The 1000 points plunge in DOW on Thursday... This is the last posting on the recent financial market turmoil. I've been pouring through the news reports and various data over the weekend to get a feel of what is going on. There is a emergency rescue package put up by the EU to be announced later on Sunday. This thing will either work and calm the markets or it will intensify the turmoil if deemed insufficient....if it gets bad, it can get really bad very fast and the effects will be long lasting.One of the interest things that happened during the market turmoil last week was this 1000pts plunge in the DOW followed by a recovery on Thursday. I was looking through various explanations including software bug, fat fingers pressing the wrong key, fast computer trading etc. There is an SEC investigation that will get to the bottom of it. But what started it?...The market was relatively stable for a few hours of trading after the open.One of things I found out happened before the big plunge was a CNBC interview of highly respected PIMCO CEO El Erian[Wiki page]. PIMCO is the biggest bond fund in the world and Bill Gross,the co-founder and El Erian are considered to be the best in the business. PIMCO has successfully has navigated every crisis very well for its investors - many attribute this to its strong team making very accurate assessment of the macro economic picture. Here is the El Erian interview:El Erian gave a very thorough and clear explanation of whole European situation. Linking the risk to the banks, explaining how credit can freeze up like in the subprime crisis and one really gets and appreciation of how severe the situation is. You notice at the start of the interview the DOW was down a mere 78pts. By the time he finished talking, the DOW was down triple digits -115pts. Shortly after that the DOW declined in an accelerated fashion followed by the 1000pts plunged. I'm not saying El Erian caused the plunge. The actual drop probably has something to do with computers overruning the system with sell orders when there are insufficient buy orders. Maybe it is just coincidence he spoke just before the market rolled over. What is important is his message. The global financial system with its high level of debt is very fragile and this economic recovery faces many headwinds. While this 1000 points drop was likely caused by computers and high speed trading, the next time it happens the causes may be economic and the problems here to stay. While things look sunny with the govt finally willing to up the CPF contribution by employers a few weeks ago, in today's fragile global economy the outlook can change in a matter of days. Why? In the alchemy of finance, they have created the illusion of wealth from debt ...you're living in a HDB flat worth $600K only because someone else is willing to borrow that amount from the bank to buy it from you. ..your wealth is determined by somebody else's willingness to go into debt. It is completely unwise to have our ability to retire linked to HDB flats which the govt now tells us are 'investments'. By tying our funds meant for retirement in HDB flats, when something goes wrong, we not only see our wealth diminish but our ability to retirement disappear at the same time. While we may not have the political means today to bring about changes that will secure our future, we have to be wary of the system we live in and think hard about our future. Minister Mah comes out to say that flats are affordable by whatever metric he uses to measure it...at the end of the day it requires a person to service a debt over 2-3 decades and it is this long exposure to a high level of debt that poses the risk. We have seen 2 crisis in 3 years and 3 recession in the last 10 years. In the previous decades when people had 'lifetime employment' it required only 7-10 years to pay for their homes. The feeling of insecurity among Singaporeans is not something imagined. .Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Web of Debt in Europe.... The above picture is from NYTimes[Link]. This picture along with Paul Krugman's article on Europe[Link] appeared in the Straits Times today.Default of any country is not an option because of the inter-linkages. They either stand or fail together. A sovereign debt default will mean govts will have to bailout the banks holding the debt unless they are willing to see the banking system collapse. So they are better off monetizing the debt. Another approach is for the ECB to guarantee the debt if the countries are willing to accept certain fiscal conditions laid out ....meaning they will monetise it only when countries can't service it...that will buy plenty of time. Given the size of the debt, there aren't many ways to solve this. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Debt and Delusion Part 2 UPDATE: It appears that the EU members have woken up to the gravity of the situation and are treating the situation as an emergency. Here is a report from The Irish Times possible measures to monetize the debt[Link]. The risk is very high and if they "underwhelm" the market doing too little, they will be force to do a lot more but the damage may be so severe by then, it will not help. Monetizing debt is a bad solution but probably the only solution that will bring about confidence. They have to overcome their aversion to this, get it done to buy some time then put in regulation, rules and processes to ensure better fiscal discipline among its members. That was what the Americans did - if there is a fire, save lives first then talk about fire safety regulations later....Debt and delusion part 1 here[Link].In March 2010 I wrote about an interesting book by Peter Warburton about how the high debt levels in the economic system which will lead to something no less than a slow collapse and complete change of the existing financial system. In 2004, Greece was hailed as an economic miracle when it was picked to host the Olympic Games. It was the comeback kid, the epitome of higher living standards brought about by membership to the EU. Today Greece threatens to fall apart under the austerity measures imposed on it by the IMF and other EU members. But it not just Greece that is problematic but a number of countries in the Eurozone known as PIIGS (Portugal, Italy, Ireland, Greece, Spain) that threaten the global economy with a new contagion.In recent days we are seeing market turmoil similar to those that occurred during the subprime crisis. Fears of troubles in Europe spreading has caused a massive flight from risk as investors flee from equities and commodities to the 'safety' of the US dollar and US treasuries. This type of fear has a way of dissipating quickly resulting in large market rebounds and recovery. However, you have to fear that exceptions can occur such as during the Asian crisis when the financial crisis turned into riots and collapse of govts - some of which was brought about by speculators who created a self-fulfilling prophecy brought by spreading fear and panic throughout the crisis. We are in an extremely dangerous situation because the recovery is fragile and if it is derailed, we will be in for a long haul if we get into a double dip recession. The debt problem in Europe is extremely serious because the sovereign debt that has been downgraded is held by banks throughout Europe. Credit is freezing up and there is little time left. The policy options are very limited for Europe. If you read Peter Warburton's book, there is only one way out. I'll talk about this later. The capital markets have been completely destabilised in the past week. If Europe acts too late, the consequence will be dire. Perhaps before last month, there was some hope that the global economic recovery can lift Europe out of its sovereign debt mess. However, speculators have destroyed this hope in the past week. The falling Euro and globals stocks, brought about in part by speculators can bring a recession by undermining investor confidence. Either the Europeans can't get it done right and the EU falls apart or the make the only right move. If they get it wrong, it will perhaps be a blunder that exceeds the decision to let Lehman collapse. What do the Europeans need to do? .....Here is a good article on where they are now and what the options are:[Link]This is taken from a transcript from of a press conference in March 2009 given by ECB's Trichet[Link]:"Question: Mr Trichet, two questions, please, one is: Could you again elaborate a bit more on your or the ECB’s problems with zero interest rate policy; the arguments which would prevent the ECB from lowering the main refinancing rate to zero. And secondly, another question on the non-standard measures: If you cannot tell us what measures the Council would prefer at the moment, could you at least give us a sort of time frame for when a decision on this might take place. Or do you think you have unlimited time to decide when to pursue those non-standard measures, because time is a bit short at the moment, is it not?Trichet: On your first question, time is short and that is why we are taking important decisions. We have taken important decisions in the past few months and we have taken important decisions today with commitments that go beyond the end of the year. As regards your second question on non-standard measures, as I said we are in discussions. I am not ruling anything out. We are not pre-committed to anything. When the time comes, you will know what we have decided. And I shall give you regular updates at our press briefings, but I do not pre-commit to any particular time. In any case, we have proved that we have been able to take decisions at any time when necessary including in exceptional unforeseen circumstances. And, as I have repeatedly said today, uncertainty is the mark of the time. With regard to why we think that zero interest rates would be very inconvenient, I will not elaborate any further. It is clearly an assessment that we have made."Remember in March 2009, things were quite hopeless all over. There were fears that US banks were insolvent, the global economy was in a severe recession. The focus was not on European sovereign debt although it was one of the major issues. At that point in time, the US and Britain decided to take a risky strategy of quatitative easing i.e. printing money and ECB was considering the same move[Link]. Within a month, the capital markets recovered and today we have some sort of economic recovery. Based on the transcript in March 2009, the ECB was considering some 'non-standard' policy moves. However, because the US & UK started easing and capital markets recovered. This recovery masked the European problems until the early part of this year. Things have come to a crucial juncture when market instability is going to spill over into the real economy. The ECB now has to reconsider these 'non-standard' policy moves e.g. print money to buy govt debt. They have to act this weekend or face further damage to confidence and risk of derailing this fragile economy. Also, because markets are heavily oversold, measures if announced this weekend will have the intended impact. In the absence of inflation and deflationary pressures in many EU countries forced to cut budget deficits....quatitative easing makes sense. It is a bit silly to be forced by further market deterioration to make this move. The wealth wiped out from global markets must amount to several trillions while they only need to buy back hundreds of billions of govt debt from the banks.Yesterday, the STOXX 50 Index that track stocks of major European companies fell 4.26% in one day. They have fallen 16% in less than a month. So there is no more time left as confidence will completely shattered if nothing is done...any more dithering and the EU will be forced off the edge and when that happens, nothing they do will work.Quantitative easing is a strategy to forestall the inevitable and buy time. If they don't do it, they will be worse off with a bigger mess to that cannot be fixed for years. However, there is some lingering political stubborn-ness on the part of Germans who feel short-changed that they have to bailout weaker nations[Link]. But the simple fact is German banks are the biggest holders of European sovereign debt and they will be perhaps the most to lose if there is no resolution of the crisis. We have seen what happens next if decision makers delay actions in such situations. History is very clear on this - we saw it during Asian Crisis and the recent subprime crisis - that the markets will force govts to act even more drastically. Govts have to put aside worries of moral hazard and politics to get this done. Looking how the Europeans bickered, dithered and quarrelled just to cough out $110B to bailout the Greeks, optimism that they will do the right and logical thing make have to be put aside. The worst case scenario is they continue to bungle and drag the rest of the world down with them in the coming days.Warburton's pessimistic view is at the end of day there is no way out but quatitative easing may lead to inflation and ultimate deterioration in living standards ...but right now there is no choice. