Rothschild’s a bear

Among his past good calls was his call years ago, at the beginnings of the US shale gas revolution, that this would transform the US, making it a great place to invest in US based industries that used natural gas.  

Lord Rothschild’s remarks on markets are always worth reading. First, he knows how to make money. RIT Capital Partners, the £3.2bn investment trust he chairs, has returned an average of 12.6% a year since flotation in 1988, which is excellent going for a defensively managed fund. Second, a substantial chunk of his personal wealth is held in RIT. His 18% stake is worth a cool £575m. Third, he gets to the point.

Rothschild has sounded progressively bearish since late 2015 but he took caution to new extremes in Tuesday’s report to shareholders. “This is not an appropriate time to add to risk,” he wrote, citing high stock market valuations, the length of the bull run (10 years, a record), and the end of the era of quantitative easing.

Then he offered a list of familiar worries: the eurozone; trade wars; the effect of higher US interest rates on emerging markets, with the currencies of Turkey and Argentina being early casualties; and Brexit, North Korea, the Middle East and populism. His key point is that the 9/11 terrorist attacks in 2001 and the 2008 financial crisis provoked a common approach from world powers, but it’s hard to imagine the same response today. His conclusion was almost alarmist: “This puts at risk the post-war economic and security order.”

For its part, RIT is keeping a very low exposure to stock markets of just 47%. Warren Buffett, the most successful investor alive today, is similarly in risk-off mode as he sits on large sums of cash and grumbles about how everything is too expensive to buy. Take note of these octogenarians. They have seen a few market cycles.

https://www.theguardian.com/business/nils-pratley-on-finance/2018/aug/07/rothschilds-caution-reaches-new-extremes-warnings-nils-pratley

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Shares to buy?

Supermarket chain Sheng Siong, ground-services provider SATS, ComfortDelgro, SIA Engineering and ST Engineering say DBS. Can’t argue with these at this time, especially the TLCs and the GLC.

With a host of risk factors, including fresh trade-related jitters, threatening to cause more pain for local equities, analysts say it’s time for investors to seek shelter in defensive plays.

“We advocate investors to reposition into defensive stocks, using the rebound in July to pare exposure to cyclical names,” said DBS Group Research analysts Yeo Kee Yan and Janice Chua.

These will be stocks that are not closely linked to the economic cycle, while having a healthy level of cash, decent growth of about 5 per cent ahead and a consistent and satisfactory level ofdividend payouts.

But buying Reits? Taz another analyst suggesting.

Now I’m still up to my eyeballs in Reits. But even I consider them higher risk stuff because they pay out most of their income. Btw, I’ve never been into retail Reits.

 

So why so cock?

“I’m retired so this was going to be a key part of my income but now, not just the income, I have to be worried about my capital. My kids are going to university soon so I have to figure another way out.”Read more at https://www.channelnewsasia.com/news/business/hyflux-shareholders-townhall-meet-management-first-time-10545662

So why did he buy Hyflux debt in the first place?

A fool and his money are soon parted.

Btw, remember to use yr CPF normal account as yr savings account

Using yr CPF OA as a savings account

Oldies use yr CPF acct as savings, fixed deposit account

Average S’poreans smarter than scholar ministers

They cottoned on a long time ago that having babies didn’t help them in the pursuit of the 5Cs.

It’s time for governments to accept a basic truth of the 21st century political economy: Children are an economic drag for parents …

Putin introduced major subsidies for parents. Russian fertility subsequently increased, but hardly enough to matter. The 1.7 rate of 2015 remained well below the replacement level. And an 11 percent decline in births in 2017 suggests the effects of governmental birth subsidies are fading.

That pattern is common. After the Hungarian government brought in some of the world’s most generous child subsidies, the average birth rate increased only from 1.2 to 1.5. The plain fact is that governments cannot pay people to have more babies. Lower taxes, more subsidised childcare, easier access to housing and so forth do little, and not for long.

The economic logic is impeccable. No government can afford to give parents enough money to keep children from being more cost than benefit. Kids are expensive to feed, and middle-class offspring these days absolutely need expensive holidays, extra schooling and a panoply of consumer goods.

For whatever immeasurable happiness parenting may provide, it does not bring much long-term economic gain. When kids grow up and start working for pay, they rarely put much into the extended family’s coffers. If anything, they take up residence in parental attics for longer and welcome a bit of assistance stepping onto the housing ladder. Older people also now expect support from personal savings and government benefits, not their children.

Child-rearing also hurts incomes. Moms and dads often find that the commitments of time and worry slow professional advancement. Fewer children inevitably equate to lesser impediments.

All in all, it is clear that in this modern world most people will only have children because they want to. Since monetary considerations are secondary, what economists would call the subsidy-elasticity of demand is very low.

https://www.reuters.com/article/us-global-economics-breakingviews/breakingviews-hadas-global-case-of-baby-fever-is-easily-cured-idUSKBN1K813Z

 

 

Gd place to borrow money from

At reasonable rates

CO-OPERATIVES, A LESS KNOWN OPTION

An … alternative that many people don’t think about is borrowing from a co-operative society.

Co-operatives started here nearly a century ago to provide a safe place for savings and access to affordable credit.

Admittedly, they are not all open to everyone. Only teachers can get loans for 3 per cent at the Singapore Teachers’ Co-operative Society, and Polwel is for police officers.

Other co-operatives are more accessible. TCC, formerly the Telecoms Cooperative Society, says it is open to all Singaporeans and permanent residents. The interest rate for loans is just 6.99 per cent.

While you would likely need to establish a track record before borrowing, you could join a credit union if you need to take up loans periodically in the future.

https://www.todayonline.com/singapore/reducing-cost-borrowing-money

And given a reported case of criminal breach of trust by employees of one co-op, with a bit of luck there might be no record of yr borrowings.

Why I’m still not filthy rich

Ken Fisher, head of Fisher Investments and a regular FT columnist, published a provocative book on the “The Only Three Questions That Count” for investors. In a nutshell, they were, what do I believe that’s wrong, what can I fathom that others cannot, and what is my brain doing to mislead me?

FT

i still can’t answer the third question well enough.

 

 

More on 85 being the new CPF Life payout date

In Akan Datang: Why CPF Life payments will begin at 85, I “explained” why the PAP was planning to move the CPF Life start date to 85: Many S’poreans would be dead by then because 85 is 2.4 years above the average S’porean life expectancy rate of 82.6 yrs.

