Is the stock market another casino

In many ways people may generalize the stock market as another casino where people place their bets and ended up win or lose. But the stock market is not meant to be that way. It has a different reason to exist. Investors buy stocks of good companies to grow with the company, earn dividends and benefit from the rising stock prices. Companies list in the stock market to raise funds for its own growth, business developments and expansion. And the stock market behaves according to some business rules and cycles. Well managed and profitable companies will see the values of their stocks going up and vice versa. Some investors will buy stocks to be kept as long term investments after careful research on the fundamentals and prospects of the companies. But when these principles are ignored or been made irrelevant, and when the prices of stocks no longer behave as they should but being manipulated with no respect to their fundamentals, something is seriously wrong. Yes, it is no longer a stock market but morphing into another kind of casinos. And this is exactly what is happening to our stock market. And this will lead to its demise in time to come. There is an urgent need to return the stock market to its fundamentals and to serve its original role as a market for the companies to raise funds. Failure to do this is criminal. The design of the stock market, the mechanism that determines its price movements, must be fair to all investors and the companies listing their stocks in the market. If the mechanism is unsound, unfair, then caveat emptor is not enough. Just like the minibonds, if the product is unsound, here to read if the mechanism is unsound, you cannot blame the investors or even the relationship managers. The problem is at the source. The designer of the product or the system must be held accountable when investors fell victims to unfair practices, exposed to undisclosed and unacceptable risks. As a financial centre, we need a sound stock market, not a casino. The stock market must function as a stock market.

Give the people a stake in the country

This was the magic formula of the first generation leaders in the early days of our history. They really built affordable, I mean really affordable, HDB flats for the people to live in. A 3rm flat in Queenstown cost about $7000! Ok, for a better perspective, that was a time when a teacher would probably be getting about $500 pm or $6000 pa. Today, a 4rm flat is $450k against a teacher's pay of $3k, $45K pa. Affordable! What has gone awry with this magic formula? Isn't it good that the flats are now costing half a million or 1 million? Don't the people feel richer with all the asset inflation? The trick then was that the people can live comfortably with their $7k flat while other costs were also relatively low. Living here was comfortable and manageable when compare to living in other countries. Today, living here is a big struggle even with a half a million dollar flat. Everything is too costly relative to options in other countries. The previous magic formula attracted people to want to stay here and have a decent living. The new formula says you will be better off selling what you have here, collect all the cash and move on to a relatively cheaper country where your wealth can be multiplied several times over. Yes, the system is designed for the average citizens to sell out and move out. The option of staying behind is a life of struggle to make ends meet while bragging about being very rich in the CPF and a half a million dollar flat. The new formula is flawed. Or maybe it is intended that way. Make your money, grow your assets, then go away in your golden years.

Dependancy on govt help

This is the stereo typed impression of Singaporeans. When they are in trouble, they will look to the govt for help. And this psyche is perpetuated by a govt that persistently insists to help, no matter whether help is wanted or unwanted. Very often help is shafted down into the throats of Singaporeans, like Peking Duck. We shall call it compulsory help. This dependency is so ironic. There is another dimensionally opposed view on this, that the Singaporeans do not want the govt's help and it is the govt that is insisting to help. Then on the govt's part it is telling the people that they should not depend on the govt for help. This is not a welfare state. But welfare keeps flowing out even to middle class citizens. It is really getting crappy and creepy. And we always compare ourselves with the more entrepreneurial and independent Hongkongers. The Hongkongers are admired for their streak of independence and for looking after themselves, not depending on the govt. The recent minibond issue has turned these perceptions upside down. The HongKong govt came out immediately to protect its citizens from the debacle, calling on the banks to act fast to buy back the bonds. On the other hand, the Singaporeans were expected to look after themselves and fend for themselves. The govt or authority only responded several days after the cries for help have subsided into a whimper. The Singaporeans were as usual looking up to the govt for help but must have been disappointed. And the usually responsive govt, always willing to help, insisting on helping the people, was slow in reaching out to the people. Strange developments and a rethink is needed on these new developments.