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Penang and Selangor pursue FOI (Freedom of Information) Act http://www.theedgemalaysia.com/political-news/165123-penang-to-pursue-foi-legislation-despite-legal-obstacles.htmlThe FOI empowers ordinary citizens by allowing them to obtain information from govt as long as national security is not compromised.Most developed countries have the FOI to ensure that there is competency, transparency, and accountability in govt. Without FOI, govts can release selective and misleading information that lead ordinary citizens to wrong conclusions. Secrecy is often associated with dictatorships and totalitarian govts whose main interest is to control the populace for its own benefit rather than the benefit of ordinary citizens.In Singapore, instead of FOI, we have the draconian OSA (Official Secrets Act)[Link] which limits the communication of information.A transparent and open govt has nothing to hide and should be willing to adopt legislation that allows citizens to request for information.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Healthcare burden worsens inequality in Singapore.... Saw this para in the TOC article on the recent 1% CPF increase:"Singaporeans withdrew a total of S$660 million from their Medisave accounts to pay for the direct medical expenses incurred in hospitals, clinics and other healthcare facilities last year.This was an increase from the S$590 million withdrawn in 2008.These figures do not include withdrawals for MediShield and ElderShield premium payments which were S$745 million in 2008 and S$875 million in 2009. 52 per cent of the withdrawals in 2009 were to pay for the members’ own direct medical expenses. The remaining withdrawals were to pay for family members: 17 per cent for spouses, 18 per cent for parents, 12 per cent for children, one per cent for grandparents and others”. (“S’poreans withdrew total of S$660m from Medisave accounts in 2009“, CNA , Apr 26)A years ago, I chatted with a taxi driver who was taking me to work during the rush hour. It was one of those days when I couldn't get up in time to take bus and had no choice but to take the taxi. The cab driver was very friendly and told me he worked close to 14 hours a day so that he could cover the morning and evening rush hour. It was tough but he had no choice as he was badly in need of money. According to him, his wife was bed ridden with diabetes. She lost both legs and her kidney had failed so she needed dialysis. Due to diabetes, his wife also lost her sight. His daughter was also suffering from diabetes. He also told me that his family situation was so pitiful, they once appeared on a documentary and were featured news paper article. He told me he had to borrow using credit cards and eventually sold his home to pay for the medical expenses. I didn't get all the details about his income (taxi drivers earn about $3-4K?) and what type of home he was staying in. However, the financial burden for medical treatment can be heavy (read this case about another family that had to sell their home[Link] ...another about a family whose savings are wiped out by medical expenses[Link]).The PAP govt insists that Singaporeans shoulder as much of the burden for medical care as possible and they carried this idea to the extreme, making Singaporeans shoulder the highest % of medical expenses among citizens of developed countries: Taking care of yourself and your family may sound like a sensible idea except that Singapore has the highest income gap in developed world. The cost of good medical care is driven the richer segments of society who will naturally demand the best private care. Because of the income gap, medical cost has been rising much faster than average income and for some in the the lower income bracket it is now unaffordable. The govt has allowed Singaporeans to use Medisave for treatment in Johor[Link] while Singapore is promoted as a world class medical hub for rich foreigners[Link]. About 400,000 adults are uninsured[Link] and face the risk of high medical costs. Without universality of medical coverage, the high burden of medical is passed other family members to keep govt's expenses down. The entire system worsens the inequality in our society by making medical care a heavy burden for those in our society less able to shoulder it.This is an area where sensible things need to be done such as providing universal coverage. For those who are too poor or unemployed, the govt has to step in to help with the insurance premiums. In some countries, the insurance premiums for govt schemes are based on income to further narrow the inequalities buildup in the society. While PAP ideology prevents them from adopting such schemes, it is not clear how long Singaporeans, some of whom now have to seek treatment in Malaysia, will continue to accept the system and support the PAP. One good thing about being a developed country is that the citizens can stop worrying about something as basic as getting medical care....that is unless you're in Singapore where the burden of healthcare actually becomes heavier for ordinary citizens as the nation becomes more affluent. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Minister Balakrishnan scolds Al Jazeera and bloggers ...Part 2 TOC has replied to Minister Balakrishnan's accusations[ TOC Part 1 & Part 2] of "propagating these falsehood". Please go through TOC's findings and judge for yourself. The truth is sometimes like an onion - it comes in many layers. I went through the comments in my last posting and a few people say its the couple's fault they end up homeless. It is almost always true that when people reach the point that they need to seek govt help, you can examine their lives and find that they could have done much better for themselves. This, I feel, is irrelevant because if everyone manages their life and finances well, nobody will need to go to Minister Balakrishnan's MCYS for help and he can just shut it down. The only relevant questions are whether they really need govt aid and whether, as a society, we want to help them or not. If the govt does not want to render help, there is no point examing their lives to pin the blame on the individuals. At the center of the truth onion are very simple facts : an unmarried couple wants to get a rental flat which is all they can afford but are prevented from doing so by various rules which they cannot overcome so they ended up it a very difficult situation withut a home."The people we have who insist on staying in beaches and parks are not first timers and not people who have bought their first flat or first rental flat. These are people who have almost always sold their second flat or a third flat, have unfortunately dissipated the subsidies and cashed them and now have run into problems. .Members would have faced this problem which almost become emotional blackmail" - Vivian Balakrishnan[Link].You have to read what Minister Balakrishnan said a few times to fully appreciate what he is getting at. So most of our homeless people actually emotional blackmailers? They are blackmailers because they had gotten into financial trouble and were forced to sell their homes to repay creditors? They are blackmailing PAP MPs with the sadness of their situation? That the minister see people losing their homes due to financial difficulties as a form of blackmail says a lot about govt attitude towards those in need.Singapore is a city-state and like many cities housing is expensive. Because land is scarce in a city, the free market can never bring forth a solution that results in everyone being housed. That is why you find some form of govt/public housing in cities around the world. In Singapore, the majority of the people stay in public housing. Within this public housing system, we have rental flats which is suppose to be the ultimate housing safety net. The govt like to say the people staying in rental flats enjoy subsidies (read the minister's comments) i.e. market subsidies. However, these 'market subsidies' are needed because there is a wide income disparity - which results in a gap between what the poor people can afford and market rental. When the subsidy is large, it is not because the govt is generous but because we have big disparities in income. There are roughly 4500 people in the queue for rental flats. The total stock of rental flats is 42,000 but will increase to 50,000 in 2012 based on current HDB plans. The waiting time for rental flats is 18-30 months long. As the cost of living increase and income gap remains, the demand for rental flats will go up. Some time in the early 90s when we were heading for the Swiss standard of living, demand for rental flats fell and near 100% home ownership was believed to be attainable. But today, we after another 2 decades of GDP growth, we see poverty rising and demand for rental flats increasing because our income gap ballooned and that is what drives the demand for rental flats. You have 2 solutions to fix this problem - (a) reduce the income gap (b) build more rental flats to match the genuine need for these flats. HDB decided to build more rental flats but not enough to meet the demand. So they decided to implement various rules to kick people out of the queues[HDB rule change for rental flats]." HDB will continue to permanently debar those who have enjoyed 2 housing subsidies. This is a current criteria, and we’ll maintain that. We will also retain the 30-month debarment for those who have just sold their flats. " [Link]I'm all for rules that disqualify those who are rich and have immediate alternative solutions to rental housing. But barring people who sold their flats for 30 months and permanently barring those who purchased flats twice from HDB just doesn't make sense. How would you know when you bought your 2nd flat from HDB that your business will fail or you will sick and have to use all your money for treatment? It is one of these rules that hit the homeless couple at the beach. Even if you are eligible, you have to wait for 2 years before you're assigned a flat...so what do you do in the meantime? Maybe stay at the govt shelter but shouldn't the govt build enough rental flats so that these people have a proper home?The govt has adopted an approach to economic development with includes a policy of importing cheap foreign labor that has led to great disparity in income - the highest in the developed world. It is this income gap that drives the need for rental housing and housing subsidies. Instead of meeting the genuine demand for rental housing, the HDB under-supplies leaving those with very real needs to find other solutions - those who are lucky have other family members who stand in for the govt to give help ....others end up at beaches, void decks and govt shelters. Why is there a 2 year queue for public housing for those with a real need when resources are allocated for foreign workers hostels so that foreigners have a place to stay?This is not a problem the govt cannot fix. The govt has more than enough resources to do this but is limited by ideological belief that 'welfare is a dirty word' and 'subsidies are bad'.....but these subsidies are neccessitated by the huge income gap which is a function of economic policies adopted by the PAP.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Minister Balakrishnan scolds Al Jazeera and bloggers "The government then made some checks and found a different story. The man in the video had made a tidy sum of over S$220,000 from the sale of three flats. Meanwhile, the woman still owns an HDB resale flat with her ex-husband. She was also getting financial help from the South West Community Development Council. Dr Balakrishnan said: "Despite these circumstances, the social workers and the FSC then offered sheltered housing for this couple. However, the couple rejected the offer and other services offered by MCYS. “This is a clear example where a foreign media has failed to ascertain the facts. Some irresponsible websites have also caused these falsehoods to circulate widely on the internet. Now that the facts are out, let us see whether those who have been propagating these falsehoods have the courage and the honesty to set the record straight. " - CNA, Govt takes Al Jazeera to task for misreporting on homelessness casesHere is the 'misleading 'video:You will note that in the video, Al Jazeera explained that they were refused an interview with the esteemed minister. But do watch the video and listen to the Al Jazeera report line by line. Can someone tell me which part is 'misleading'? All Al Jazeera reported was that there are people in Singapore with difficulty getting housing due to various rules and have resorted to camping at the beach. Perhaps Minister Vivian is saying that Al Jazeera is misleading because it left out a few facts ...facts that only the govt can know about and Al Jazeera has no access to because the esteemed minister refused to be interviewed by them. But really lets look at the facts mentioned by Minister Balakrisnan:1. "The man in the video has made a tidy sum of over S$220,000 from the sale of three flats". Al Jazeera could never have known that since they have no access to govt records. But is the minister saying because the man had once made money, he should be denied a rental flat? Actually I don't know whether he used the money for drinks, women, business, debts, gambling, medical