Seriously, two points to note on why there’ll be a move to up the age when CPF Life starts paying out (Remember the default age is now 70:CPF Life: How withdrawal age “moved” to 70)

When ang moh countries introduced state old age pensions: example when UK introduced state pensions in 1908, the retirement age, 70 for both men and women, was well above average life expectancy.

And then there’s the issue of accelerated ageing where S’pore is among those top of the class.

Senior VP financial planning was a problem gambler

WTF!

For 12 years, Emeline Tang Wei Leng carried out an elaborate ruse, deceiving five people – including her own family members – into investing their savings in non-existent fixed deposit plans with HSBC bank.

Given her former position as a senior vice-president at the bank, they trusted her with a total of S$5.2 million. But Tang, 39, used their savings to fund her gambling habit.

On Friday (June 29), the District Court sentenced Tang to 10 years and six months’ imprisonment for 34 charges including cheating and forgery. Another 223 charges were taken into consideration during sentencing.

…

Starting out as a relationship manager, Tang rose up the corporate ladder and was in the financial planning division when she left HSBC in 2012.

https://www.todayonline.com/singapore/former-hsbc-senior-vp-jailed-cheating-family-members-and-elderly-s52m

As an investor in HSBC, I’m left wondering about the HR practices of the bank.

But then all this modern day emphasis on employees’ dignity and privacy rights, and employers fear of getting into trouble on social media for intrusive survelliance of staff, means incidents like this is more likely than not to happen. Sad.

Investments: What rocks, what sucks

Xiaomi: “Easy come, easy go” or why cybernuts happy again

Xiaomi, the [US]$100bn Chinese smartphone and TV unicorn? It’s now a $50bn unicorn after it decided to cancel plans for a Chinese depositary receipts issuance.

FT on Wed/ Thurs

This is the latest twist in a tale that will have cybernuts happy again that Temask and GIC always losing money.

Juz six months ago Xiaomi was valued at US$100bn after getting into trouble a few yrs ago: Xiaomi’s IPO will make anti-PAPpyists frus

Then a few months back, it became worth US$70bn: Xiaomi IPO: Why cybernuts will be happy again

Oh and Xiaomi has juz launched an IPO to raise US$6.1bn (amended from US$6bn). It had planned to raise US$10bn but the cancellation of its Chinese depositary receipts issuance made that impossible.

Whatever, the cybernuts will never accept that Temasek and GIC made money on this investment. The changes in the valuation reflect the difficult of valuing an unlisted investment, especially a tech company.

Akan Datang: Why CPF Life payments will begin at 85

This will happen because 85 is 2.4 years above the average S’porean life expectancy rate of 82.6 yrs.

Let me run readers thru the argument.

In CPF Life: How withdrawal age “moved” to 70, I explained how the CPF Life default age for receiving payments was raised to 70, while earlier in Why CPF annuity will begin at 75 I joked that Queen Jos was planning how to justify raising the age to 75.

Well Russia has an even better ,plan to screw the elderly. Russia today, S’pore tomorrow?

Russia recently proposed raising retirement age above the average life expectancy of Russian males (63 yrs)

Prime Minister Dmitry Medvedev proposed increasing the pension age for men from 60 to 65 years old, and increasing the pension age for women from 55 to 63 years old.

… with many pointing out on social media it would make retirement age higher than the average male life expectancy in Russia.

https://www.bbc.com/news/blogs-trending-44495136

In S’pore, according to govt data the average male life expectancy age is 80, the female life expectancy age is 86.1 and the average 82.6. Don’t ask me how the average is calculated.

Rounding the average up to 83, and learning from Russia, CPF Life payments will begin at 85, enabling the reserves to grow and grow because many male S’poreans will be dead before CPF Life payments begin.

Btw, remember if CPF Life plan dies, you die: not yr money.

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

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

 

 

 

 

CPF Life: How withdrawal age “moved” to 70/ Silence of the activists

I was going to explain how the dastardly deed was done but when TRE republished

Red alert! Achtung! S’poreans approaching 65, a TRE reader gave the answer, saving me the need to explain.

Lye Khuen Way:

June 11, 2018 at 7:50 am  (Quote)

The CPF Board do send out letters to those approaching their cohort drawdown age.
For those borned in 1953, it’s their 64th Birthdays.

There after, I believe it is 65.

The sly way they put it, is to suggest that you could delay your drawdown and receive more per month.

That applies to both Minimum Sum Scheme or those who opted for CPF Life.

Those who instinctively do not want any delay might just chuck the letter and the forms aside.

That’s where the devils come in.
Tuck away in the middle of the FORM, is a line that tell you that if you didn’t indicate that you want to start your drawdown from age 64,or 65,the DEFAULT AGE is 70.

Yes, Age 70.

I happen to opt for the CPF Life and somehow my enhanced topup application had already stated I wanted my draw down to start from age 64.

If unsure, call, write or better still go down personally to any of the CPF offices. Note that the Main CPF Board office is closed on Saturdays.

(Emphasis

In places like the UK, or US of A or Europe, this kind of action

Tuck away in the middle of the FORM, is a line that tell you that if you didn’t indicate that you want to start your drawdown from age 64,or 65,the DEFAULT AGE is 70.

is not acceptable. It’s not Christian, kosher or halal. It’s politically toxic, playing bgames this way.

Civil rights activists would be KPKBing and rightly so.

Here it’s par for the course.

Worse our ang moh tua kees don’t care. They don’t have to rely on CPF Life payouts. People like Kirsten Han got pa’s and ma’s money just like Harry’s children.

And juz as bad is the silence of the Oppo politicians. Nothing from the Wankers’ Party or from Goh Meng Seng (Silence of Goh Meng Seng) or Lim Tean (Where’s yr defamation video and jobs rally Lim Tean?) the two talk, sing song artistes.

All so rich. It’s a fact that Lim Tean rents a black and white bungalow costing $15,000 a month.

TOC saying vote PAP?

I kid u not, Terry’s Online Channel has a gd word for the PAP govt and one of its flagship programmes.

This is what TOC wrote

S$1 million will easily cover the cost of most new and resale HDB flats in Singapore. The median price of HDB resale flats in every neighborhood is below S$1,000,000, so prospective homebuyers could afford a comfortable residence in even the most expensive areas of Singapore.