A desperate cry in Hong Lim

I was at Hong Lim Park this evening to soak up the mood of the victims of the minibonds and high notes and low notes. There was a little sadness, a little despair, and a little resignation in their faces. Many of these people would not have known how to go about trying to seek recourse for their plight. They need a helping hand. Now who can they turn to for help? Fortunately there is Tan Kin Lian who took the initiative to clobber up a petition for these helpless senior citizens. And Goh Meng Seng was there to repeat Kin Lian’s speech in Mandarin. I think there was still a group there that could only understand dialects and they found it necessary to be there. I wonder what would have happen to these people if Kin Lian had not taken up their case. I wonder whether the case would have been closed and forgotten, nothing heard except a few whimpers in cyberspace. You took your risk, made your decision to invest your money, who can you blame? One corner would have said this to them. Can Singaporeans afford to remain voiceless when they are in trouble? This case is a good example of how things would have turned out, or turned down, when Singaporeans simply accept that it is water under the bridge. Caveat emptor, they went in for higher returns and must bear the consequences of their decisions. I think this case would be much stronger if some MPs were to give Kin Lian their support by appearing at Hong Lim Park this evening. It was also a great opportunity for the MPs to be standing side by side with the people in distress, to be with the people in good time or bad time. If attending a citizen’s funeral wake is important, I think this is even more deserving of their presence. I sense that this is missing and is felt be the people there. Or maybe MPs should not be seen in Hong Lim Park. They have their own Speakers Corner in Parliament House. Yes, they will be asking many questions on Monday.

Everything is fine, don't question

Did I remember correctly that someone in this blog said we are so lucky. Everything is so fine, in good hands. Look at the poor Ah Peksand Ah Mahs and their lifesavings disappearing after buying financial products from reputable financial institutions with good faith, believing that everything is in control and safe here. Don't ask, don't question don't kpkb, count your blessings. We have a good brand. I am going to Hong Lim Park this evening to get a feel of the feel good phenomenon in Singapore. I bet many will be grumpy, angry, hostile, and will beat up anyone who tells them that they should count their blessings and go home. It is water under the bridge, let's move on. Too must trust, too much complacency, or just blind f0llowers or pure ignorance? Unthinking Singaporeans?

Reaching for the pinnacles the profitable way

Tan Kim Chuan wrote to the ST forum stating that the relaunch of Pinnacle@Duxton is priced at $200k more than when it was launched in 2004. Now this must be a mis statement. It cannot be. How could HDB priced its flats at $200k more than the original launch price? HDB is not a private developer existing just for pure profits. A whopping $200k increase all because the market value of these flats were priced at a discount to market value is simply atrocious. Most of these buyers are going to incur a loss very soon with the condition of the economy and the falling property market. Now, shouldn't this be a good question for the MPs to raise in Parliament? Or should Tan Kin Lian be responsible to talk about it in Hong Lim Park first? Tan Kim Chuan politely commented that this is either over pricing or profiteering from the property boom. Does anyone with political and moral responsibility to the people think that the pricing is grotesquely excessive and need to be brought down as the buyers are our people and many are young first timers? Or is it another case of greed is good, profit is good? What has become of the original HDB, the builder of affordable homes for the people. HDB used to be a nation builder with a national responsibility. Now it is becoming a commercial animal, and profit is all it sees. Come on MPs, ask some questions would you?

Need to be more proactive in asking questions

MPs will raise questions in Parliament on the recent financial turmoil. But most of the questions will be on the selling of risky bonds by banks and how these were done and the need for closer supervision. Isn't it a bit too late? Why wait until the coffin is about to be lowered into the grave to ask questions? I am hoping that some MPs will raise the issues of the stock market and the relevance of its mechanism. The amount of money wiped out from the stock market is much much more than the money lost in the risky bonds. Caveat emptor is no longer acceptable. The stock market must provide a level playing field for all investors and some of the processes that are anti investment or inherently negative to the healthy growth of a stock market must be reviewed and put right. The MPs should also look into the values that have been wiped out, the number of penny stocks in the market which is now a laugh stock, and how companies and investors are going to be affected by falling stock values. It is better to ask question before people start falling from the flats or jumping onto MRT tracks.