bills or had it cheated from him. That is not the issue. The real issue is the HDB has a rule that prevents people who have sold a flat from joining the queue for rental flats within a certain period (6 months?) regardless of whether they sold it because their business failed or they had to do it to pay off loan sharks. I like what Ravi Philemon said in the video about giving 2nd chances to people. You can alway examine a person's life to explain how he end up in the state he is in and put the blame on him for his plight (why didn't he do this and that to escape poverty and so on) just like what Minister Balakrisnan did to pull out records to show that the man once had money but giving help is about giving 2nd chances to people so they can better their lives...2, "The woman still owns an HDB resale flat with her ex-husband". Isn't it obvious this woman has fallen through a crack in the rules? You cannot get a rental flat when you are a co-owner. The logic being that you can stay in the flat you co-own. However, this woman co-owns a flat with her ex-husband and it is obvious that it is impractical for her to stay in the flat although she co-owns it. It was also mentioned that the couple rejected help for 'sheltered housing'....so this was to only alternative left for them? ..govt shelters. That only proves Al Jazeera's point that these people can't get homes!!!! Hmm....I wonder what is the reason for them wanting to camp rather than stay in the govt shelters? But what the couple wanted was a home....a shelter is not a home.We see very few homeless people in Singapore not because everyone can afford a home or can rent one - the rental queue is several years long. Have you ever wonder how is it possible that Singapore has the most costly public housing in the world, the biggest income inequality in the developed world and insufficient rental flats yet you don't see many homeless people. So why are there so few homeless people in Singapore? Because it is illegal to be homeless. If you're found camping without permit, you can get jailed[Link] or forcibly evacuated and taken to a shelter so that the problem can be hidden away....so the homeless cannot afford to be visible out of fear of being caught. There is nothing misleading about the Al Jazeera report. The only thing misleading about the whole situation is the false impression created for visitors that everyone in Singapore has a home and that poverty does not exist here.-----------Govt takes Al Jazeera to task for misreporting on homelessness casesBy S Ramesh Posted: 27 April 2010 1552 hrsGovt takes Al Jazeera to task for misreporting on homelessness casesSINGAPORE: International news agency, Al Jazeera, has been taken to task for not checking its facts in its report on the homeless in Singapore. Speaking in Parliament on Tuesday, Community Development, Youth and Sports Minister Vivian Balakrishnan stressed that homelessness is a complex problem and that the government will continue to enable people to be self-reliant. A video titled "Government Policies Force Some Onto The Streets" was produced by Al Jazeera. It featured a couple camping on the beach, claiming that they had been homeless for nearly two years as a result of divorce proceedings.The government then made some checks and found a different story. The man in the video had made a tidy sum of over S$220,000 from the sale of three flats. Meanwhile, the woman still owns an HDB resale flat with her ex-husband. She was also getting financial help from the South West Community Development Council. Dr Balakrishnan said: "Despite these circumstances, the social workers and the FSC then offered sheltered housing for this couple. However, the couple rejected the offer and other services offered by MCYS. “This is a clear example where a foreign media has failed to ascertain the facts. Some irresponsible websites have also caused these falsehoods to circulate widely on the internet. Now that the facts are out, let us see whether those who have been propagating these falsehoods have the courage and the honesty to set the record straight. "Homelessness or potential homelessness is a universal threat all over the world.The question is how best to fix this. “In Singapore, we have given housing, cheap affordable rental housing as well as heavily-subsidised first-time entry into home ownership. “The people we have who insist on staying in beaches and parks are not first timers and not people who have bought their first flat or first rental flat. These are people who have almost always sold their second flat or a third flat, have unfortunately dissipated the subsidies and cashed them and now have run into problems. “Members would have faced this problem which almost become emotional blackmail." Meanwhile, Al Jazeera has ceased to operate its channel on mio TV. This prompted Nominated MP Viswa Sadasivan to ask about the talk that this is linked to the report on the homeless. Acting Minister for Information, Communication and the Arts, Lui Tuck Yew, said: “On the speculation that recent critical or negative reports by Al Jazeera were the reason why the channel was taken off mio TV service, this is unfounded. In a report by TODAY, Al Jazeera itself was quoted as saying that "it was a 'mutual' decision between Al Jazeera and SingTel for the broadcaster to drop out of the latter's pay TV service." Mr Lui noted that Al Jazeera's contract with SingTel was coming to an end and was looking into other distribution avenues in view of its low subscriber households. - CNA/vmThoughts of a contented Singaporean who has lived in Singapore for 40 years. Market in panic and the real dangers ahead..... UPDATE 29 April 2010 6:08AM: I will get back to writing about Singapore politics in my next posting after I quickly go over a selected number of observations to explain who our bourse is about to have the next leg up over the next 2 weeks. The DOW Jones Index rose 53 points yesterday despite the fears surrounding the European sovereign debt crisis. Not only that, during the trading session a third European country, Spain, was downgraded but that didn't cause the DOW to move down - the triumph of liquidity over fear?. The US Fed also gave assurance in its latest statement that its easy money policy is here to stay. In addition, if you look at yield curves, they are shaped such that US banks will be able to generate good profits going ahead so they are likely to rebound after they were sold off due to Goldman's fraud charges and regulatory changes. In Asia, Chinese stocks hit a 6 month low due to continuous and heavy handed govt actions. This pulled down the Hong Kong HSI (Hang Seng Index) for the last 2 weeks - if I'm not wrong, the HSI should recover as soon as today given the tremendous pressures it faced over the past 2 weeks has been dissipated and I believe that will further add to favorable factors that will move our markets up. Remember... after fear, comes euphoria and after euphoria comes the hang over....we will be seeing some euphoria in the coming days after the fear of the last few days/weeks following that perhaps a hangover.UPDATE 28 April 2010 5:06PM: I took a quick look and saw that the European STOXX 50 has fallen at this point in time by another 2.6% that is in addition to the 3% fall yesterday. Terrifying isn't it? Will the market rebound quickly within 1-2 days like I predicted or is this the start of something sinister? We will know very soon. When I woke up early this morning, I turned on the TV and saw the DOW Jones Index has dropped 213 points due to the problems with the debt of european countries. While the market has been wary of these problems, the Standard & Poor ratings agency cut the debt of Greece to junk causing a panic in the markets. These ratings agencies have a way of creating self-fulfilling prophesies - this downgrade has badly affected Greece's ability to service its debt as it causes borrowing costs to escalate. While Greece is just a small economy with 11M people, other countries in PIGS (Portugal, Ireland, Greece & Spain) have similar problems with their sovereign debt and Greece threatens to be the start of another major financial contagion. Before I discuss Greece further and the near term direction of the markets, I want to talk about a few other problems in the global economy.In a posting in March 2010[Link], I wrote about the global economic problems being masked by the efforts of central banks around the world that pumped money into the system to stimulate it and low interest rate that has inflated assets around the world. The heart of the problem is too much debt and that problem has not disappeared. Greece is just one facet of the real problem. Many companies around the world are highly leveraged but stayed afloat because it became easy to borrow again after the easing by the Fed. The low interest rates also drove many Singaporeans to take on debt to purchase private property. To see the effects of liquidity and credit withdrawn, we only need to look to China which as in recent weeks imposed curbs on bank lending for property and a whole host of anti-speculative measures. The red hot property market there corrected sharply overnight.In another post in March 2010[Link], I said I believe the market which is driven by liquidity will peaked when liquidity wanes regardless of the economic recovery. You just have to look at the Chinese market that peaked in July 2009 to understand why this is the case - that was when the liquidity peaked and the Chinese started to withdraw their stimulus so while the global economy picked up and Chinese GDP growth and exports recovered, the Chinese stock market never gained traction.So where are the markets headed? My earlier post talked about a peak in May 2010 (best estimate 12 May 2010) based a number of models I use to track liquidity. The Greek problems was the focus of markets in Feb 2010 causing a correction. Because the system is flush with liquidity the market snapped back and we saw the DOW hitting new highs. The question is what we are going to see in the days ahead.Before I go ahead to describe what I think will happen, I have to remind everyone that I'm not a professional in the financial industry so take what I say with a pinch of salt. The situation is clearly a very dangerous one with non-negligible possibility of a serious contagion so you can expect investors to reduce their exposure which might turn out to be the best thing to do given markets are not too far from their recent highs.I will stick my neck out again to peek into the future and for sure, one day I'll get it wrong and my neck will get chopped but my job don't depend on this and it is all for fun...and like I said in my previous posting, markets are unpredicatable most of the time but we are not in 'normal' times .We can discuss how it is done later:1. Despite the shock and panic in the markets at the downgrading of Greece, there were earlier expectations that it will downgraded as part of the unfolding saga of events surrounding its massive sovereign debt (US$300B). Recall we already had a correction in Feb 2010, do you remember what it was about? It was about Greece and fears that it might default....Greece's immediate problem is US$16B of debt that it needs to restructure in 19 May 2010. As markets rose in March 2010, the Greek problem fell into the background as Greece negotiated with IMF and EU partners for a rescue...along the way there were protesst in Greece, standoff between govt and unions and so on...messy.2. Many investors and fund managers keeping an eye on Europe probably stayed out of the market since Feb 2010 fearing events like the downgrade of Greek debt.3. The downgrade of Greece takes the problem from 10 to 100 on the minds of investors. There is little doubt that Asian markets will open down. ADRs and ETFs indicate they will drop between 2% to 3%.4. Note that Greece's problem was massive all along (US$300B) and could never have been solved without external help. So did it matter if it was downgraded? Greece clearly wasn't going to hold up its original debt grading of BBB+. Because the Euro fell sharply in reaction to the downgrade, EU countries will act with greater urgency to get this resolved.5. While the market panic is intense, markets will find the bottom quickly. There is enough liquidity for this market will rebound within days (or even after 1 day of drop). My belief is this one is different from what happened in Feb 2010 when the market fell and stayed down over several weeks. Because this is the 2nd round, market participants are wary and have already understood the Greek debt issue ...this will not drag on for weeks by uncertainty.6. Going through my models and all the data I have, my prediction is the market will rebound very quickly (next day?) despite the heavy selling that we will see today. If it drags on for more than 3-4 days and the DOW goes down another 2-3%, I'm probably wrong this time and we are headed for something more sinister and painful.7. If all goes according to (6), we should see a peak in May 2010.