Time to acquire local banks

With the stock market going into a tailspin, with banks and blue chips companies at fire sale prices, it is time for GIC and Temasek to consider buying them up in the cheap. The American govt is pumping in US$250b to buy up bank stocks. GIC and Temasek should find value to acquire or build up their holdings of local banks and blue chips. And with DBS being the smallest local bank, why not buy up the number One or number Two banks?

Selling ice cream!!!

Not everyone is a super talent. Not everyone can perform multi tasking effectively. Not everyone can wear 10 or 20 hats and still get the jobs done competently. And not everyone has the privilege of holding multi jobs and can get away with doing very little, or doing nothing, and still being paid handsomely. As each profession or job gets more complex, it will require higher level of knowledge and skills and attention to details. And if several professional jobs or trades, perform by different professionals, are lumped together and expecting people of diverse professional background to be able to execute them efficiently, what we are going to have is superficiality. It also insults the complexities of the nature of the jobs and the professions. The financial industry has undergone this phase of transition when insurance agents and stockbroking agents were ‘encouraged’ to cross train, to allow insurance agents to sell financial products and stockbroking agents to sell insurance products. What a silly idea. But it was done. So what can be expected? Each profession is governed by a series of stringent rules and regulations, laws and technical expertise that demand professional devotion. But some jokers thought that both professions were like car or ice cream salesmen, and a little training will do the job. So what we have eventually is the blurring of roles and the blurring of products. And there are many such products to complicate matters. And these inadequately trained people were out there trying to sell additional things which they are not familiar with. And they called them Financial Advisers, I think. And I think some of these financial advisers are now involved in the minibond fiasco. They are presumed to have the professional knowledge to sell financial products but now found inadequate. Some are going to be screwed till their anus burst for failing to exercise professional due diligence. Ignorance or inadequacy will not be an excuse. Financial products and instruments, derivatives etc are complicated stuff and cannot be administered superficially. There are many technical, financial and legal terms and conditions governing such products and these are not easy to understand. It is not like selling cars or ice cream. I have even been approached by bank tellers to buy such ‘ice cream’. Selling such products is not a once off the shelf, its over. They are dynamic products that require constant monitoring and attention. And the consequences for misreading, misjudging and mis selling can be very serious.

A gaping wide hole!

When the minibond crisis hit the fan, everyone ducked. Or at best, no one stand up except one, or a handful from the most unexpected place, the Hong Lim Speakers Corner. Where were all the people and organisations who are expected to fight or advise the citizens who are in trouble? And in the ST today, Chua Mui Hoong is asking for the setting up of an industry watchdog. She said this is an opportune time to push for it. You mean we don't have any industry watchdog? Oh, she said we have, but they failed to respond to the crisis appropriately. Or everyone was looking over their shoulder to see if someone was going to give the go ahead. Or they may not want to step on the wrong shoe or get involved into something that would put them in a bad light. This boils down to the incestuous relationship of corporate and govt in paradise. When govt is in business, not only that the roles of govt and corporations are blurred, you do not know who is what. Even the govt, the regulators, may unknowingly, unintentionally to put it nicely, compromise their tasks to regulate. It all added up to create this mess. Incestuous relationship is never healthy. And now we have all kinds of cries to question the selling of high risk products to the people. Why in the first place? Are these carefully thought over? We need watchdogs to look after watchdogs. That is for sure. We cannot have people floating in in their eight horse chariots when there is a crisis and rode away after slapping a few guilty ones. The watchdogs must really be independent, and not affected by incestuous relationship.

Judge I shall be

I reckon this is the most perfect position to be in life. Just sit in the office and waiting for people in trouble to come knocking. Then the judge will sit at the top of the bench and look down at everyone from the distance, totally innocent, calm and untarnished from the scuffles and mess in front of him. Better still, the judge should remain above and detach from the combatants. His role is simply to judge, dish out the punishment, who gets how many strokes, how much fines and how many years behind bars. Ideally a judge is best completely detached from earthly problems, and rightly he can remain blameless. For he is not involved, and has nothing to do with the problems people bring to him. In paradise, many in authority think and behave like they are judges. They may head ministries, corporations, administering big operating systems etc. And when trouble appears, they ride in in their 8 horse chariots and judge. Some will be fined, some whipped, some decapacitated. Then back they ride their chariots into the clouds to be near to god. Never mind if they are in charge of all the organisations, set missions, policies, directions, goals, systems, rules and regulations, they are blameless, like judges. Not involved. They are there to judge and punish. Even if they wake up late and turn up late is ok.

Preventing supernormal profits

Ho Geok Choo wanted to know why the govt did not set up an independent body to regulate electricity tariffs after the 21% hike. Iswaran's reply is that too much regulations mean that there will be regulatory risk. And 'If there's more regulatory risk, you must expect that electricity generating companies here will expect a higher rate of return than what they currently have.' And because we don't have independent regulatory body, 'Singapore Power...does not earned a "supernormal rate of return".' SP only earned $1 billion in profit last year. With independent regulatory body, they could probably earn $2 billion or more and the tariff hike could be more than 21%. Whew, Singaporeans are so lucky.

