deposit rates, he said.

“So the timing is not ideal. The economy has stagnated in the first half and this will worsen the situation.”

Citibank analysts expect that of a total S$559 billion of deposits in the banking system, 36 percent are savings deposits held by households. If on average the central bank issued about S$6 billion worth of bonds each year, S$30 billion would flow from the deposit base into bonds over five years, they estimate.

MAS Managing Director Ravi Menon played down fears the bond will cannibalise bank deposits.

“The savings bonds issuance numbers pale in significance compared to the total size of the banking deposits,” he said but note that the government says it will issue a maximum of S$4 billion worth of bonds this year, which is still more than a fifth of deposit growth in 2014.

Whatever, down right bizarre this decision to issue the bonds. now. But then a GE is coming.

And the bond is really good for savers. “The Singapore Savings Bond is bending the risk-reward paradigm in investors’ favor,” said Zal Devitre, head of investments at Citibank in Singapore.Government bonds yield about 0.95 percent for one-year and 2.6 percent for 10 years. Bank deposits fetch around 0.25 percent for a year and just double that for 24 months.

Other evidence that Tharman (and Hng Khiang for that matter) are aliens from Bizarro S’pore:

https://atans1.wordpress.com/2012/05/25/will-hougang-make-the-pap-moan-the-inflation-blues-not-joke-abt-it/

https://atans1.wordpress.com/2013/11/11/tharman-trying-to-tell-jokes-again/

https://atans1.wordpress.com/2014/07/10/property-tharman-trying-to-crack-jokes-again/

Backgrounder from Wikipedia: The Bizarro World (also known as htraE, which is “Earth” spelled backwards) is a fictional planet appearing in American comic bookspublished by DC comics. Introduced in the early 1960s, htraE is a cube-shaped planet, home to Bizarro and companions, all of whom were initially Bizarro versions of Superman, Lois Lane and their children and, later, other Bizarros including Batzarro, the World’s Worst Detective.

In popular culture “Bizarro World” has come to mean a situation or setting which is weirdly inverted or opposite to expectations.

—–

*The new bond, which will begin selling in October, will have a term of 10 years. It will offer the same yields as government bonds or ten times the returns on bank deposits, and can be redeemed without penalty at any point. They are are aimed at meeting a long-felt need for long-term investment options in the low-yielding economy. “The Singapore Savings Bond is bending the risk-reward paradigm in investors’ favor,” said Zal Devitre, head of investments at Citibank in Singapore.Government bonds yield about 0.95 percent for one-year and 2.6 percent for 10 years. Bank deposits fetch around 0.25 percent for a year and just double that for 24 months. the Monetary Authority of Singapore (MAS), has set a cap of S$100,000 on individual investments in the bond.

**Bizarro bonds: “Guaranteed to lose money for you”

***The late Dr Goh Keng Swee called the stock market a casino.

Unicorns are not real: latest US tech “scam”/ Can unicorns be exited?

In Financial competency on 21/07/2015 at 2:43 pm

PROTECTIONS FOR INVESTORS INFLATE START-UP VALUATIONS Don’t believe all the hype over the “unicorns,” or start-up technology companies valued at more than $1 billion, Randall Smith writes in DealBook, pointing to the late-stage financing terms that inflate a company’s valuation before any initial public offerings of stock – often with little or no disclosure of those terms. Venture investors say that these terms include extra protections, like a discount to the price of any eventual initial offering, a minimum return on investment or extra shares if the company later raises money at a lower valuation. Early stage investors warn that these terms can jeopardize a company’s financial stability, diluting the value of their original stakes and worsening a company’s prospects in a downturn, but the protections appeal to company founders because they provide new cash at the highest nominal valuation, reducing dilution if all goes well.

The protections can push up a unicorn’s valuation 10 percent to 25 percent, said Rick Kline, a lawyer at Goodwin Procter whose firm does legal work on start-up and initial offering financings. He said the phenomenon has been part of a general “frothiness” in late-stage valuations. Neeraj Agrawal, a general partner at Battery Ventures, said such structures work for companies when, “like ‘The Lego Movie’ theme song, everything is awesome.” But, he added, “things won’t always be awesome, and when they aren’t, a company can blow up over this issue.”

THE CASE AGAINST A TECH BUBBLE Last month, three partners at Andreessen Horowitz – Morgan Bender, Benedict Evans and Scott Kupor – made the case to the firm’s limited partners for why today’s tech boom is different from that of the dot-com era. It’s not too surprising that a major venture capital firm is arguing that Silicon Valley is not in a bubble, Steven Davidoff Solomon writes in the Deal Professor column. But he says that the presentation, which was released to the public, is worth a look, “not just for the debate over whether a bubble exists but also because it leads indirectly to the fate of the unicorns and the eventual fallout.”

The partners cite plenty of data to back up their arguments. E-commerce has a lot of growth potential in the United States, making up only 6 percent of retail revenue, and technology funding as a percentage of gross domestic product is only 2.6 percent, compared with 10.8 percent in 1999. Another key difference is the unicorn factor, the start-ups with a valuation of at least $1 billion. Gains that used to go to the public through stock offerings are now going to private investors, the partners contended, citing the example of Facebook. When Facebook went public with a valuation of more than $100 billion, all of its gains went to private investors.