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. What the next General Election is about.... There is plenty of speculation on the date of the coming GE. The next GE has to be held by Feb 2012 but the govt usually times it such that it is held earlier when 'the ground is sweet'. It is likely to be within the next 9 months and the 1st possible window is in Sept 2010 after the YOG. While the PAP leaders probably already have the date and backup dates in mind, the opposition parties are left with the disadvantage of having to allocate limited resources without knowing when actual date is. Many have started their walkabouts in areas where they expect the most heated election battles to be fought. Based on various accounts, the membership in opposition parties has increased and this will be the most widely contested election in recent years.Unlike other countries, our media does not conduct opinion polls to track the support level for the govt so the electorate is an uncertainty. One thing I'm quite certain about is the support for the PAP among the younger voters has declined considerably compared with 4 years ago when the last election was held. 4 years ago, if you sit with a group of young people, you may sense some dissatisfaction among them but they were still willing to give the govt some time to bring about positive changes and 'remake' Singapore. These days, it is hard to miss the frustration and anger among this group of voters. The anger and frustration come from very real problems such as rising cost of housing, overcrowding, increased competition from foreigners and work stress. It is not the problems alone that cause this frustration but the PAP govt denials and refusal to solve them add to rising anger. When HDB prices escalated, Minister Mah's approach was to deny they are expensive insisting that they are affordable instead of fixing the problem. The PAP denied any negative impact of massive foreign influx asking Singaporeans not to be 'small minded' and blamed Singaporeans for not being able to integrate well with foreigners[Link]. It is very clear that if the PAP govt is voted in without significant opposition representation, it will be more of the same - the much need changes that many Singaporeans look forward to will not come.The PAP and the Singapore media are very good at portraying the alternative views and opposition parties as something from the fringe. The PAP is mainstream and all else are ill considered wild ideas that are unworkable . After years of conditioning many Singaporeans find it hard to think outside the framework the PAP cleverly uses to make its ideologically driven ideas acceptable to Singaporeans. It is actually the PAP that is non-mainstream and extreme in its policy making - constantly passing the risk and financial burdens to ordinary Singaporeans to create an environment favorable for govt-linked businesses. Its policies created the highest income gap in the developed world and a growing underclass struggling within our society. I'll go through one or two examples to illustrate this and later discuss why the need for change has become urgent.2 decades ago, Singaporeans were told there was a need to bring in foreign expertise lacking in our workforce. That was the start of the Foreign Talent policy which morphed into a totally different animal today. In the past few years, the PAP govt opened the floodgates to cheaper foreign workers mainly from China and India for all types of jobs to pander to the demand of businesses here. The large number eventually stretch our infrastructure and caused our housing market to overheat. In terms of numbers per capita no other govt in the world even come remotely close to what the PAP allowed into Singapore in the past 5 years- the only countries with such huge influx are middle eastern states where the indigenous population sits comfortably on top of imported labor not compete against them for a living. It is not enough for the PAP pursue this policy that makes life tough for Singaporeans, they have to invent justifications that put the blame on Singaporeans for large influx - Singaporeans are too fussy to take up the jobs, fertility rate is too low and so on. Most of these are bogus, for example the low fertility rate of Singaporeans today has nothing to do with the need to import adult workers today because our current workforce was born 20-40 years ago when the fertility rate was much higher. The low fertility rate today can only be fixed by importing babies or workers 20 years from now. The real reason, I believe, for the huge influx is the PAP has run out of ideas to keep our GDP growing and resorted to opening the flood gates to cheap workers as a brute force approach to growth through population expansion. Many ordinary Singaporeans are made to suffer the consequences of depressed wages and greater competition. Our already large income gap got worse and we are seeing a rising underclass among the bottom 30% of our population.The PAP approach to transport, healthcare and education is to keep its own expediture low and get Singaporeans to shoulder as much financial burden as possible. If the income gap in Singapore in is low, the approach may actually work. However, we with our income gap, it means that much of these resources/services, say healthcare, are allocated to those who are able to pay while those need it most from the low middleclass and below have to suffer very high financial strain. The COE system means that a car ownership may be given to a multi-millionaire's son for dating while a lower middleclass father of 3 with a disabled parent cannot afford to own one. The approach to make each Singaporean shoulder his own healthcare cost might work (although not well) if the income disparity is narrower however with the huge income gap, the top 5% can drive up cost by demanding the best most exclusive care while the middleclass are finding it harder catch up with the rising cost. This cost spiral is worsened by the PAP govt's aim to increase profits of the healthcare sector by bringing in rich overseas patients - if you go to a govt restructured hospitals such as Changi[Link to advertisement to market to foreign patients], you can find international health services offering healthcare to foreigners while there are insufficient beds for Singaporeans[Link] and the high cost of treatment has forced some Singaporeans to seek treatment in poorer developing countries such as Malaysia[Link]. The same minister responsible for this situation once suggested that Singaporeans send their aged parents to nursing homes in Malaysia because the cost of nursing homes in Singapore has escalated beyond what many can afford[Link] due to the scarcity of land....yet no PAP leader has ever suggested converting golf courses that occupy close to 1400ha of land, the equivalent of 2200 football pitches[Link] to hospitals for the sick, public housing for the poor and nursing homes for the old because our elites enjoy hitting a ball into a hole.We cannot continue with the current policy directions of the PAP govt because the income gap grown to the point that makes many of the PAP policies unworkable i.e. a large segment of the populace will be worse off. We cannot expect any change from the PAP to bring about more balanced policies because their interests are diversified beyond that of ordinary Singaporeans to a complex network of business interests linked to the power-elites in govt. Balance in policy making will come only when the interests of ordinary Singaporeans are more strongly represented in parliament. The opposition parties offering alternative ideas are not taking us to the fringe but towards the center from the fringe where we are now located.15 years ago, Singaporeans accepted the semi-authoritarian govt because other asian countries were either under strongman leadership (dictators) or military rule. Singapore was ahead in terms of political progress. However, after the Asian crisis, countries like South Korea and Indonesia became full blown democracies almost overnight and Singapore's authoritarianism start to look more out of place. The PAP made very weak attempts to address this by 'opening up slowly' (read very slowly, at a pace that ensures PAP's hegemony). In the previous elections 33.3% of those who had the chance to cast their votes, voted against the govt but the GRC system resulted in this group of people being under represented in parliament. My belief is this 33.3% has probably grown to 40% given more people have felt effects of various policies first hand in recent years. The PAP will resort to its usual undemocratic pork barrel politics promising expensive estate upgrading to those who vote for them. They know that Singaporeans work for decades to pay for their homes and estate upgrading which pushes HDB prices up in upgraded estates will attract votes despite the implementation of policies unbeneficial to ordinary Singaporeans. Singaporeans have to look beyond upgrading as a carrot and understand the long term consequences of current policies to make the right choice. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Google Publishes Government Requests.... Google has published the number of requests for information from governments around the world[Link here best viewed with Google's Chrome Browser] from July to Dec 2009. There were 62 data requests from Singapore to provide information about users of Google's services and products. Japan, with a population size 27 times that of Singapore, made only 44 requests. Israel which faces many security threats made only 30 requests. Why were there so many requests from the Singapore govt? Google did not state the exact nature of these requests but they are likely to be requests for user information such as IP addresses of people who use Googles extensive services which include Newsgroups, Youtube, Blogger, E-mail etc. These addresses can be used to trace and identify users. In Feb 22 2009, Dr Vivian Balakrishnan said, "Anonymity in cyberspace is an illusion"[Link]. Singapore is a semi-authoritarian state and the govt has a record of monitoring, repressing and silencing its critics and opponents in the name of security. This has led to a climate of fear that stops many citizens from stepping forward to speak up for much needed changes that will improve our society. There is constant fear among many Singaporeans of being monitored and of govt action against critics of the system. The Google figures show that the Singapore govt has a demand for Google user information that is higher than most other countries....it is not clear if it uses the information for the purpose of monitoring citizens but the high figure is not reassuring. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Dylan Ratigan explains the moral bankruptcy at Goldman Sachs Last Friday, Goldman released a statement[Link] to defend itself after the SEC announced that it was pursuing fraud charges against Goldman. Among other things, Goldman said that it lost money on the deal and made full disclosure to the buyer. Really? Remember the near collapse of AIG? After AIG was bailed out, Goldman Sachs received US$13B[Link], the largest chunk of the money to bailout AIG. What was this money for? Goldman had taken bets on wide ranging number of securities by buying CDOs from AIG[Link] and stood to gain if the complex securities (CDO, MBS etc) it sold to clients failed i.e. Goldman made massive net gains from the losses of its clients.Dylan Ratigan is one of Goldman Sach's harshest critic and he explains what Goldman did with great clarity in this video:It is about time for the Americans to pass the bill to regulate the financial institutions so that such conflicts of interests made possible by the investment banks 'playing all sides' is no longer possible. