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.