However, Professor Solomon writes, the Andreessen Horowitz presentation inadvertently highlights the problem of the unicorns: No exit.“Competition among venture capitalists to get in on technology start-ups is driving up prices exponentially. But that pricing is justified only if there is an exit. And as Dan Primack noted recently in Fortune, there isn’t one for unicorns.” The venture partners may be right that private markets have pushed out the public ones, but Professor Solomon contends that this shift does not justify the ever-increasing valuations or identify potential buyers of these unicorns. “Perhaps most important, it is silent on how to salvage a unicorn investment when it sours,” he writes.

NYT Dealbook

FT on avoiding the madness of crowds

In Financial competency on 20/07/2015 at 2:38 pm

The problem for the investor trying to avoid crowded trades is not just spotting them, but managing to resist joining in. The basis for crowding is usually compelling. The US economy seemed to be doing well; the Swiss central bank was stopping the currency strengthening; and the ECB seemed to be offering a guarantee of easy profit on German bonds. The fact everyone agreed seemed not to matter.
It is hard to buck the consensus. Investors need to recognise that while the story may be obvious, the risk that it is wrong is not properly discounted. When that risk becomes clear, “the mass volte face is what causes some of these crowded trades to reverse spectacularly,” says Altaf Kassam, head of equity applied research at MSCI.

James Mackintosh, Investment Editor

FT, sorry for the cutting and pasting such a long extract. I know, I know good quality journalism and profits is hurt by such an action. But given that the FT is almost as leftist as the Guardian on Greek austerity (i.e. making the Greeks face reality) …

CPF: B in global rating is wrong/ Ang mohs sotong on CPF Life

In CPF, Financial competency on 14/07/2015 at 4:49 am

Actually we should be in C or D not B.

When we were upgraded to B from C in 2013, the constructive, nation-building BT reported: The Republic has moved up sharply in the latest Melbourne Mercer Global Pension Index rankings, placing its Central Provident Fund (CPF) among the top 10 retirement-income systems in the world.

Singapore jumped from 13th to seventh spot, with its overall index value at 66.5 this year, up from 54.8 last year.

Although the Republic moved up a grade – from C to B – Mercer said the CPF system has room for improvement in some aspects “that differentiate it from an A-grade system”, although it had a sound structure and many good features.

The 20 countries in the rankings were scored in three key areas: adequacy, sustainability and integrity.

Denmark, the Netherlands and Australia held onto their top three spots. Denmark, the first country to achieve an A grade last year, maintained it this year, despite its overall score falling to 80.2 from 82.9.

Mercer said: “Denmark’s well-funded pension system with its high level of assets and contributions, the provision of adequate benefits and a private pension system with developed regulations, are the primary reasons for its top spot.”

Singapore’s B grade puts it in the company of other highly developed countries such as Germany, the US and France.

Mercer said the Republic’s overall index rose mainly because the Organisation for Economic Co-operation and Development (OECD) revised its approach to recognise the CPF’s three separate accounts, instead of just its retirement account.

The OECD also updated its data on private pension coverage.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=412758763-19361-922318696

Obviously Mercer and the OECD don’t realise how CPF Life is structured. It sucks as this piece explains why https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/ (Warning I quote some chim analysis which is no BS like Roy’s analysis).

We get screwed even though it’s our own money that’s funding our retirement.

Because as Chris K (writes for TRE but is no cybernut) one of the persons I quoted in above link concludes: The writer does not accuse the government of deliberately profiting from the financial risks of longevity.  However, the triple provision, triple redundancy or in the strictly local parlance “kiasu, kiasi, kiabo” of absolutely ensuring not a single cent is spent on retirement funding, can only mean that there will be excess money left from CPF LIFE which reverts back to the government.

Some may call this conservative financial management but there is a very thin line between such conservative financial management and indolent financial management which arises from coercion and monopoly over retirement savings. Undoubtedly, the usual price of not getting more from their retirement funds is paid by you and me.

(My emphasis)

Btw, an FT actuary tells me that Chris K argument is financially sound.

 

Another fan of Reits

In Financial competency, Reits on 13/07/2015 at 12:40 pm

“In 2013 we decided to go for Reits as a long-term hedge for inflation,” Heman Womg, executive director of the HK Hospital Authority Provident Fund Scheme (HK$57.9bn /US$7.5bn).

Source: Today’s FT

China’s mkt in revulsion stage?

In China, Financial competency on 09/07/2015 at 1:02 pm

Platers are so -sick that they sell despite whatever the CCP is ordering, doing?

THE great Charles Kindleberger described the pattern of how bubbles form and then burst in his book “Manias, Panics and Crashes”. His model, which was linked to the work of the economist Hyman Minsky, saw the process as having five stages: displacement, boom, over-trading, revulsion and tranquillity. China looks like it is following the model pretty closely, having reached stage four already. The Shanghai Composite rose 130% between September 2014 and June 12 this year and has fallen 31% since then, with another 6% decline today [yesterday].

http://www.economist.com/blogs/buttonwood/2015/07/chinas-stockmarket

Ewcovwewd a bit today