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Understanding the Singaporean Dream..... "Well, as I said, because so many more are getting higher education, the scarcity value of a degree is less. Furthermore, the overall inequality in the society is much less than when 3 or 5 % were getting degrees and they were in great demand. If you had a degree, you could easily buy a house or a car, and it was no problem because that was your pulling power. Now, with 20% getting degrees and more tertiary educated, they are earning more than those who didn't go to university. But university graduates are not as few as before and, therefore, make less." - PM Lee Hsien Loong, Harvard Interview[Link].The Singapore Dream was once defined as 5Cs - Cars, Cash, Condo, Club Membership, Credit Card. These days they market credit cards to anyone with a heartbeat so you can drop that... overspending on your credit card can easily result in a nightmare. Club membership and cash are quite ill-defined - you can take club membership to be at one of the exclusive country clubs with golf not your NTUC Fairprice membership and cash to be something like $1-$2M in today's dollars. The Cs are still relevant today at least for a large segment of our population whose values have been shaped by materialistic orientation of today's society. I'll get back to the 5Cs but first I would like to share something from my childhood....One of the fondest memories from my childhood is that of my dad driving the whole family to a drive-in cinema somewhere in Jurong. I can't remember what movie was screened but that day, my sister and I got to sit on the bonnet and roof of the car to watch the movie. In those days, I lived in a kampung but my dad owned a car so we get to go places. Family weekends were spent fishing at Bedok Jetty, the beautiful beaches, rustic Sentosa, movies etc. Children did not get much homework in those days. I was an undisciplined student who did not submit 90% of his homework even when required. Those days the teachers did not bother, my father did not bother as long as I passed and I had this thinking that if I understood the stuff they were teaching, homework wasn't important. PSLE was a pass/fail thing i.e. no marks involved. You can take it that I had a childhood - a happy one. My dad worked as a technician all his life after he earned his 'O' level attending night school. Degrees were rare in the 60s when a large part of the population was uneducated. My dad's story is one of spectacular social mobility. We left the kampung in the late 70s when my dad bought a HDB flat. It was fully paid in a few years and my dad was debt free. In the late 80s there was nasty recession and housing prices plummeted. My dad bought a terrace house and serviced his loan with his technician pay. My parents still stay in the terrace house today. Our neighbors have moved and sold their properties. The house on the left was sold to a rich lawyer and the one on the right was sold to a rich specialist doctor. You may be asking : what is so spectacular about that? Many people were able to do that in those days. See my dad had one of the worst starting point possible. He was an orphan and had to support himself working when he was still a child. Owning a landed property and putting all this children through university exceeded his wildest dreams....and he did it working as a technician. Two years ago, my dad asked me to buy the neighbor's house. Our neighbor's son got into some financial trouble and he had to sell the house to help his son out. I couldn't match the price offered by the rich lawyer and was priced out....actually I didn't come that close to being able to buy it because I realised later when I got to know the lawyer better that he is, to put it bluntly, 'filthy rich' and would have offered a much higher price because he liked the location. I was priced out 2 years ago and at today's prices, I'm completely priced out. But that is just a small disappointment not being able to own the same type of housing as my dad. The challenges for our younger generation is much bigger than mine - life is tough even for an Ivy Leaguer like Scott Huang (see previous post). .There is one C that describes our society so well - that C is COMPETITION. Intense competition that one cannot avoid. If you look at attaining the 5 Cs as a form of success, then a high rate of failure is built into the system - number of cars is dictated by a quota so most people will not own one and only 20% of the population will live in private property as land is scarce. Working hard alone will not do. You have to make more money than the other 80%. As if it is not intense enough, the PAP govt make sure the spurs are in your hide by importing people at a high rate at all levels. Today 80% of the 1st class honours in engineering are foreigners because the govt goes overseas through Contact Singapore and other means to hand out scholarships to bring in foreign students in large numbers. Among the 2 billion people in China & India, you can always find a large number of smart people willing to come here for a fully paid education. Don't be so simplistic to think that the local guys are not good enough to do well. When you have a quota and you have to grade people, people get knocked off simply due to the quota i.e the differentiation can be inaccurate and artificial. You can this extend to the rest of society. People make a mistake when they think that this intense competition and our meritocracy goes hand in hand ...but this idea of doing better when you work smarter and harder is only true up to a certain level of competition. When competition becomes too intense and working hard alone is not enough to attain your dreams and people will resort to excessive risk taking, unethnical, unfair, unhealthy & immoral ways to get what they want. What emerges out of this intense competition is not a better, stronger and cohesive society that can take on world but a selfish, unhappy one that is bogged down by the numerous failures it creates internally. Our FT policy went from one to import only the best carefully selected people to elevate Singaporeans to one that brought in so many people that it can only depress Singaporeans. PAP policies has caused the dreams of Singaporeans to become less attainable and the intense competition is now a source of great unhappiness in our society....and there is now plenty of unhappinessness with the PAP..While many Singaporeans still dream of the 5Cs, a growing number dream about having more freedom, democracy, equality and justice in our society. The 2 dreams are ultimately linked and whatever stands in the way of one is also standing the way of the other. A growing number of Singaporeans do not want to wait any longer - they are leaving. The other day, there was great dismay in my company when we found out that an employee from one of our associates had applied to emigrate to New Zealand. My company had invested a large sum to have him trained for something very high tech and uncommon. I was asked to find out what was going on. He told me that our investment is safe because he has no plans to leave in the next 5 years. He was getting a head start because such applications can take a very long time. I asked him why he wanted to leave when he is actually doing quite well for himself in Singapore. He told me that looking ahead there is great uncertainty for his children - they are average students and may not have the same capabilities as him.....there is great uncertainty how well they will do given the extremely intense competition here. I asked him, "why New Zealand?". He told me that any place where an average person can lead a high quality of life would be okay....and that is probably what it takes to keep good people in Singapore. It is not just about attaining our own dreams but also a system that will give our children a good chance to do well in life.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Singapore Dream : The Scott Huang Story.... I will write about what has happened to the Singapore Dream later but first read about Scott Huang....and various views of what the Singapore Dream is and how it has evolved. If it is tough for Scott Huang, an Ivy League graduate, ever wonder what it is like for the ordinary Singaporean? What is their Singaporean Dream?-------------The Great (unreachable?) S'pore Dream (Straits Times, Insight, 17 April 2010).IF YOU are compiling a handbook on how to succeed in Singapore, you might be tempted to just cut and paste Mr Scott Huang's story into it.He studied hard in school, received a prestigious scholarship, attended an American Ivy League university, earned a master's in electrical engineering, and went on to a mid-level job in a large maritime company.What is supposed to happen next - so goes the Singapore Dream - is that he gets married, owns a car, moves into a condominium, joins a golf club, and settles into a comfortable middle-class life happily ever after.Yet, as the 30-year-old will testify readily, this age-old formula isn't working like he thought it would.He intends to marry his fiancee, who works in the media industry, by the end of the year, but that's just about where the wheels start to come off the wagon.Spiralling prices mean the choice piece of private property he hankers for hangs in the balance. Driving a car of his own has been relegated far down the priority list.He has now drafted a B-dream just in case the A-dream turns out to be beyond his reach.'I now have what I call a minimum goal and an ideal goal,' he says. 'The minimum goal is an HDB flat; the ideal goal is a condominium apartment and a car.'Achieving his ideal goal - which includes an overseas education for his future children - is beginning to sound like an impossible dream.'It will require major changes in lifestyle. I cannot go out so much and cannot have holidays every year. But I'm trying to stay hopeful,' he says.Mr Huang's tale of the struggle to achieve the Singapore Dream is one familiar to many young Singaporeans of his cohort: in their mid-20s to mid-30s, tertiary-educated, about to settle down or newly married, on the cusp of life.An increasingly competitive environment and news of rising car and home prices have led to a feeling that the good life they aspire to is slowly slipping out of reach.But is that really the case?After all, the country has encountered such bumps several times in its history and every time, young Singaporeans seem to have emerged with their dreams more or less intact.In 1996, an impassioned debate took place in Parliament over concerns that the Singapore Dream was dying. Eventually, a basket of measures was uncovered to keep the dream alive, including building executive condominiums to provide affordable condo-style living.The question now is whether another round of initiatives may be forthcoming to keep the young from losing hope. Or is the current situation just a fleeting feeling of helplessness, a phase, a product of economic cycles?More pertinently, do the young Singaporeans of today dream the same dream as their parents and grandparents?Or have they scaled the hierarchy of needs and gone beyond such dreams? Or, given a matured economy with slower growth, should Mr Huang and company scale down their expectations instead?What is the dream?ONE early articulation of the Singapore Dream in a 1981 Sunday Times article defined it as: 'A salary of a few thousand dollars a month; enough extra cash to decorate the home with the latest equipment and branded fabrics and furniture; holidays abroad; two children and a promise for the future.'Sometime in the 1990s, this definition was refined to specify the five Cs - a car, condominium, credit cards, cash, and a country club membership.Are these dreams still relevant, considering that the country has undergone a complete transformation in the past three decades?Insight posed this question to a dozen young Singaporeans like Mr Huang, and the answer has largely been, 'Yes'.Although many responded initially with answers like 'happiness' or 'a good life', the achievement of these goals is predicated on the acquisition of material goods.Only two stress that the happiness they seek has nothing to do with money.Mr Colin Lim, who works in the finance industry, feels that it is completely natural for people who have grown up watching their parents get rich to want the same things.Says the 29-year-old: 'I think any society that is going through a period of economic development would end up dreaming the same things and aspiring to the same material things.'Indeed, no matter how you attempt to classify it, the Singapore Dream is invariably shoved into a money-lined pigeon hole.National University of Singapore sociologist Tan Ern Ser is someone who knows a thing or two about the Singapore Dream, having set out to study it in the early 1980s when he did his master's thesis.He concludes that the Singapore Dream is in many ways similar to its American equivalent in the sense that both have to do with social mobility.'Essentially, it involves crossing a symbolic public-private divide,' he says, referring to things like housing and transport.He adds that the Singapore version has not changed much over the years because the Singapore project has not changed either.'Apart from the project of building a nation populated by people with a strong sense of national identity, the Singapore project aims to create a middle-class society. These two components are best seen as works-in-progress, and likely to remain so for a long time to come,' he says.Political observer Eugene Tan, a law lecturer at the Singapore Management University, links it to the Government's emphasis on the economy.'The five Cs are still very much regarded as the benchmark of success, and government policy entrenches the mindset that expanding economic opportunity is critical to the nation, the family and the individual's well-being.'He adds: 'Societal conditioning and political socialisation mean that the Dream has a powerful effect on Singaporeans' value systems, attitudes, aspirations, and ambitions.'Many also point to the sort of role models society and the media tend to present here.Singaporeans invited to schools to give talks tend to be financially successful people in the mainstream, not a stay-at-home mum or an avant-garde artist living in a Little India walk-up.Of course, it cannot be generalised that young Singaporeans care only about things related to money. Probe further and many list more intangible things, like raising good children or having a good work-life balance, as close seconds on the dream hierarchy.Says Ms Jamie Lim, 27, who works as a consultant in an accounting firm: 'Raising good children is definitely part of the big picture, but of course, when people think of children, they also have to think of money.'Then there are some who dance to a different drum beat. Like Miss Li Hanyi, 28, an art director in an advertising agency, who says simply that the thought of being tied to a house, kids and money is 'everything I don't want in life'.She dreams of a more open society: 'I want the vibrancy of New York but with all the things I like about Singapore.'Mr Eugene Tan thinks that such dreams will creep slowly into the Singaporean's consciousness but that it will be some time before materialism is usurped: 'The Dream has evolved but the innate vulnerability of our society continues to persist and that heightens the drive towards continuous striving as a hedge against being irrelevant. Being poor carries a heavy social stigma.'IT MAY not be the most unbiased view, but nearly every young Singaporean interviewed is convinced he is facing a harder struggle and a steeper climb than the preceding generation.Teacher Ross Nasir, 24, is certainly feeling the strain. She is hopeful that she will one day match the executive maisonette her businessman father bought when he was in his 40s, but it just seems very bleak to her right now. 