11/03/2008

Foreign workers indispensable?

Shanmugam is emphasising on the importance of having foreign workers again, as if they are indispensable to our growth and viability as a country. Yes, I agree, we need foreign workers, at least to upgrade the depleted and poor gene stocks we are having today. Then the question is how many and how fast? We are not a continent like Australia or the US. We are just a little piece of rock. We cannot keep filling this rock with more people. When shall we stop? 5m, 6m, or 10m? And when we reach these numbers, will we keep adding on? Don't get too ambitious about how big we can be. Just like our financial centre, it has limitations because we are just small. I wish I can type this word small in size 1 to emphasise how small we are. Don't get carried away by pushing for more foreign workers and growth and growth. There is a very heavy price to be paid.

11/02/2008

Selling Alaska

Does this tickle your senses and thoughts? The Russians sold Alaska to the Americans for quite a sum of money in those days. By now the money would have been spent and lost. But Alaska still stays, maybe in perpetuity, as a state of America. How much should the Russian price it to make the deal worthy of the land that will be there forever? We have our own equivalent of selling Christmas Island to Australia. Accepted that it was all a British deal and there was nothing we could do about it. The moral of the story is that you do not sell your land, the motherland, away for cash. Cash disappears or becomes worthless, or diminishes in value. The motherland is forever, there, as an inheritance for the future generations. I saw this advert yesterday of this beautiful island called Sentosa Cove. I wish I have the money to buy a unit there. What saddens me is that it is for sale to foreigners. Do we need the cash? Do we need to sell the limited motherland that we have to foreigners for cash, like selling Alaska? Even the Indonesians have better cow sense to lease their lands to foreigner for only 30 years. As a temporary short lease, I have no problem with it. But to sell our inheritance away, my god, what do we have left for our future children? Or are we preparing to migrate to the moon when we have sold off everything?

Selling caustic soda and lehmon juice

There are many trade fairs and pasar malams that provide opportunities to peddle soft drinks. It can be a very profitable franchise to sell caustic soda and lehmon juice with minimal cost and high returns. Of course there are risks involved. Caustic soda is poisonous. What about lehmon juice? Don't have a clue what it is, but as long as it sells, why not? All that is required is to take a few precautionary measures. First, print a 10 page disclaimer, frame it nicely and hang it in the stall. Can even say specifically that caustic soda can kill. Don't worry, no one will be bothered to read it. The next thing is, yes franchise it. Let other people do the selling. And when trouble starts, let the franchisees take the blame. Just point the finger at them and lie very low. Do everything that is possible to put the spotlight on the franchisees, not on the caustic soda or the lehmon juice or you, the originator of the product. This is entrepreneurship at its best. It needs a lot of talent to come out with it. Entrepreneur of the Year Award akan datang.

Gay rights and gay movement

The gays are planning for a demo at Hong Lim to champion their rights, among which is to repeal the law against homosexual sex and their right to live their lives. Our society has progressed quite far in this area and gays are generally accepted as part and parcel of life, with hardly any discrimination or aversion against them. They are accepted in the profession and as friends and colleagues. The question is whether it is a good idea to champion their lifestyle and sexual preference? Would we also popularise incest, after all incestuous relationship is a secret to our success? Or what if someone's sexual preference is for animals? He/she is not harming anyone in particular and the animal may enjoy the intimacy? I think the gays are pushing their luck too far and may turn society against them if they try to make their lifestyle as a glamorous way of life. Better to just live their life without disturbing anyone than to invite people to look at them under the microscope.