For example, the median resale price of a 4-room HDB even in Central was S$850,000 in the early months of 2018.

And

S$1 Million is Not Enough to Afford Most Homes in Many Major International Cities

Both quotes from https://www.theonlinecitizen.com/2018/06/09/what-kind-of-home-would-s1-million-buy-in-major-cities-around-the-world/

Is TOC getting paid to say nice things about the PAP govt? One of TOC’s grouses is that mothership gets sponsorship from GLCs. So has TOC saold its soul too?

Btw, the writer is the only numerate person in TOC’s stable of writers and editors.

 

Red alert! Achtung! S’poreans approaching 65

Responding to this Why CPF annuity will begin at 75 fat cat investor and ex-medical doctor “abc” said that

In case you didn’t know, the DEFAULT CPF Life payout age is now 70.

This is in the event you don’t get back to CPF before your 65th birthday.

I think this policy started (silently) in 2017.

I asked a financial planner if this assertion was right, and he said after checking with a colleague, “Yes”.

So if u want yr CPF Life payments to start at 65, tell CPF. Otherwise have to wait until 70: which will soon morph into 75 as I predicted.

As, I’m on the minimum sum and I’ll be checking to see if I have to give notice that I want my money from 65 onwards. Until I give CPF details of bank account where the money is to be paid into ,I know the money will be rolled over but now I want to know if I don’t give them bank account details before I’m 65, will the payments start only when I’m 70.

Not at it really matters, I’ve not withdrawn any of my CPF monies.

Btw, anyone knows what happens if someone “opts” for payment to begin at 70, but dies between 65-70: will the estate lose “everything” i.e. the amountrs not paid out? If so better start receiving money at 65.

Fate of S’porean dating Initial Coin Offering

A report in the FT over the weekend that an ICO has raised US$4bn reminded me of this recent BBC report about a S’pore-based ICO

Violet Lim wants to get rich by marrying together internet dating and the latest investment craze.

“Our ICO is about love on the blockchain,” the founder of Viola.ai exclaims.

“You can use it to get curated matches, to buy flowers, to book restaurants or even get dating and relationship advice.”

ICOs – or initial coin offerings to give them their full name – are a way to raise funds by creating a new form of money from thin air.

Singapore-based Violet has been involved in the internet dating industry for years.

But she believes an ICO presents a way to raise $17m (£12.6m) from investors, who will get tokens to use in their dating activities.

Why, I want to know, do you need a token to buy flowers for your loved one and why does the service have to be on this magical blockchain which apparently solves every problem?

“We are trying to solve a very important problem in our industry, which is the lack of trust,” she replies.

And she explains that by entering people’s details on an immutable blockchain, Viola will be able to deal with “love scammers” who hide their true identity.

But her enthusiasm gives way to a degree of despondency soon after, when Google bans crypto-currency and ICO ads on the very day Viola’s public sale gets started.

“[It’s been] a very bad first day followed by a very bad first week,” a more muted Violet tells me.

http://www.bbc.com/news/technology-44038181

It got a lot worse. The BBC asked finance blogger and former banker Frances Coppola to look at the S’porean’s ICO, and she was not impressed.

Of Viola she asked: “What’s the point?”

And she was not convinced by Violet Lim’s assertion that the blockchain would make dating more secure

“Why on earth would I want my entire dating history up on a public blockchain where everyone could see it?”

Well she wasn’t the only sceptic

As for dating-on-the-blockchain Viola, its founder and her team have decided to “pause” the sale and are monitoring market conditions to see when will be a good time to restart.

Another BS scheme bites the dust. There goes Violet’s and her team’s 5Cs ambitions, assuming she’s not a rich, clueless kid, playing with pa’s money.

 

Staircase to financial paradise

From FT columnist

Step 1: Do you need a financial adviser?

Step 2: Decide which type of service you want

Step 3: Independent or restricted advice?

Step 4: Choose which level of advice you need

Step 5: What are the charges?

Step 6: Finding an adviser

Step 7: Choosing the right person for you

Step 8: Keep your finger on the pulse

Gd advice for struggling S’poreans

In fact for anyone who isn’t fithy rich.

“You need to use a different lens to look at this question of finances,” says Ken McKellar, partner at AGM Transitions, a consultancy, and former partner at Deloitte and EY. “Rather than thinking of how big an income you need, think of how small a cost you could get away with without major changes to your lifestyle. Be aggressive about the cost. We learnt that a lot of ‘fat’ had crept into our spending over the years, and I have heard the same from many others.”

He was talking in the context of retirement planning and living in retirement in the UK.

Meritocracy? What meritocracy?

Double confirm: Paper general made Temasek and other NOL shareholders poorer too.

Not that Ho Ho Ho or other S’porean decision makers seem to care. Good luck SPH shareholders.

More evidence that NOL was sold when the cycle was about to turn &Sale completed in mid 2016).

Deutsche Bank is turning positive on Asia Pacific’s shipping sector with the strongest preference for the container sub-segment, followed by tanker and dry bulk.

This comes on the belief that industry conditions have now fundamentally turned, with the peak in deliveries of mega vessels and the recent acceleration of industry consolidation in recent years, which in turn means operators have the potential to achieve stronger price discipline.

https://www.theedgesingapore.com/tide-turning-favour-regions-shipping-sector-says-deutsche

Meritocracy? What meritocracy?

— Why PAP doesn’t do accountability, meritocracy

— Meritocratic hubris/ Who defines “meritocracy”

 

TRE poster asks “Why save when struggling?”/ Corporate raiders and change

When TRE used PAP is losing the war to keep S’poreans in ignorance there was this comment

SUNNY:

why must we save for future generation when we are struggling to survive in the most expensive city today.

in fact every generation can barely only support it self.
actually we are now the future generation ,what benefits are we enjoying??
may be the leaders should have their 90% salary/bonus cut for future 20 years generation,so we can witness before we die.
why save when it is raining heavily today.we won’t be around tomorrow.
who knows if the world will end tomorrow.

Here’s another thing to think about

What is the point of having a very good balance-sheet if the S’pore economy is underperforming its full potential?

In the 50s, 60s and 70s, US CEOs boasted of their companies strong balance sheets while spentdingcorporate funds on private jets, hunting lodges for themselves, co directors and senior executives, and their cronies. Shareholders got “peanuts” but wewre grateful. Then came the corporate raiders with the doctrine of “shareholder value”. CEOs  etc are still well renumerated but they have to keep the shareholders happy.