'Everything seems to be getting inaccessible. It's like striking Toto,' she sighed.This exaggerated sense of hopelessness is common, even if not completely valid as each generation has to slog to achieve its dreams.It is true to say, however, that earlier generations generally enjoyed greater social mobility than later ones.Professor Tan Ern Ser calls the late 1970s and early 1980s the 'golden age of the Singapore Dream'. Since then, he says, the playing field has become more crowded, with more higher-educated middle-class families all jostling to get ahead in the 'mobility game'.Mr Eugene Tan puts it this way: 'A degree earned a generation or two ago was a passport to a good life but a degree today is no guarantee.'Indeed, the sort of asset appreciation the older 'lucky generation' enjoyed is mind-boggling to the young professionals of today.In 1965, half the labour force earned less than $150 per month. By 1985, this had shot up to between $600 and $1,500, an increase by up to 10 times.An average young professional starting a job today with a $2,000 salary would not dare dream that it will turn into $20,000, no matter how long he works.The same goes for property. Those who bought HDB flats in the 1960s and 1970s for $10,000 or less would have been able to cash out today at up to $500,000.Much of this perceived luck can be attributed to the rapid growth Singapore went through in that period. With a mature economy comes slower, productivity-related growth.For today's young, that simply means good wage increases and asset appreciation cannot be taken for granted.Says Prof Tan: 'The journey is perceived as becoming somewhat more hazardous, competitive, insecure, and uncertain, brought about by globalisation and economic competition and fluctuations.'Moreover, even as Singaporeans seek to enhance their assets, those in the sandwiched generation may find themselves having to handle various big-ticket items, such as parents' health-care costs and children's education costs, notwithstanding government subsidies for these items.'But older Singaporeans point out that this hopelessness is just another phase of life. Everyone, baby boomers included, started out fretting that they would never be able to reach their dreams.Parents of twenty-somethings speak of how their early days were spent in modest rented flats, slowly saving up to bigger and better things.And even if the comparisons with baby boomers are cast aside, it may not be all bad news.Yes, car and home prices may be high now, but this is not the first time they have hit these heights. Just like the economy, the affordability of the Singapore Dream follows the fluctuations of the market.As Prof Ivan Png, professor of information systems and economics at NUS, puts it: 'Affordability is cyclical. So, yes, one strategy would be to wait until affordability improves. The challenge is to predict the cycle.'Also, if the experience of the elders are anything to go by, there is always hope.Keeping the dream aliveIF THE Government's action in 1996 is any guide, it is clearly concerned about keeping the Singapore Dream alive for the young. This is why it is monitoring the public housing market very closely and making sure that prices remain affordable.Explaining why this is very much an important political issue for the Government, Mr Eugene Tan says: 'Having substantial buy-in of the Singapore Dream is fundamental to the Government's legitimacy, popularity and power. Being able to mould the Dream gives the Government considerable leverage and influence over the lives of the average Singaporean.'If the Dream loses its standing, then the way of life promoted by the Government will lose its efficacy and effectiveness.'Dr Gillian Koh of the Institute of Policy Studies, in turn, notes that part of the Government's commitment to help innovation and entrepreneurship flourish is driven by the recognition that those are the only vehicles that can provide the exponential wage increases Singaporeans want.She says the Government's approach to the dream problem is to make sure that it provides a certain minimum, such as good, affordable housing and health care for the masses.'It has to draw a line in providing some of the basics as its social compact, a line established at where a relatively large portion of the population can benefit, that is fair, and will not bankrupt the system,' she says.Ultimately, she stresses, everyone's destiny lies in his or her own hands: 'Even if the public makes the Government promise more, I am sure most people do eventually want to go well beyond that and set higher targets for themselves - to do things where their passions lie and let that pay for itself - today the bus, tomorrow a Ferrari?'Jeremyau@sph.com.sgThoughts of a contented Singaporean who has lived in Singapore for 40 years. Goldman charged with fraud by SEC US regulators, the SEC, has sued Goldman Sachs for fraud. The details of the case can be found in the Reuters article I attached below. The case relate to a deal known as ABACUS in which Goldman sold CDOs to European banks. The SEC has evidence that the Goldman vice-president, Fabrice Tourre, who arranged the deal knew that the structured product marketed was toxic [Link]. Also, the selection of securities for the product was done by hedge fund manager, John Paulson who structured the product so that he can take a huge billion dollar bet that the product will fail - this was not revealed to buyers of the product . If SEC can prove its case, at the minimum, this is a really bad case of conflict of interest and poor disclosure. Technically, the buyers 'knew' the actual securities they bought which was detailed in the contract so it will be a challenge for SEC to prove fraud - maybe misrepresentation or mis-selling is more appropriate.This case reminds me of the minibond saga in Singapore in which many Singapore investors lost money in structured products. This is the advertising for Pinnacle Notes:Click on the picture to see when the product was sold to Singaporeans - 29 October 2007. The ABACUS deal in the SEC case against Goldman was sealed in Jan 2007. One piece of evidence SEC has is an email by Fabrice Tourre showing that he knew the securities in ABACUS deal were toxic because the US housing market was about to collapse[Link to article about that email]. By Oct 2007, it is likely that it was common knowledge among American investment bankers that these products were highly toxic. That was when many of these products such as Pinnacle Notes were launched and sold in Singapore to ordinary Singaporeans who were unsophisticated investors by local financial institutions. The question is whether American investment banks sold these products in Asia knowing they were toxic. If that is the case, they probably came to Asia to be out of the clutches of the SEC and other American regulators. If they were caught in America like Goldman, it is almost certain they will be made to pay restitution to investors. The selling ban for many local banks for structured products has just ended[Link]. I don't think many Singaporeans will start buying these products given the sad memories of Lehman minibonds are still quite fresh in their minds. But 5 or 10 years from today, the lessons will likely be forgotten by investors and new products will make their way here. After the minibond saga, most of the changes to the system came in the form of measures to ensure relationship managers are adequately trained and improvements to sale process of these products[Link]. This recent crisis shows the need for a strong proactive regulator with the expertise to detect and prevent dubious schemes and bad products from entering our market and harming our citizens. Even after the Lehman saga, the MAS still takes a hands-off approach leaving it to the banks to improve their internal selling process. If something goes wrong in the future, you can bet MAS will recite its "buyer beware" mantra - it is the 'do-nothing' approach passing the responsibility to ordinary Singaporeans who are most vulnerable. Proper regulation and better regulators are actually required for our financial hub to thrive because investors like to know before they put their money down, the products are regulated and when something goes wrong, the perpertrators will be caught and prosecuted. In 2006 & 2007, the SGX courted Chinese companies to list in Singapore to boost trading volume - brokerages and SGX were main beneficiaries. A sizable number of these companies engaged in accounting fraud causing investors hundreds of millions. While accounting fraud cannot be completely prevented, the number of fraud cases among these Chinese companies known as s-chips was very high. When they occur, all that the authorities can do was to blacklist the perpertrators (read article: SGX names 'em and shames 'em) because we have no legal jurisdiction over these companies. Our authorities must be the only ones who think they can prevent fraud by 'naming and shaming' the fraudsters. These guys are probably enjoying their millions in posh KTVs and mansions somewhere in the middle kingdom while Singaporean investors are left holding the empty bag.....buyer beware?....Investors should be aware that nobody looks after your interests but yourself - hidden conflicts of interests possible in our systems, the lack of a proactive watchdog and lack of protection for investors. At the end of the day, many Singaporeans play it safe by over-simplifying their investments sticking to fixed deposits, insurance and property. Not that this is a bad thing for individuals but it does show a lack of trust for anything slightly more complex - if it goes wrong, you don't only lose your money, you may not even get justice...the idea of someone enjoying his life with money stolen from you is just too painful. Where are those Chinese crooks who sold Singaporeans those flaky s-chips with accounting problems? ------------------ ------Factbox: How Goldman's ABACUS deal worked[Link to Reuters]NEW YORKFri Apr 16, 2010 4:30pm EDTNEW YORK (Reuters) - The U.S. Securities and Exchange Commission is accusing Goldman Sachs Group Inc of committing fraud in a complicated transaction involving securities known as collateralized debt obligations.The particular deal that Goldman entered into with Paulson and others was called ABACUS 2007-AC1.The particular deal that Goldman entered into with Paulson and others was called ABACUS 2007-AC1. Here's how the deal worked, according to the SEC's complaint:1) Hedge fund manager John Paulson tells Goldman Sachs in late 2006 he wants to bet against risky subprime mortgages using derivatives. The risky mortgage bonds that Paulson wanted to short were essentially subprime home loans that had been repackaged into bonds. The bonds were rated "BBB," meaning that as the home loans defaulted, these bonds would be among the first to feel the pain.2) Goldman Sachs knows that German bank IKB would potentially buy the exposure that Paulson was looking to short. But IKB would only do so if the mortgage securities were selected by an outsider.3) Goldman Sachs knows that not every asset manager would be willing to work with Paulson, according to the complaint. In January 2007, Goldman approaches ACA Management LLC, a unit of a bond insurer.ACA agrees to be the manager in a deal, and to help select the securities for the deal with Paulson. In January and February 2007, Paulson and ACA work on the portfolio, coming to an agreement in late February.Goldman never tells ACA or other investors that Paulson is shorting the securities, and ACA believes that Paulson in fact wanted to own some of the riskiest parts of the securities, according to the complaint.4) Goldman puts together a deal known as a "synthetic collateralized debt obligation" designed to help IKB and Paulson get the exposure they want. IKB takes $150 million of the risk from subprime mortgage bonds in late April 2007. ABN Amro takes some $909 million of exposure as well, and buys protection on its exposure from ACA Management affiliate ACA Financial Guaranty Corp in May 2007.Goldman's marketing materials for the deal never mention Paulson's having shorted more than $1 billion of securities. Goldman receives about $15 million in fees.5) Months later, IKB loses almost all of its $150 million investment. In late 2007, ABN is acquired by a consortium of banks including Royal Bank of Scotland. In August 2008, RBS unwinds ABN's position in ABACUS by paying Goldman $840.1 million. Most of that money goes to Paulson, who made about $1 billion total.