Right time to buy stocks -Warren Buffett

Warren Buffett Says Now Is the Right Time to Buy U.S. Equities By Alan Purkiss Oct. 17 (Bloomberg) -- Warren Buffett said he's buying U.S. stocks and, if prices stay attractive, his personal investments, as distinct from his stake in Berkshire Hathaway Inc., will soon be wholly in American equities. Writing in the New York Times, he said he's following the principle: be fearful when others are greedy, and greedy when others are fearful. Exaggerated concern about the long-term prosperity of the many sound U.S. companies is foolish, and most will probably be setting profit records in years to come, Buffett said. While short-term stock-market movements can't be foretold, the likelihood is that the market will recover before the economy or general investor sentiment do so, and ``if you wait for the robins, spring will be over,'' he said. The above is an extract of an article posted in 'Diary of A Singaporean Mind'. I agree that our stocks are very cheap. But some measures must be taken to stop short selling or the stocks can get even cheaper by the days.

Stop the massacre in the stock market

This is the second time I am making this plea. The first time was probably a couple of years back. The meltdown in the stock market is running out of control. Does anyone think that he has some moral responsibility to protect the small investors from the massacre? If not, does anyone think that he has some responsibility to protect the interests of big investors or companies listed in the stock exchange whose shares are turning worthless? They will suffer the same double whammy like the senior executives of Lehman when their shares pledged to banks as collaterals became worthless. The banks will call their loans and liquidity will become zero. Companies will be hit hard in such cases. Individuals could be bankrupt in the process. If these are not important, does anything think it is important to save the stock exchange and the financial industry from collapsing? The indiscriminate sell down of shares in the stock market is like a run on the banks. This is intolerable and unacceptable. I would expect a crisis meeting tonight and over the weekend to address these issues and some actions be taken to temporary stop the carnage. I would suggest the following measures be put into place over the weekend before trading commences on Monday. 1. Stop scrip borrowing for short selling. 2. Ban short selling, naked or with borrowed scripts. 3. Broking houses/funds shall not be allowed to trade without having to pay any commission except for a small clearing fee. A 0.1%, or more if appropriate, shall be made payable to the stock exchange for house/fund's own trade. This will restrain the indiscriminate selling/buying to sell down a stock. 4. A minimal commission be charged to big traders/funds, proprietary traders etc to level the playing field. This must be strictly enforced to prevent undertable deals. Commission can still be negotiable but subject to a minimum determine by the stock exchange. The above measures may greatly affect the volume of trades in the market. But it is healthier to have genuine investors trading rationally in the market, in smaller volumes, than allowing the market to be destroyed. Our market has been driven so low that many stocks are at very good value for investment and funds or rich investors will find them attractive buys at current levels. Let normalcy and sanity return to the market for the time being while more appropriate long term measures be introduced to ensure a market that is viable and sustainable in the long run. Something must be done quickly to prevent a crisis situation over the next few days/weeks. This is my plea.

Banks buying back risky mortgages

JPMorgan Chase is buying $6b worth of risky mortgages into its own investment portfolio. How could banks be involved in risky products? Or why would banks be allowed to take on such risk? Let's hope this kind of practices stay in the US and our local banks are not allowed to be too adventurous again. Banks are the bedrock of the whole financial system and should not be running around like koyok men selling anything that can make quick money. The dizzzy days of seeking quick profits for big bonuses and unrealistic pay at the top should be frozen. Banks should continue with its traditional business and roles, and grow steadily over time. And for that matter, as a country, we also need to stop this relentless drive to achieve everything in the shortest and quickest time. Population growth, high economic growth, high rental growth, property prices, undergrowth and whatever growth, should be reined in. Time to change the time scale and go for sustainable growth in a more unhurried pace.