Recognise what should happen here next?

Too bad we got the likes of the Wankers’ Party, Mad Dog, Uncle Leong, Phillip Ang, Goh Meng Seng, s/o JBJ, TKL, Martyn See, Seelan Palay,Kirsten Han, M Ravi and TJS. They are the faces that the swing voters (those who voted for Dr Tan Cheng Bock) usually associate with change.

We need more people like Dr Paul, Terry Xu, Sonny Liew, Chris K, Tay Kheng Soon, Yeoh Lam Keong, Cherian George, Donald Low, Alex Au, Mohamed Imran Mohamed Taib, Tan Tarn How and Remy Choo.

 

Estate agents so stupid and selfish meh?

Mr and Mrs Ow should lose their licences because they are so stupid that they didn’t know that the shorter time left on any lease, the value of flat goes down. (HDB flats: 35 is a dangerous age and Why 30-year old HDB flats difficult to sell/ Why PAP rule will end in 2029)

I am very concerned if property agents who are suppose to be advising their clients personally had such an unrealistic idea that prices of HDB flats would rise forever that they thought it prudent to pay $580k for a 5-rm HDB flat that was already 35 years old at the time of their purchase.

ST also highlighted another case of HDB owner trapped in buying old HDB flats.

It featured a property agent, Janet Ow, who bought her 5-room flat with her husband, also a property agent, in the old estate of Telok Blangah. They bought the flat at $580,000 some 8 years ago in 2010. Currently, their old flat has just got 56 years left on its lease.

In 2016, they started marketing their flat at $680,000 to $690,000 hoping to make at least a $100K. Bids came in at $620,000 and $630,000 but now offers have also dried up. For more than a year now, they couldn’t sell their flat.

“Those who called asked about the balance of my lease first,” Ms Ow said. “The flat’s age has now become a main concern after National Development Minister Lawrence Wong’s reminder in March last year.”

“Upon knowing the age, sometimes they won’t even proceed with viewings. In 2016, when we put up an ad, we would get around 10 calls. Now, we don’t even get a single call for one to two weeks,” she added.

“If I don’t sell now and prices keep dropping, I will be making losses on my flat eventually.”

Ms Ow and her husband are hoping to sell their flat quickly so that they could get a condo with a fresh lease.

“At least we know we have a long lease ahead of us and can cash out,” she said. “We don’t want another HDB resale flat because the ageing lease problem will crop up again.”

…

In any case, at the moment, Ms Ow said she feels “insecure about the future”.

https://www.theonlinecitizen.com/2018/04/15/owner-sells-3-room-hdb-for-15-less-after-wongs-comment-about-zero-value-of-expired-flats/

Another reason they should lose their licences is that to help her and her hubbie out of their stupidity, they want the govt to screw other S’poreans

Ms Ow said, “Perhaps HDB could look into allowing buyers of flats with less than 60 years left on the lease to utilise their CPF fully (ie, 100%) instead of partially.”

“That will help to alleviate the worry of having to pay cash for part of the purchase. This will help buyers who need to buy flats in an oder estate to be near their parents who may be there,” she added.

Err that means those who use 100% of his or her CPF savings to buy such older flats will not have enough to retire on later because of the near-zero value of the flat.

Robbing blur Peter to pay stupid, s3elfish Pauline isit?

 

Welfare for insurers (cont’d)

Here in Welfarism the PAP way I gave an example (share of taxes paid) that the PAP did welfare: corporates get welfare, not the people

Here’s another: the new requirement that Integrated Shield Plans (IPs) with riders have a co-payment portion of at least 5%.

When the PAP introduced this welfare scheme for insurers, a minister talked about “buffet syndrome” of policyholders.

Well the insurers should have allowed to wallow in their own urine and shit.

The problem was self-created. The “free” riders were created to increase their profits, or so they tot. Now that it was not working for them, the PAPpies should not be riding to their rescue. They should simply stop marketing the products. And start increasing the premiums for existing holders to reflect previous pricing mistakes.

But to be fair to the corporate loving PAP govt: the change has not mandated any change for the 1.1m people who already have full riders for their Integrated Shield Plans (IPs) – which means they still will pay nothing for hospital bills.

But the freeloaders and scroungers that are the insurance industry will not stop lobbying for this to change. They had wanted the co-sharing to apply to the existing contract, or so Secret Squirrel and Morroco Mole tell me.

But the PAP govt didn’t want another public row what with its plans to raise GST after the next GE.

 

Remember the Death Cross?

Since 2009, equity markets have been in cheong mood.

Death crosses became an endangered technical sign.

One was sighted in Germany very recently.

Reminder: A death cross not only involves the 50 Daily Moving Average below the 200 DMA, but it also happens when both moving averages are declining

Welfarism the PAP way/ The last word on GST

Here corporates get welfare, not the people: and its foreign corporates that get the best goodies. PAP is not against welfarism so long as the beneficiaries are corporates, especially if they are foreign-owned. Ang moh tua kee kind of fascist movement?

Don’t believe me?

Well a friend, a respected economist, wrote

In Singapore’s case, there are other reasons to avoid the GST: In the context of an economy where there is an extraordinarily high profit share of GDP, is it appropriate that households bear a higher proportion of taxation than corporates? Our very rough estimate is that the direct taxes plus indirect taxes plus various levies paid by the household sector amount to about 11% of GDP, whereas the equivalent for the corporate sector is around 6%.

And

Given that foreign shareholders earn roughly half of the profits accruing to the corporate sector, the burden on Singapore households seems already to be unevenly high. This being the case, it does not seem appropriate to increase the burden on the household sector even more by increasing the GST rate.

Writer is Manu Bhaskaran. He was Tharman’s cell mate when they were convicted of breaching the Official Secrets Act. OK, OK, they were only fined. Btw, that incident showed that S’pore is a place of laws. Manu talked to his old boss in Mindef (Manu’s a scholar), BG Yeo, but BG Yeo couldn’t help. But maybe BG Yeo was ball-less or powerless, or both?

Sorry back to the article. Do read https://www.theedgesingapore.com/singapore-funding-its-rising-social-spending-right-way. Lots of other good stuff that show the fallacies of Hard Truths on Reserves, GST and govt spending.