(Reporting by Dan Wilchins and Karen Brettell; Editing by Richard Chang)After reading this article, people also read:Goldman Sachs charged with fraud by SECThoughts of a contented Singaporean who has lived in Singapore for 40 years. Transport woes in Singapore..... Without the recent spike in COE prices, the cost of car ownership and usage in Singapore was already the highest in the world. Given the sharp reduction in number of COEs and recent stock market surge (which I discussed here) , the recent hike in COE is probably just the beginning of further increases. The temporary solution for those who need a car is to go to the 2nd hand market to get one - this market will tighten up and prices here will also rise as more people hang on to their cars for longer periods instead of switching to new cars. As the COE rises, it will start pricing out more and more people who really need cars. The COE creates unhappiness by allocating car ownship to those who are wealthy enough to pay for it instead of the people who need it most. The problem is further compounded by Singapore having the most unequal distribution of wealth among developed countries and a for-profit 'public' transport system. The primary goal of the public transport is to generate profits to pay dividends for its shareholders while meeting 'standards' laid out by the PTC. There is no incentive for public transport operators to make quantum leaps in service quality because they have shareholders to please and shareholders want higher profits which translate to more dividends.In a recent report, the PTC says it sees greater improvements in QoS (Quality of Service) in its latest report for June to November last year[Link]. This is measured by the number of non-compliance to a set of service standards laid out by the PTC. I think very few people who have to endure the sardine packed buses and armpit smelling experience will agree with the findings. Besides, real personal experience, it is hard for commuters like myself to dispute the PTC - but note that the PTC only looks for compliance to standards not measurement of comfort i.e crowding on the buses and MRT. Few or none on the PTC depend on public transport system to get to work. In June 2008, I switched from taxis to buses/MRT when the last taxi fare hike resulted in my taxi fares to work (and back) to surge to roughly $55 per day [my blogpost on the taxi hike here]. Before the switch, I took taxis to work everyday for 7 years so my 1st experience taking the bus/MRT after I switched in 2008, I could see the accumulated changes in service quality over a 7 year period. The first time I got back onto the bus/MRT, I was simply overwhelmed by how crowded they had become. Many people taking public transport may not be aware because the squeeze on our buses and MRT occurred incrementally over months and years....many Singaporeans also experienced greater stresses at the workplace, and rising cost of living may have switch their minds off to the other deteriorating aspects of our quality of life. Goh Meng Seng showed a few months ago that the service capacity fell far short of the expansion in population[Link]. You can go through is numbers to see the problem.For those with longer memories, I would like to show you something else. Remember these? These are bus tickets from the 1980s. In those days, you don't have to bring your EZLink or exact change when you board the buses. Besides the driver, there was another person working on the bus - the bus conductor. After you got on the bus and sat down, the bus conductor would come to you to collect the bus fare - if you had a $5 note, no problem, you would get change. He would then punch a hole in the ticket to indicate which stop you got on and hand it to you. What has these tickets to do with our public transport system today? If you're old enough, dig hard for some old memories. See the truth is the bus conductor could never do his job if the buses were packed like sardines - he had to issue a ticket to everyone before the next 1 or 2 bus stops otherwise the passenger would get a free ride. While the buses in those days did not have air-cons like the modern ones, they were rarely as packed as today's buses during rush hour. It was only possible to pack buses like sardine cans only after automatic ticketing was introduced in the 90s and bus conductors were relieved of their jobs. These bus tickets remind me how much the pace and quality of life has worsened in Singapore over the past few decades.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. PAP Govt gets really ridiculous! Talk about denial mentality in the PAP. This one really takes the cake.....After the LTA announced that the COEs quotas will be reduced using a new formula for calculating the number of replacement COEs, the price of COE surged by 30% in anticipation of the reduction in the next round of bidding[Link]. When the number of COEs was actually cut, COE prices surged by another 30-40%[Link].Here is a report of what Minister Lim Hwee Hua said in One Motoring:"THE spike in certificate of entitlement (COE) premiums and car prices this week was not caused by changes to a formula to determine the number of replacement COEs, Second Transport Minister Lim Hwee Hua said yesterday.Instead, there are a host of reasons for the spike in the COE prices, including market forces and economic conditions" - COE spike not due to change in formulaWe are expected to believe that a 30% reduction in the number of COEs has nothing to do with the spike in COE prices. In the past few years, ordinary Singaporeans have to suffer from non-stop rapid increase in cost of living. Many lower middle income families that are already financially squeezed and need cars are now have to endure more financial pain to own one - the cost of car ownship and usage in Singapore is the highest in the world. The minister now insults ordinary Singaporeans by treating them like idiots when she gives such a incredulous and illogical explanation just to deny responsibility for spike in COE. I believe Singaporeans deserve better.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Mah Bow Tan : We don't fudge the numbers Part 3. 'So I ask, what are you questioning? Am I telling lies or fudging the figures? Which part is wrong? Point it out to me,' Mr Mah says. [Straits Times Article : Link]Page 2 of today's Straits Times (see article below) mentioned Hazel Poa's findings and urged Minister Mah to address the concerns of ordinary citizens. If you're with the PAP and the Straits Times is not on your side, you have really gone off-course and better wake up soon or find your hot seat getting hotter."Reform Party member Hazel Poa, a former government scholarship holder, has an interesting blog post in which she points out that such statistics may not show the full picture. Change the base year, and the results could be different. Using 2000, 2001 or 2006 as alternative base years, she calculated that resale flat prices have grown faster than household incomes. If her calculations are correct, some policy recalibration is required to ensure that housing does not become a bigger financial burden on Singaporeans, as that will lead to Singaporeans having insufficient funds for their retirement.” - Su-Ann Chia, Straits Times, 12 April 2010.Minister Mah is losing a lot of credibility trying to talk his way out. The very basic fact is HDB supplied only 11,000 new flats from 2006-2008 while the resident population in Singapore increased by 438,000 people[Link]: From 2006 to 2009, the price of HDB flats rose 46% while household income rose by only 21%[Link].Support for the PAP rose in the 70s because people moved from kampungs to highly affordable HDB flats in large numbers experiencing a significant improvement in living conditions. Today affordability has declined and that will translate to a loss of support for the PAP. It doesn't help that Minister Mah continues to deny the problems with housing creating the expectation that he will not be doing anything significant to improve the current situation..'I just want to remind Singaporeans it was not that long ago that we were at that situation (where people were still living in kampungs). We had to work hard for what we have. Life doesn't hand things to us on a silver platter, and I think that has not changed.' - Minister MahWell it is not a question of working hard but many ordinary Singaporeans have to work harder and harder for less compared with the past - make no mistake things have changed...for the worse. I've shown in my previous posting on this topic that housing cost increase has outstripped household income growth by a large factor over a 2 decade period. Many netizens have also pointed out the pitfalls of using household income - it could have risen because more people in the same house are working or large number of PRs(foreigners) account for the increase. Others pointed out that the RPI (resale price index) is not a good index because it include homes of different sizes over the period. Whatever it is, the situation is probably worse than what the numbers tells us. The govt now asks ordinary Singaporeans to lower their expectations. Most of us already have - we know that the Swiss standard of living is just a pipe dream. Most ordinary Singaporeans will never own a car, most will have to service housing debts over multiple decades, most will never live in private property, many will not be able to retire comfortably, and many will have to travel to Johor for affordable medical treatment. For ordinary Singaporeans, what is the selling point of the PAP system? We suffer from the 2nd highest stress levels in the world[Link] living in this unequal, undemocratic, elitist system that squeezes the ordinary citizens to create favorable outcomes for the power-elites and their network of business interests. Unless there is change, the future for ordinary Singaporeans can only get bleaker.-------------------------Tweak fundamentals of housing policy By Sue-Ann ChiaPRIME Minister Lee Hsien Loong’s recent remarks about the emergence of fake online campaigns to pressure the Government were intriguing.Referring to recent e-mail messages calling on the Government to cool the property market, failing which the writers threatened to withdraw support from the ruling party, he described the phenomenon as ‘astroturfing’.The term, derived from a brand of fake grass, comes from the United States where it refers to a fake grassroots movement which manufactures support or opposition to certain policies or issues.Why fake? Because a number of the purported e-mail writers were found to be non-existent. The conclusion is that one, or at most a handful of people, could be behind the deluge of e-mail messages sent.Mr Lee’s comments have led some to wonder if the Government is concluding that, because some writers are fake, the concern on the ground over property prices is likewise not as strong as made out to be in the e-mail messages.I hope not. Whether the e-mail messages were sent by real or fake people, there is real unhappiness on the ground over soaring housing prices. That unhappiness should not be discounted.To be sure, there is no hard data on exactly how many people are unhappy. Some may argue that those who are unhappy are but a small group, only very vocal.Anecdotally, a number of those who are angry are young, upwardly-mobile professionals earning incomes in the mid-levels. They desire strongly to buy a dream home – but find their dream fading as prices have escalated in recent months.Middle-class families who have been saving up to upgrade to a bigger home in a better location could be experiencing similar unhappiness, as higher property prices force them to rethink the move.Add the recent surge in the number of foreigners in Singapore, and the result is even greater resentment as foreigners are blamed for driving up demand and prices.What exactly is the root cause of the unhappiness? Is it affordability of housing, unrealistic expectations, or a growing disenchantment as the Singapore Dream slips away?Many Singaporeans have latched on to the first reason, blaming the Government for letting home prices become too high.The Government, on its part, has countered by arguing that complainants are being unrealistic.It points out that it has taken steps to cool the property market, such as by curbing the deferred payment scheme for private property and increasing the minimum occupation period for HDB flats.It has also explained repeatedly that most flats are not priced beyond reach, and that those who want one should be able to get a flat if they are less fastidious about location.National Development Minister Mah Bow Tan, in a recent interview with The Straits Times, cited people’s unrealistic expectations as a cause of the angst.People want a nice flat, in a nice location, with a nice view and at a nice price, but that is just not possible, he said.Making a case that affordability is not an issue, he also gave statistics to show that the