Please tell Hsien Loong or Chok Tong

Some of you reading this may have access to either one of them and you have my permission to tell them of my views about the Stock Market. My position is that the mechanism and structure have many flaws and the Stock Market is unsustainable in the long run. It will die a slow death with many innocent investors losing their life savings. We should not wait till another minibond scenario before we wake up. It is in need of an urgent review. One main point is that our market is too small, too imperfect that it can be easily cornered by the big funds or houses and be played to the disadvantage of small investors. Short selling is one feature that is often used against the small investors causing big losses to them. Short selling also disadvantages the shareholders and the company by driving the share price down against its fair value. This has many consequences to the company in fund raising and to shareholders who may pledge such shares as collaterals. The smallness of our investor pool and their limited resources are severely stressed by a constant inflow of new listings and also new derivatives. Not forgetting cross listing of stocks from other bourses. To make things worst, many of the stocks listed have proven to be raw deals resulting in many investors losing their pants. Then there is the uneven playing field between small and big investors, trading houses and big funds in the commissions charged. This literally translated into different odds favouring the big boys. Even casinos do not have different odds for big or small gamblers. The above are brief outlines of the flaws in the present system. I could further elaborate on them if necessary. If these are not put right immediately, innocent investors will continue to lose money relentlessly in the stock market. It will lead to the stifling and eventual termination of all trading activities when the small investors lose all their money, and also lose faith in the market. When that day comes, even the foreign funds will pack up and go as there will be no players in the market for them to exploit. Companies too will find it pointless to list here as the value of their stocks will become worthless. They cannot use them as collaterals or to raise fund in the market. There will be no IPOs, or if any, probably will be fly by night companies coming in for a hit and run. This is the dire strait of our stock market. And everyone seems to be in a state of eternal bliss. Yes we have a lot of good rules and regulations governing trading in the market. The compliance people and regulators are efficient. But the flaws are systemic. Do something quick.

Unhappy with other people's news?

Start your own news and tell your own story. Increasingly people who are dissatisfied or disillusion with official news or other people's news are launching out on their own and start their own news. No need to live with news or views that they are uncomfortable with. This is exactly what the students at NTU did. Three students, Chong Zi Liang, Sakaria Zainal and Lin Junjie, have set up a news website called The Enquirer. They were formerly from the Nanyang Chronicle Editorial team and wanted to report 'in depth issues that matter to undergrads.' The internet is always available to those who want to speak out or to listen to different views. We will get more diversity of news as this trend continues. And The Enquirer is another new member in the cyberspace community.

The Golden Formula not working

Earlier I posted about the Golden Formula that brought us the Olympic medals. It was working or starting to work. But the flaws of such a formula are starting to reveal itself. It is a short sighted formula. It depends on foreign talents that can be bought but can go away as quickly as they come. Foreign talents that come to us in this way have no commitment to us. They are not one of us. Unlike our own children who are born and bred here. Even paying them peanuts or not paying them anything, they will still be here. We need to rethink this parasitic principle that we can live off the talents of other countries. it is poaching in one way. And we are happy when we poached other people's citizens but obviously we would not be happy if others do that to us. Now the table tennis fiasco is beginning to tell us to wake up and look inward at our own children. For they are all we have to depend on in the long run. And this does not apply only to sports. It is applicable to all industries. Take care of your children first, look after them well. Don't be infatuated by foreigners. They come smiling when you put money into their pockets. But they will not hesitate to turn around and slap you on their way out. We need to be more self sufficient in our own talent pool. Depending on foreign talents can only be a short term measure and opportunistic. Come to the crunch, the citizens are all you got. Don't neglect your own children. Did I here that we are going in a big way to get more medals and more foreign talents?

A third reply from EMA

EMA is replying to the rising criticism of the electricity hike today. But again it fails to address the issue of forward buying and spot buying as well as the composition of natural gas in the tariff formula. Oh, in the letter it said that all Singapore's electricity is generated by imported fuel! Does this include natural gas or oil alone? The people deserve to know what is in the formula. The EMA must also put into system a process whereby they can opt to buy spot when future is too high. If their buying process is so rigid to only buy using one method and ignoring the alternative of buying low, then it is not doing justice to the people. Another point is that the hedging or buying forward system sometimes lead to losses and sometimes to gains. When EMA gains, they keep quiet and happily enjoyed the bigger profits and big bonuses. When they hedged wrongly, the loss is immediately passed to consumers. This is unfair. In businesses, there are ups and downs and EMA must take in the profit and losses in its stride instead of one way, always win and no losses.