Examples

And this brings us to the nub of the issue: What is the optimal savings rate for a country like Singapore? Savings is not an end in itself; it is the welfare of the citizens that is the end. Simply accumulating savings continuously is not the right thing to do — the right approach is to look holistically at all the determinants of welfare and then decide an optimal savings rate.

And

The thrust of the discussion above essentially leans to a view that Singapore is probably already saving enough and may even have exceeded the optimal savings rate. In that context, the better approach to funding rising social spending is to use more of the income from investments and to not raise taxes, be it the GST or some other tax.”

 

PAP is losing the war to keep S’poreans in ignorance

Be of good cheer, those of us who want the PAP lose its hegemony (Cybernuts excluded because like TRE’s Oxygen, they think a crushing defeat of the PAP is just another GE away: they’ve been thinking that since before Cyberspace came into existence), the PAP is losing the war on keeping S’poreans financially illiterate with comments like:

GST hike ‘the responsible way’ to fund areas of collective need: Heng Swee Keat

(Today)

Preserving reserves signals to markets strength of Singapore dollar: Chan Chun Sing

(ST)

Let me explain.

When two natural PAP supporters make the comments I report below, it’s clear that the retired chief economist of GIC (Known as LKY on FB), Donald Low, Chris K and others (including little old me) have not wasted our time raving and ranting that

— S’pore has too much reserves and that they can and must be used to make life better for S’poreans.

— And that tax rises show that the PAP administration are reckless prudent, or at least are mindlessly prudent.

FB post by a retired SAF officer, now active in mental welfare causes. He was one of the first Black Knights.

Maybe what the Government needs to do is to show to the citizens various scenarios (given some assumptions) about how to cater for the future financially. Period 2021-2025…, Scenario1…use of GST hike and 50% of Investment returns to manage the budget; Scenario 2…use of all reserves to do the same. Then show Sporeans what is left at end 2025, and how the projected financial state will affect Spore’s future financial health.

And this FB post by a lawyer who has said he voted for the PAP

The G says that Singapore’s reserves must be kept secret as a defence against speculative attack.

Whether true or false, there is an obvious price to pay in that if there is no public information about Singapore’s reserves, intelligent debate about Singapore’s fiscal policy becomes well nigh impossible.

The debate in Parliament currently appears to be rather sterile in the absence of meaningful facts and figures.

I am not in favour of the G’s current approach to the (non)transparency of Singapore’s reserves, which to me is not justified and makes no sense, on balance. We are better off having the knowledge to chart our national destiny.

People like Dr Tay Kheng Soon should take heart that the 70%ers can change their mind. He has often mused that educating S’poreans to realise that the PAP articulated alternative is not the only “right” way is a thankless, long and tedious task.

Whatever, remember that half of the 70% voted for Dr Tan Cheng Bock as president. He only lost because of Tan Kin Lian and Goh Meng Seng decision to fix S’poreans. As a TRE reader put it

Sabo King help Tony Tan by persuading Tan Kin Lian to steal 4.91% votes which is enough to prevent Tony Tan from winning.
Sabo King sabo TKL and made him lost his deposit.

 

 

“Why are stocks and inflation going up?”

Historically, rising inflation hasn’t always meant sinking equity markets. But some people worry all the same. The market historian James Stack told Jim Stewart of the NYT that high valuations and years of low interest rates mean “we’re dealing with what might be the most interest rate-sensitive stock market in our lifetime.” NYT’s Dealbook

Bitcoin exchanges are not safe

Did you know this?

A third of the world’s bitcoin exchanges were hacked between 2009 and 2015, say US authorities.

FT

The FT reported this in its article about the U$500m theft of XEM coins by an anonymous hacker from Coincheck, a Japanese virtual currency exchange. It claimed the day before the theft that “Cryptocurrency exchanges are already down to 1.5 players. We’re top …”

“Will crypto-crime end the Bitcoin bubble?”

But first, did you know virtual currencies lost US$100 billion in 24 hours on thursday?

Coming back to:”Will crypto-crime end the Bitcoin bubble?”

Likely because the marshalls are taking more action because criminals are trying to take advantage of the interest in crypto-currencies.

[T]he cyber-security firm Digital Shadows produced a report on the latest fashion in cyber-crime: profiting from the crypto-currency boom.

The report – titled The New Gold Rush – details the various types of scam, from fake ICOs to raids on exchanges to simple phishing attacks. Its author, Becky Pinkard, tells Tech Tent that cyber-criminals have decided to jump on the bandwagon as the frenzy of popular excitement about the rise in value of Bitcoin has grown.

“We have people all the way down to my grandmother asking about Bitcoin and what it means and whether I can make money from it,” she says.

“What that does is then create the type of exposure that criminals need in order to come in and take advantage of folks who don’t really know what they’re doing.”

Digital Shadows has been scouring criminal forums on the dark web and has found plenty of conversations about ICOs – and how to profit from them.

“Just set it up, people will come and they will drop the money on you,” said one comment.

The mood about ICOs and other manifestations of the crypto-currency boom certainly seems to have shifted this week. Facebook has announced that it is to ban all adverts promoting any kind of crypto-currency product.

Meanwhile there has been a sudden slew of prominent thinkers casting doubt on everything from the value of Bitcoin to the significance of the blockchain technology underpinning it.

The boss of MIT’s Media Lab, Joi Ito, wrote a piece headlined The Big ICO Swindle. The respected economist Nouriel Roubini weighed in with Blockchain’s Broken Promises, casting doubt on a technology that proponents claim has great potential, whatever happens to Bitcoin.

Such downbeat assessments, combined with growing regulatory pressure, seem to be having an effect. Bitcoin and other so-called altcoins have taken another sharp lurch downwards in recent days,. The crypto-bandwagon may not have halted but at least one of the wheels looks like it is coming off.

http://www.bbc.com/news/technology-42917172

“Is Someone Manipulating the Price of Bitcoin?”

(Added at 11-05am: Btw it’s down 40% since 1 January. Sorry for the omission.) Given that the price of Bitcoin price has just fallen below USA$8,000 for first time since November 24, “Is Someone Manipulating the Price of Bitcoin?” (the title of the u/m piece from NYT’s Dealbook) is laughable because price manipulation must have been the other way or failed: New questions about Bitcoin’s price

Regulators are increasingly worried that Bitfinex, a widely used (and famously opaque) exchange, has been propping it up. The Commodity Futures Trading Commission has subpoenaed the company, whose Tether digital token is often used to buy other virtual currencies.