11/01/2008

Of greed, corruption, collusion and irresponsibility

Article by WisestSage posted in Singapore Kopitiam. He puts everything about the collapse of subprime loans, minibonds etc in a simple way for all to understand. Greed, corruption, collusion, irresponsible govts and rating agencies are all accomplices in this fiasco. Now it is a case of blame game and see who ended with rotten eggs in the face. In recent months when the subprime-related securities trigger the collapse of Lehman Brothers, many Asians, including Singaporeans, got their fingers burnt. Some 10,000 Singaporeans have lost $500 million in their investments in Minibonds, DBS High Notes, Jubilee Notes, and Pinnacle Notes, some of them becoming worthless overnight. Asians have a reputation of saving habits as they need to save for the old age while most Asian countries do not have social welfare safety net. They inevitably become the victims of the structured products which have been marketed by the greedy bankers and the Wall Street crooks from the west. How come only Asians from Hong Kong, Singapore, and Taiwan are hardest hit by Minibonds, DBS High Notes, Jubilee Notes, and Pinnacle Notes, but none of the western countries is affected? Let me explain why the situation is so dire and dangerous. When the financial shits hit the ceiling fan, I was hoping that the so-called leading economics and financial commentators and opinion makers would explain the situation to the public via the national dailies, the blogs and the TV network. I came across not one article or broadcast that explains the underlying reasons for the inevitable dire consequences. Sure there were articles on the crisis, but they were merely describing the rescue of the largest insurance company in the USA (A.I.G.) if not the world and the amount involved. No explanation whatsoever, as to why only a few days earlier the Fed and the Treasury allowed the 4th largest investment bank, Lehman Bros to fold up but rushed in to rescue AIG with an unprecedented US$ 85 billion. In my various articles published previously, I explained in great detail the corruption within the global banking system and how these financial leeches through fraud and political protection created and amassed a global financial fortune in excess of US$500 Trillion. Let me assure you that this is not a typo error. You got it right. It is not billions but a whopping US$500 trillion. I have been advised that as of the Q2 of 2008, the figure may have reached US$565 trillion. This is a complex subject but I shall endeavour to make it as simple as I can. Starting Point The Ponzi Scheme The crux of the fraudulent Ponzi scheme is the twin pillars of: 1) Fannie Mae & Freddie Mc – the two giant mortgage corporations of USA 2) The Derivative financial tool known as Credit Default Swap (CDS) Once you have a grasp of these two concepts, you cannot but agree that we are facing total global banking collapse. Why? Because the entire global banking system has been built on these two financial pillars! But the system became irreparable in the last 7 years when CDS became the linchpin in the massive expansion of derivative trading and financial engineering. The Mechanics 1. Banks became greedy and were unwilling to earn safe and steady profits from mortgages for housing and commercial properties which usually spread over a period of between 5 to 30 years. 2. Banks wanted massive profits in the shortest period of time and the ability to lend massive amounts and not be regulated as to how to do it. 3. The crooks devised a scheme. It was a simple idea. 4. Banks will provide mortgages to all and sundry. 5. I am going to use a simple example and using small numbers to illustrate for ease of calculation. Thus, assuming the Bank gave out US$1 million to finance mortgages, bearing interest at 10%. 6. The bank then sold the mortgages to Fannie Mae and Freddie Mac at a discount. Fannie Mae and Freddie Mac being Government Sponsored Companies (GSCs) are able to get cheap financing to purchase these mortgages as they were assumed to be “guaranteed by the US Government”. 7. Fannie Mae and Freddie Mac then package these mortgages into all sorts of structured financial products and these were sold to investors (private as well governments). Central Banks hold massive amounts of dollar reserves and they need to find a safe haven for them. Hence, and invariably, Central Banks invest their reserves in US Treasuries and financial “mortgage-backed" products issued by Fannie Mae and Freddie Mac as well as other US financial institutions. 8. With the payment of US$ 1 million by Fannie Mae / Freddie Mac, the bank by law, can lend ten times the amount after keeping 10% reserves i.e.US$100,000. Therefore, the bank can lend US$9 million by “creating money out of thin air” i.e. by crediting the borrowers in their loan accounts in amount of the loans extended. These US$9 million loans secured by mortgages are then sold to Fannie Mae / Freddie Mac again. The cycle keeps repeating and the banks keep creating more and more loans. It was so easy that the banks decided to create dubious loans called “Liars Loans” whereby the borrower need not state the actual income and or ability to repay. 