Hold off Mean Testing

Timothy Chin appealed to Khaw Boon Wan to hold off mean testing in his letter to Today. His justification is that time is bad and recession is here. He suggested that hospital should compete for high end clients but also provide for no frills wards for those who do not want the frills. Then he compared the charges for B1($165.85) and B2($51). In his opinion, the difference is too great. He then suggested an intermediate grade like B1a. His overall reasonings are reasonable until this point. By pointing out that charges for these two wards are too wide will prompt only one kind of reaction. Ok, B2 should be raised so that the difference is smaller. And this exactly the kind of thinking Singaporeans will have, a variance from his own B1a. My point is that the ward charges remain and mean testing stops. Let the people decide what they want. Let the people be thrifty and save if they can and want to. Do not imposed on people to spend. The latter kind of thinking is the most ridiculous and can only happen here. Making people spend according to how much money they have. This is one of the reason why Singaporeans have very little savings in their CPF for retirement, simply because HDB flats were priced on how much they can afford to pay. Higher income must buy bigger flats.

Where is CASE?

David Goh wrote a letter to the ST forum questioning why CASE did not say anything when oil prices has been tumbling down while petrol pump prices are still high. For that matter, what is the position of CASE on the 21% electricity tariff hike? For CASE to keep quiet suggests a couple of things. CASE is quite comfortable or agreeable with the pump prices and the electricity hike. Or CASE may be busy, either with more important issues or is still studying the two cases. And if both cases are justified, then there is no need for CASE to be involved. Singaporeans should be rest assured that their well beings are in good hands. No need to worry lah.

Is my memory failing?

If I can still remember, sometime, not too long ago, there was an official announcement that there will be no increases in govt services or charges. But today we are facing higher electricity tariffs, higher phone bills, higher transportation cost, while we were told to brace up for a recession. Maybe I did not read them or understand them correctly. All these are private organisations, so it is still correct to say that govt services and charges have not gone up. Would hospital or medical bills be considered private as well? How private are our private organisations? Can a govt organisation or govt linked organisation be private by simply restructuring it and call it private when the major shareholder is still the govt? These are difficult and tricky things for the simple minded Singaporeans to decipher. It is easier to just accept any thing as private when it has a private label. That all is well.

Disneyland or beggars paradise

Orchard Road is the closest we can get to being another Disneyland. The cool and rich shop there and are seen there. The heartlanders will find it quite an expensive place to be. The parking and CBD charges will be enough to burn a hole in their pockets, unless they go there by public transport. You need to pay to be in Singapore's Disneyland. But this Disneyland is in a state of transformation. Other than the foreign workers and maids gathering there to size each other up for a weekend tryst, or for some serious business transactions, there is another big group of people seen regularly at Orchard Road. The beggar sects of all the neighbouring countries have turned Orchard Road into their business district and playground. From buskers to beggars, to monks and conmen, they lined the famous sidewalks of Orchard Road, mingling around and inhaling the expensive perfumery, and the beautiful shops and their gorgeous wares. The Twains have met, in Orchard Road. Both extremes found Orchard Road a paradise in their own ways. The rich and famous, the poor and ragged, are all in Orchard Road. A Disneyland and also a beggars paradise.

CPF - Ignorance is bliss

This Ah Pek told his kakis that the happiest moment of his life was to read his CPF statement every month. He said he felt so rich, so comfortable knowing that he had so much money in the CPF. My money would not run away. It would be there, guaranteed by the govt. And the money is growing with very high interest rate some more. Hopefully the CPF is still there when he needs the money. My CPF money did not run away, except that it retreated away from me when I reached 55. Now it has ran 7 years away. And after that, I still cannot touch all of them. I can only take a few hundreds every month until it runs out or I run out or comes 80. No, not true. Some can only be taken out after I die, at least $30k in the Medisave. I am not sure whether to be happy for the Ah Pek. Obviously he is another ignoramus who did not know anything about inflation. When the interest paid to his CPF saving is less than inflation, his money is withering away, becoming lesser by the day. And when real inflation hits him, for the cost of basic necessities are shooting way more than the official inflation rate, he might as well forget about saving when it all comes to nothing. His $3 today that becomes $20 in 20 years time may just buy him another bowl of wan tan mee. No matter what kind of spin is being churned out, it is all craps. The best option is to take your CPF money and put it into your own pocket. Use them when there is still some value. Who knows, one might just kick the bucket tomorrow and not smelling the CPF savings completely.

New format

Hi everyone, I have just changed the template and trying to work around the system. For the moment I have lost the list of contributors and I will try to get it back asap. Will see how much or what else I can add to the new format. Cheers PS. Please click on 'follow this blog' to insert your name in the box. This should do the trick.