More from Nathaniel Popper of the NYT:

Hundreds of millions of dollars worth of new Tether were created; almost always when the prices of other virtual currencies were heading down. The Tether were used on the Bitfinex exchange to make big purchases of Bitcoin and other tokens, helping push their prices back up, according to multiple analyses of data from Bitfinex. “This became more and more concerning, because every time the markets went down, you have seen the same thing happen,” said Joey Krug, the co-chief investment officer at Pantera Capital, which runs several virtual currency hedge funds. “It could mean that a lot of the rally over December and January might not have been real.”

Where we stand: According to CoinMarketCap, Bitcoin is trading at $9,545, down almost 7 percent over the last 24 hours, Ethereum’s Ether at $1,099, and Ripple’s XRP at $1.05, down 7 percent.

The digital money flyaround

• How Goldman Sachs was rushed into supporting Bitcoin. (Bloomberg)

• Meet Bibor, a proposed interest rate for lending Bitcoin. (Bloomberg)

• Samsung is making specialist chips for mining virtual currency. (CNBC)

____________________________

Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.

Why 30-year old HDB flats difficult to sell/ Why PAP rule will end in 2029

A doctor turned fat cat investor responded to Jialat for PAP where I reported a property saleman (OK, OK, he’s title is “research director”) as saying “From the ground, homes with leases of less than 60 years took longer to sell, and at a much lower price …”. (Background reading for those who have not followed the problem with HDB leases of less than 60 years: HDB flats: 35 is a dangerous age)

He wrote

Since 2016/2017 HDB flats older than 39 years have seen a “cliff drop” in prices due to:
(1) Reduction of CPF quantum that can be used for properties with less than 60 yrs lease;
(2) Age of buyer plus remaining lease must be >= 80.

In many mature estates undergoing SERS activities, the price of 40+ year old flats are having 35% discounts against nearby brand new “subsidized” BTO flats. Even with marketing efforts extolling the “higher chance” of SERS for those older flats, buyers are not buying it.

This mini cliff drop has been exacerbated since LW [Lawrence Wong] did an about turn against Old Fart’s & Woody’s asset enhancement propaganda.

Currently majority of HDB flats are still within 25-38 yrs old. The above problem will get worse over the next 10-15 years.

This gives PAPies another 2 terms at least to continue milking Sinkies.

Assuming the next general election is in 2019, this means the PAP will lose power or its two-thirds parly majority in 2029 or thereabouts. Mad Dog will then be 67 and Dr Paul will be about 65. If Mad Dog becomes PM jialat. If Dr Paul becomes PM, let the good times roll.

So if SDP is still headed by Mad Dog as is most likely because he’ll knife Dr Paul in the back to ensure that he’ll rule the SDP, I’ll be forced to vote PAP for the good of S’pore. So I hope he steps down soon.

 

Bitcoin keeps on falling, amid more bad news

January has been the worst month for the virtual currency in three years, with its price down 30 percent. And it’s because of the very thing that Bitcoin and other digital currencies were supposed to be free from: central authorities and regulators. (NYT Dealbook) What the central authorities and regulators are doing to make mining or trading virtual currencies a lot harder:

• The S.E.C. froze a $600 million initial coin offering by AriseBank.

• China has continued to clamp down on Bitcoin mining.

• South Korea is still weighing legal checks on virtual currency trading. Then also Facebook’s ban ads for digital money

But amid all this, NYT Dealbook reports The Japanese messaging service Line has plans to open its own virtual currency exchange, while the embattled publisher of Penthouse magazine wants to promote its own adult-entertainment-focused token.

Jialat for PAP

Unhappy HDB “owners”will complicate change of PM (Connecting SMRT failures, 4th gen ministers & change of PM) and other plans.

In yet another sign of a recovery in the private residential market (SIBOR up 25%, but property mkt is hot?), prices went up 1.1 % in 2017, reversing the 3.1%  decline in 2016, figures from the URA showed last  Friday.

But the HDB Resale Price Index (RPI) for 2017 declined by 1.5% , HDB said on Friday.

Worse for those wanting to sell older HDB flats

From the ground, homes with leases of less than 60 years took longer to sell, and at a much lower price … we anticipate the market to improve, especially in areas where former HUDC developments were sold en bloc. Some of these buyers downsized to a HDB flat and kept the proceeds for retirement, or to support their children in purchasing a private home.

Dr Lee Nai Jia, Head of Research at Edmund Tie & Company

http://www.todayonline.com/singapore/private-home-prices-11-2017-reversing-2016s-31-decline

(Trumpets pls: I posted this in April 2017 HDB flats: 35 is a dangerous age. And btw, this Old private flats’ value can also fall off a cliff).)

Anyway, the PAP has a problem if private property prices keep going up while HDB flats prices continue to decline, or stagnate at these levels.

Those with HDB mortgages will not be happy that their their “heavily subsidised” flats have not appreciated in value in line with FTs’ and elites’ private property values, while those with older flats will be doubly unhappy.

Since more than 80% of Singapore’s population live in HDB flats, a growing gap between HDB prices and private housing prices is not good for the PAP.

But at least Mad Dog and the cybernuts will be happy: more of the 70% will be unhappy with the PAP. They can “Keep on wanking and dreaming that the PAP will lose the next GE”.

Public tenders = PAPpy greed?

At regular intervals, cybernuts (Think TKL and TRE nuts) and usually rational S’poreans complain that public sector public tenders must not always go to the lowest bid or to the highest offer. Discretion must always be exercised for the good of the public. In their opinion, the PAP administration’s failure to exercise discretion for the good of the public is evidence of the greed of the PAP.

But are they willing in turn to give the govt and other public organisations the benefit of the doubt when bids are won by those bidding more or offering more (say for leases) but then things go wrong?

The reality of winning public tenders is that the lowest bids or highest offers are the way to win them. The UK has seen the collapse of Carillion, a construction and outsourcing contractor, who won public sector bids by consistently being the lowest bidder.

—————————————————-

The trap of awarding tenders to lowest bidder for society

Rob Whiteman oversaw the procurement process at the government’s UK Border Agency, where he used to be chief executive. He now heads up the Chartered Institute of Public Finance and Accountancy.

He worries public contracts are too often awarded to low bidders.