9. As more and more of these loans were created, investors (government and private) demanded assurances that these loans were good for investments. The rating agencies (e.g. Moodys, Standard & Poor and itch etc.) who in collusion with banks, gave AAA ratings to what were essentially junks. This fraud led investors to believe that these financial products were good investments. 10. The rating agencies were only too aware that this scheme needed something more concrete to prolong the fraud and induce the investors to part with their monies. 11. The insurance companies like A.I.G. came into the picture. They were seduced by the idea that if they can insure against risks of accidents, storms etc., they could also insure risks against default by the mortgage holders. Thus was born the financial innovation – Credit Default Swap (CDS). Any financial product with a sound CDS would be rated AAA. It was as good as being guaranteed by Uncle Sam. Assholes the world over, especially central banks, fell for it – hook, line and sinker. 12. The scheme works out like this – AIG sells protection – i.e. in the event there is a default, AIG will pay out to the buyer who buys the protection (the CDS) in exchange for the payment of premiums covering the period of protection not unlike your usual insurance policy. It was easy money for everyone. The banks get to sell their loans and have the liquidity to create more loans. Fannie Mae / Freddie Mac and other financial institutions get the opportunity to repackage these loans / mortgages and sells them to investors with a tidy profit. The investors are happy with their so-called guaranteed returns. The insurance companies, investment banks and other players get their premium income for selling protection. It was old fashion mafia loan sharking and protection business dressed up in modern financial jargon and everyone was too arrogant and greedy to see through the fraud. 13. When loans default and continue to be delinquent, the law (depending on each country) provides that if the loan is in default for 90 days or more, it should be declared a Non-Performing Loan (NPL) and banks must provide reserve to cover the loss. 14. What happened was banks were covering the defaults and kept them on the books for two years or more in the hope that no one would be wiser and interest income from new loans would cover the defaulted old loans – the classic ponzi modus operandi. 15. When the two years default reached critical proportions starting with the sub-prime loans, the fraud began to unravel. Investors began demanding their protection money for the losses arising from these defaults. It has been estimated that the market value of the CDS was in excess of US$60 trillion but the capital of the insurance companies like AIG are only in the billions. It is therefore a physical impossibility to make good the demand for payment for the defaults. 16. If AIG the No. 1 insurer in US and the world is in default, it means the rest are in deep shits. You can take it as a given that no one and no one has good coverage and protection anymore. 17. When there is no coverage and protection, how can there be AAA ratings for new issues of such financial products? Fannie Mae/Freddie Mac etc. cannot package these products for sale to investors and if they cannot sell, they will have no funds to buy more dubious mortgages from corrupt and fraudulent Wall Street banks. With no additional funds, these crooks in JP Morgan Chase, Goldman Sachs, Citigroup, Lehman Bros., Morgan Stanley, Merrill Lynch, Bank of America, UBS, Barclays, HSBC, Deutsche Bank, Credit Suisse, etc. will have difficulty extending new loans. The “Musical Money Chair” will have to come to a complete halt. The entire system gets into a gridlock. Given the above explanation, can the US government and the Fed continue to bail out banks and other financial institutions? When US is in deficit in both the budget and current accounts, where else can they get the extra monies except by creating out of thin air (virtually by keying digits into computers) or print more dollars. If you are a sovereign lender or a private hedge fund, knowing the situation, would you lend more monies to the US Treasury knowing that each dollar issued (whether digitally or in printed notes) are not worth the value stated therein. These dollars ARE NO BETTER THAN TOILET PAPER. When the Asian investors become the insurers of the structured products like Minibonds, you know why they have been conned. It is inevitanle that they would lose their pants through the investments in structured products like Minibonds, DBS High Notes, Jubilee Notes, and Pinnacle Notes. Have you wondered why MAS and other financial regulators allow these structured products to be marketed to the naive general public? If they are not sleeping on their jobs, what are they doing all day long?