Milking to the max

When selling the flats during the first launch of the Pinnacles was already making a decent profit for the HDB, the additional $200k added to the second launch, when all the costs have been accounted called must be pure additional profit. And this profit is made from our citizens. And they called this subsidy. Then we keep wondering why our people did not have enough savings for retirement. The answer is simple. They were at the wrong end of the formula, 'Milking to the max'.

Australia continues to ban short selling

Australia must have seen the danger of short selling and is continuing its ban. And the Australian market is much bigger than ours. The US, probably the biggest market in the world, has now and then banned short selling. And we stubbornly or cleverly continue to allow short selling in our market. It must be good for us. I hope one day someone will have to account for this. And no one can claim ignorant of the damages short selling is causing to the investors and the market.

Thieves and Thugs

The thieves and thugs of today are not called Ah Seng or Ah Long. They don't have tattoos all over their bodies. They don't carry guns or knives. Very likely they come armed with a string of degrees from Harvard or Yale or some Ivy League Universities. And they are well connected and protected. Actually they are all very nice people. Dressed in designer suits and can be seen in all the high places. And for sure, they don't kill. They don't cheat people of a few dollars or a few cents. They only talked about millions and billions. They don't rob. They just reward themselves for their talents. Their rightful claims.

Myth 192 - The myth of top brand and reputation

Lehman Bros has more than 150 years of track record. A highly rated investment banks staffed by some of the best brains money can buy. And they were all paid damn well, many, not ten or twenty, were driving Ferraris and owning several multi million dollar castles in the US and in retreats across the globe. Working in Lehman Bros is like having it made. And their products were A rated and sold across the world. The more they were sold, the more credibility they earned and the stronger is the brand name. No one expects Lehman Bros to collapse. No one expects its products to be flawed. The only organization here that can match the reputation of Lehman Bros is Singapore Inc. Though it does not have the long track record, it is staffed by the best men and women, proven to be the best, thorough, hardworking, transparent, incorruptible etc etc. In other words, the brand and reputation alone will bring confidence that it will not fail. Whatever it does, its services and products are unquestionable. Today, not only Lehman Bros has fallen, Merrill Lynch, Goldman Sach, Morgan Stanley, Barclay, UBS, Citibank and a lot more big names with big reputations have fallen to the wayside. In terms of reputation, brand, expertise and capitalization, none of our local institutions is in their league. Some big local institutions are also going to be dragged down, despite their big reputations. Can we live and trust on brand names and reputations alone? When the people change, the ideas change, the values and products change, the brand, the mission change and the reputation must also change. When good people have left, when bad ideas and values replaced the good of the past, the goods and services will not be the same again. Sometimes the changes are incremental and small and are difficult to detect. But change is taking place. You want proof, call Lehman. One can choose to continue to believe that nothing has changed. Refused or cannot see the changes. Everything is fine. One can also be frighten, be very frighten, when one is perceptive enough to see the rot within. To each his own belief. But surely there will be many Lehmans to come along.

You want to be rich?

You want to have big house, big pay, world class transportation? Sure, who will say no to such offers? Saying yes is a natural response. But be careful, be very careful. Read the fine prints. This was exactly what happened to the retirees who converted their FDs to minibonds. You want higher interest? How can anyone resist such an offer. But they did not hear the whole story. There is a price for everything. There are consequences. You want growth, pay your price. More foreign workers to compete for facilities and fresh air. They need all the living space as much as we do. Growth also means higher cost for everything and many more. Don't just simply accept a statement at face value.

Time to change beneficiary in CPF

In the past it is normal to name our spouses as the beneficiaries to our CPF savings. With all the new changes to how we can withdraw our CPF savings and how we cannot withdraw them, naming our spouses as the beneficiary is becoming irrelevant. Quite a number of CPF holders will die together with their spouses, if the projection is correct, in their late eighties. What this means is that our spouses will not inherit our savings. Also, a huge sum of our savings will not be used even after we pass away. It is thus necessary to name our children or maybe grandchildren as our beneficiary. Our children may be too old by then.

The buck stops here! Blame the RM

All the fingers are pointing at the Relationship Managers for the fiasco of the minibond sales. They are the devils. Watch them, put them under the microscope, charge them, sue them. How convenient. And very familiar too. Does anyone want to ask who designed the minibonds, who did the clearance and approved these bonds for sale, who worked out the strategies to target the retirees? When the product is a problem, why blame the salesmen? These salesmen were released into the market to make their sales pitch and conclude deals. The more successful they were, the more they will be rewarded. Come on, this nonsense of going after the lowest rung in the pecking order must be stopped.

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.