“Low bidding can appear attractive to procurement officers because they know they will be judged on value for money. But I think there is a bear trap,” he explains.

“If we overscore cost in the evaluation then we risk squeezing contractors’ profits and if they’ve got their sums wrong they may take their best staff off the contract and the taxpayer gets a sub-standard delivery.”

Another concern raised by Mr Whiteman is a lack of focus on the companies’ financial robustness during the tendering process.

He thinks that while civil servants look at a firm’s track record for delivery, more questions need to be asked about how financially sound the company is before awarding a contract.

http://www.bbc.com/news/business-42720245

——————————————————————–

To avoid accusations of wasting public money, there’s pressure to accept the lowest bid. Conversely when tendering revenue generating contracts (say leases), there’s pressure to accept the highest bid to avoid accusations of failing to maximise public revenue.

Remember that in the background is the elephant: there’s the taint or accusation of corruption, favouritism or cronyism when the lowest bid (or highest offer) is not accepted.

Coming back to the idea that discretion must be exercised for the good of the public, what is the “good of the public”? Ideas on a post card, as those wanting public tenders to be awarded using this criteria don’t seem to be able to define it. In the case of renting leases, for the “good of the public” usually amounts to renting out to a small mom-and-pop comfort food operation rather than Tony Tan Colonel Saunders or Big Mac who can afford to pay and pay unlike the small family eatery. So everyone KPKBs of “moneytheism” of the PAP administration.

 

This issue is more complicated than the cybernuts think.

 

 

Xiaomi’s IPO will make anti-PAPpyists frus

Xiaomi is laying the groundwork for its planned float in the second half of this yr as it appoints banks for a planned US$100bn IPO.

This make make our anti-PAPyists who are PRC lovers bang their balls really hard

It wasn’t that long ago when anti-PAPpyists (nutty and sane) were KPKBing that both our SWFs lost billions after investing in Xiaomei: http://www.theindependent.sg/gics-and-temaseks-investee-company-xiaomi-lost-40-billion-in-value/

Bear in mind that the above piece was not written by a cybernut but by someone who while sane didn’t have a clue about investing.

Xiaomi, which was valued at more than US$45bn in its last funding round three years ago, went through a difficult period last year that burnt through its cash. But it appears to have turned a corner in the middle of last year.

(FT a few days ago)

FT went on that the co made a:

significant recovery from January last year, when a humbled Mr Lei wrote in a memo posted on his WeChat account and on Facebook: “A few years ago, we rushed too fast, achieving a miracle in the history of modern business growth, but we also overspent a portion of our growth. We must slow down and earnestly learn from our mistakes. Prevention is better than having to fix things later.”

Why we speculate/ How to speculate responsibly

The u/m came from an FT piece on speculating in bitcoin. But it applies equally when speculating  in penny stocks, contracts of difference, binary options, currecies, and in fact in anything.

We speculate because we have little money (relatively speaking) to invest so we’re more likely to put our money in something that has the potential to see massive returns.

one young man who graduated from a US college last year and now writes a newsletter about cryptocurrencies offers a more mundane explanation. “Young people like myself have little money to invest so they’re more likely to invest in something that has the potential to see massive returns,” says Matteo Leibowitz. “Not having a family to feed or a mortgage to pay, we can take these riskier bets.”

“Not having a family to feed or a mortgage to pay, we can take these riskier bets.” Now taz being a responsible adult. If u got a family to feed or a mortgage to pay, don’t speculate.

 

Cybernuts, stock and property mkts are a cheong

Aussie Tax dodger and welfare cheat, and chief TRELand cybernut Oxygen and his pals are in for a frustrating time as S’pore’s markets dance to US’s tune for the next 6 to 24 months.

[O]ne intrepid fund manager thinks it is likely that American share prices could rise by 50% in the next six months to two years. Perhaps the biggest surprise is the identity of that pundit: Jeremy Grantham.

Mr Grantham, one of the founders of the fund management group GMO, is best known for a cautious approach to valuations. He was one of the investors who got out of the dotcom boom well before the top.

https://www.economist.com/blogs/buttonwood/2018/01/wild-ride-2018

Of course, the party will end in tears. But so long as

Jack be nimble,Jack be quick,

Jack can get away with some loot.

 

 

Trying to take profit from bitcoin

BBC reporter’s experience of converting it into cash

I have been selling some of the Bitcoin I bought 18 months ago, paying about £60.

In theory that is simple enough and indeed I have sold £500 worth for a small fee. But actually getting that cash into my sterling bank account is far from seamless – so far I am a week in to what promises to be a two-week process.

Hardly the frictionless finance that was promised by Bitcoin’s advocates and if the rush to sell gathers pace there is a good chance that the system seizes up completely.

Eat blemished fruit

Half of them acknowledged that they could have taken steps to avoid food waste generated from leftovers after a meal, food expiring or becoming spoilt, and throwing away blemished fruits and vegetables.
Read more at http://www.channelnewsasia.com/news/singapore/half-of-food-thrown-away-by-singapore-households-can-be-avoided-9464560

This reminded me that for several months now I’ve been regularly buying and eating pears whose skins don’t look that nice. I wouldn’t give them away as presents or use them as altar offerings but they are good to eat and are sold at knocked down prices. A pear that should be going for $2-2.50 is sold at $1 because the skin is less than perfect.

And slightly damaged or overripe pears are sold for 50 cents each. Just cut off the damaged bit.

From BBC article

‘Use by’ Vs ‘best before’

Best before

• “Best before” dates are about quality, not safety.
• When the date has passed, it doesn’t mean that the food will be harmful, but it might begin to lose its flavour and texture.
• The “best before” date will only be accurate if the food is stored according to the instructions on the label.

Use By

• “Use by” dates are the most important date to consider, as these relate to food safety.
• “Use by” dates are found on food that goes off quickly, such as smoked fish, meat products and ready-prepared salads.
• Don’t use any food or drink after the end of the “use by” date on the label, even if it looks and smells fine.
• For the “use by” date to be a valid guide, you must follow storage instructions.
• Once a food with a “use by” date on it has been opened, you also need to follow any instructions such as “eat within three days of opening”.
• If the “use by” date is tomorrow, then you must use the food by the end of tomorrow, even if the label says “eat within a week of opening”.

source: NHS

http://www.bbc.com/news/uk-42223507

Countering PAP’s BS that taxes must go up

The now retired chief economist of GIC published u/m on his Facebook wall but tOC has circulated it to a wider audience*.

Summary: There’s plenty of money.

And if anyone should know, it should be Yeoh Lam Keong.

The Bigger Fork in Our Long-Term Fiscal Policy Road

To be fair to PM Lee, both the MOF and he have clarified that consistent with DPM Tharmans 2015 remarks, we do not have to raise taxes before the end of the decade.

So there’s really no need to get our fiscal knickers into a twist about GST or income tax increases till after the next GE folks..

IMHO what’s really at stake are larger, more important policy issues and related fiscal choices over the longer term.

What PM was talking about and trying to tell the public was that in the longer term after 2020, tax increases might be needed given inevitable rises in social spending and infrastructure needs in the more distant future.

Actually I really hope that in the end he’s right but from an entirely different angle.

My reason : our current fiscal headroom is so large that were we to truly need higher tax revenues, this would mean that much needed increases in social spending would finally finally have been funded first. Given our current paltry current social policy spending levels, ( much lower than OECD averages as a share of GDP for healthcare, education and social protection) this would be an excellent policy development!

Consider first that we have a 5-7% GDP structural budget surplus ( calculated by global fiscal policemen the IMF no less) – that’s $20-30 bn extra a year. (I don’t want to get into technicalities of how that is a valid number here – please read my previous posts ).

Second, the formula for using net investment returns contribution or NIRC only uses only half of expected long term real returns leaving official reserves to grow by about 2% in real or about 4% in nominal terms for future generations. This could potentially contribute at least another $14bn to the budget or 3.5% of GDP currently.

This 50% spending rule for NIRC itself is a questionable division of investment income from official reserves and a shows a strangely skewed social time preference. Shouldn’t a more reasonable time preference be to use more of the investment income ( not even the real principal mind you ) for the pressing problems of the present generation in this current decade?

Surely the needs of current citizens who have built modern Singapore through very tough times and have serious remaining problems with absolute poverty, inadequate retirement finances, no universal long term or primary chronic health care, underspending in primary and secondary education relative to OECD norms, inadequately planned and funded industrial policy and a badly underperforming public transport system needs this spending now and over this coming decade. Much more so than the uncertain problems of significantly richer coming generations in the much longer term future.

I suspect though, that in the end, we might just be left Singapore daydreaming.

Rather than first spend this hard earned, exceptional fiscal largesse on pressing social and infrastructure needs of the day, then raise taxes only if necessary afterwards, I suspect that our policy makers would instead tend rather towards raising taxes first, partly to keep this implicit huge fiscal savings largely intact ( by the way the IMF thinks that this is an excessively unhealthy level of national savings ) for the rainy day in the even more distant future!

So here is what I think is the really important fork in our long term fiscal and social policy road:

Either we will finally spend enough on social and infrastructural spending – another 8-10% of GDP over the next decade – or we will continue in the kia su practice of spending considerably less, yet still raise taxes in the name of fiscal prudence to maintain one of the most extravagant public savings rates in the world.

All this while continuing to expand social policy at decidedly suboptimal levels that does not really meet our social policy needs sufficiently in all the above key areas.

To do the former means stepping out of current incrementalist, anti – welfare and state intervention mindsets and boldly reshaping, refitting and reinvesting in social policy in healthcare, education, social security, public housing and transport and industrial policy to make these key areas truly future ready for our citizens. This is what we did so successfully and innovatively in our first 30 years of independence.

Please keep in mind that at this much higher level of spending we will merely be at the lower bound of OECD public spending as a share of GDP and roughly on par with developed East Asian economies. We would also be close to true budget balance ie not structurally in fiscal deficit or running up debt. Yes, that’s how extremely conservative our current long term fiscal position is.

The latter, however ( largely status quo), means kicking the can down the road through incremental rather than transformative changes that are likely to end up being constantly behind the relentless curve of economic instability arising from globalization, technological change and worsening demographics. And perversely maintaining the highest and fastest growing fiscal resources in the world.

No prizes for which I think is the more likely scenario on current trends. Which fork we finally take and when, however, depends on both the boldness of political leadership and citizen political awareness to push for a new social and fiscal policy regime that will truly cater to our well being in a more reasonable and balanced but still sustainable way.

*I’m surprised Terry’s Online Channel didn’t republish it for a wider audience, so I’m doing it and hoping that TRE will pick it up for a wider audience: not everyone going to TRE is a cybernut. The rule of thumb on the internet and social media is

1 % of users initiate discussions or content, 9% transmit content or participate occasionally and 90% are consumers or “lurkers”.

I’m hoping to reach the lurkers who visit TRE.

(Btw, didn’t ask permission.)

Opportunity cost of owning car

Great graphic from http://www.channelnewsasia.com/news/brandstudio/how-much-it-really-costs-to-own-a-car-in-singapore-9346730

But the table doesn’t show how not having a car affects sexual attraction and relations. Taz an important factor for young males.

Reason why CPF Life so mean?

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?

Worth of analyst report? Worthless?

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”?

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

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

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?

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?

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

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

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.

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

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

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.

HDB flats: 35 is a dangerous age

It’s all about financing.

Here’s a 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.

 

Hilary’s newspaper trying hard to talk market down

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

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

Endowment Sweepstakes: How Tiny Houghton College Beat Harvard

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

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

By DAMON DARLIN

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

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

By JAMES B. STEWART

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?

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

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

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

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?

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”?

From NYT’s Dealbook

WEALTH MATTERS

Aligning Your Investments With What Motivates You

By PAUL SULLIVAN

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

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

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

 

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?

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

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

By CARL RICHARDS

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

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

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

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

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

 

Illustrarions from FT

The Hedge Fund Robot that Outsmarted Its Human Master

By BLOOMBERG

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

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?

“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

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.”

TISG and readers need protection from TISG misinformation

“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

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?

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

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

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

By ROBERT J. SHILLER

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

NYT Dealbook

Uber raises money to subsidide users

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?

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

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

From FT

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

(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?

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

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

Beats S&P which in tirn brats hedge funds

 

Gem of an investment insight

“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

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.

• NYT »

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.

• BUSINESS INSIDER

Feeling sea-sick?

Value in dog sectors?

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

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.

——————————

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.

——————————————-

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”

“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

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

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

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

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

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

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

—–

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

Perspective on S’poreans’ Debt, Leverage

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

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

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.