prices of resale flats have not outpaced household incomes in the 10 years from 1999 to last year.Are Singaporeans convinced? It remains to be seen.Reform Party member Hazel Poa, a former government scholarship holder, has an interesting blog post in which she points out that such statistics may not show the full picture. Change the base year, and the results could be different. Using 2000, 2001 or 2006 as alternative base years, she calculated that resale flat prices have grown faster than household incomes.If her calculations are correct, some policy recalibration is required to ensure that housing does not become a bigger financial burden on Singaporeans, as that will lead to Singaporeans having insufficient funds for their retirement.But coming back to Mr Mah’s point about unrealistic expectations: The question is why this is so.Has the Government oversold its housing policy? For decades now, it has encouraged citizens to own their homes, believing this gives them a stake in the country and increases their sense of belonging. The result is that owning a home is what almost every Singaporean now aspires to. Some have even come to expect it as an entitlement.Meeting this aspiration was perhaps easier in the past than it is now. People had fewer wants; many were happy to move from kampungs or cramped quarters to new flats. However small and in whatever location, a home with a flush toilet was sufficient to make many happy.Today, however, we have a new generation of Singaporeans who want more, due to growing affluence and a mentality that they should be able to buy the home they want as long as they get good jobs and work hard.They want a flat that is big enough, in a location close to town, next to an MRT station, near good schools, and at a price that suits them. Are they unrealistic? Perhaps.But rather than just putting the blame on home buyers, it could be time for the Government to relook a number of the political messages it has been sending to citizens over the years. To manage their expectations better, some fundamentals need to be relooked.First, the promise of home ownership. This should now come with caveats. A home for everyone – but not exactly at the place and price that you want.Second, home ownership should not be pushed as the goal to aim for from the start. There is the option of renting first, if funds are tight.Third, should home ownership continue to be touted as an asset enhancement tool? Such a message may be at odds with the commitment to provide affordable public housing. The Government will be hard put to ensure prices that are comfortably affordable, if prices are pegged to a property market that is constantly rising while incomes do not rise as fast in tandem.These are complex questions, but the Government should put serious effort into finding good, sustainable answers.People’s expectations can have very real impact on the ground, regardless of whether that ground is paved with real grass or astroturf.Source : Straits Times – 12 Apr 2010Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Secondary School Teacher turns property speculator. Yesterday's Straits Times carried this story in the My Money section about how a secordary school teacher ended up with 3 investment properties (see story below). He sold his freehold terrace house (fully paid?) in April 2009 for $965K, used the money to buy a terrace house for $1.43M and a penthouse for $1.18M. In Jan this year, he bought another terrace house for $1.14M. His investments are sitting on nice capital gains and he's getting good rental yield. He did well...in fact his gains in these investments have probably surpassed what he earned as a teacher for the past 15 years.What the teacher did is no different from what hedge fund managers do, REITs do and shipping tycoons do. The basic strategy is to borrow cheaply to buy higher yielding but riskier assets for both capital gains and recurring income. A hedge fund manager may leverage what investors give him by borrowing cheaply in Japan or US where interest rates have hit the floor then put the money in emerging markets e.g. Brazilian stocks or real estate. Its a no-brainer but they get paid millions when they make double digit returns from this strategy. A REITs manager specialising in Indonesia commercial property that yield 12% can borrow money at 4% - so he goes out to borrow at 4% then use this money to buy Indonesian shopping centers and earns a net of 8%. See making money is not so difficult right? ....In fact it looks so easy it makes a morkery of hard work, instead of teaching his students maths and science, the teacher should be teaching Robert Kiyosaki's Guide to Financial Freedom.....why not?In 2001, I was in California for a business trip. Unable to sleep due to jet lag, I decided to watch a bit of TV. Late night TV in Calfornia was mostly advertising - infomercials. A number of these infomercials were about financial freedom through real estate investing - buy the DVDs (for USD$100?) to learn about the secret of real estate investing and make millions. The secret strategy in those expensive DVDs is probably no different from what our secondary school teacher did in Singapore - borrow cheaply to buy then rent out.....become a millionaire when you sell later at a higher price. For the next 5 years (2001-2005), this strategy created hundreds of thousands of millionaires when the US had the biggest housing boom in its history. The problem with simple strategies is that almost everyone and anyone can do it ...when everyone does the same thing, that is when it goes wrong and the destructive force on the way down creates 10 times more paupers than the millionaires it created on the way up.The surest way to make money....sell blue sky and hot air to the gullible:Last year I wrote about investing during recessions[Link] - most of the time it pays to the contrarian and apply good strategies when nobody is interested in doing so. It is necessary and healthy to have some level of speculation in the markets. However, when everyone thinks they can become real estate tycoons, that is when it gets dangerous. Teachers should concentrate on teaching, engineers should concentrate on building new gadgets and doctors should concentrate on their patients. When we have these wild swings in asset prices, the people that get rewarded the most are the people who can speculate well...not the people who produce useful goods and services for our society.There are many pitfalls with the "borrow cheap to invest strategy" - interest rates can surge within a short time, asset prices can fall sharply and catch you off-guard, rental yields can fall killing your cashflow and so on. Instead of financial freedom, you can end up shackled by debts and financial troubles that keep you awake at night.---------------------[Full Story in the Straits Times : Link]Q: What property do you own?I got married in 1996 and bought my first home, a three-room HDB flat at Rochor Centre for $250,000. It made sense as it was very near my parents' flat and they helped to take care of my son.I 'lost' $50,000 when I sold my flat in 2002 for $200,000. But I took the opportunity to upgrade and bought a one-storey, 2,000 sq ft freehold terrace house in Sembawang Hills estate at a low price of $820,000.In April last year, I applied what I learnt about property investments and leveraging and sold my terrace house for $965,000 to free up cash.I then bought three houses. One was a 21/2-storey, 2,900 sq ft corner terrace in Sembawang Hills estate, bought in April for $1.43 million. The current market value is about $2.2 million.I bought, also last year, in September, a 2,662 sq ft penthouse unit at Nuovo in Yio Chu Kang for $1.18 million. It is being rented out at $4,600 monthly.Finally, in January this year, I bought a three-storey, 3,200 sq ft terrace house at Century Woods in Marsiling for $1.14 million. It is next to the Singapore American School and should fetch a rental of at least $5,500 when construction is completed.I made sure that my home loans are on fixed rates and my investment properties must be able to attract tenants easily, to generate a positive cash flow. This simply means that the rental income that I get is more than enough to pay the bank loan so there is sufficient buffer.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Mah Bow Tan : We don't fudge the numbers Part 2 Here's the chart from the Straits Times to show that HDB price move in tandem with household income:Hazel Poa[Link] showed that when the base year is changed to another year besides 1999 the household income falls behind the rise in property prices. But there is something more sinister that can be shown in these charts.You wonder what the same chart looks like if we go back another 10 years to plot for a 20 year period with 1990 as the base year: The blue line shows the Resale Price Index taken from HDB website[Link] and the red line shows the median household income(MHI) taken from wikipedia and combined with the table that appeared in Straits Times yesterday shown here: Notice I skipped the years 1991-1994 & 1996 because wikipedia page on household income skip those years. I can update my charts if anyone can supply the data.From the charts we can see:1. From 1990 to 2009, RPI rose to 442 (442% of the base year) but household income rose only to 211 (211% of the base year) i.e. income rose at roughly half the rate property rose over a 20 year period. The RPI was only 34.1 in 1990, today it is 154 i.e. a HDB flat today is 4.5 times the price 20 years ago but household income is only 2.1 times.2. You will notice the big jump from 1990 to 1995 when the RPI rose from 34.1 to 101.9. That jump occurred just after CPF was liberalised for housing in 1991. During that period household income only went up by 36% but HDB price almost tripled. CPF basically went from funding retirement to funding home purchases. By Minister Mah's own methodology, there is no question that HDB flats were much more affordable in 1990 relative to household income than they are today. Singaporeans' inability to retire with enough funds is linked to the high cost of housing which far outstripped household income growth over the past 2 decade. The chart also tells us why life is so much tougher in Singapore today. It is not unrealistic expectations that cause this unhappiness....it is very real financial burden that caused this unhappiness and much of it is due to PAP policies. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Mah Bow Tan : We don't fudge the numbers.... Yeah? But they are pretty good producing nice graphs.In yesterday's Straits Times article about HDB flats being affordable, there was this chart:It shows household income rising in tandem with HDB prices.Credit goes to Hazel Poa[Link] for unveiling the trick here. Move the base year around and you get some other interesting graphs, here's one of the graphs generated by Hazel Poa:Yes, not so "in tandem" if the base year was 2001. In fact only when you choose 1999 to be the base year instead of any other year in the last 10 years, you can show this "in tandem" movement.Someone dropped a comment to the previous post on the topic to say that using household income is really inappropriate.Definitions of household income[Wikipedia]1. The residents of the household do not have to be related to the head of the household for their earnings to be considered part of the household's income2.That the size of a household is not commonly taken into account in such measures may distort any analysis of fluctuations within or among the household income categories, and may render direct comparisons between quintiles difficult or even impossible.[3]Using resident (which includes PRs) household income instead of Singaporeans household income takes us even further from the real situation for Singaporeans. The fact is HDB flats are expensive and put Singaporeans in debt for 30 years and that takes away their financial ability to retire properly. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. COE shoots up further.... DPM Teo Chee Hean recently called the COE an innovation."The public housing programme, the Central Provident Fund system as well as the certificate of entitlement scheme for vehicle ownership are all examples of policy innovations,” - DPM TeoI'm not too sure how many more policy innovations from the PAP govt that Singaporeans can survive but the COE is really something we can do without. No city in the world has fallen apart without the COE. The COE has resulted in Singapore having the highest cost of car ownship and usage in the world. The COE allocates an important resource based purely on a person's ability to pay - the rich man's teenage son can afford to own a car for dating while a middleclass father who needs to drive his children to school and parents to hospital may not be able to do so. It maximises the pain among those with greatest need and limited means ...and it maximises the govt revenue.There is a technician I know with a leg problem. He cannot stand for more than 15 minutes without feeling pain in his legs. Every day he struggles to work in the sardine packed buses and the MRT. Because of the COE system, he can never afford a car.----------------------Relentless rise in COE premiums Wed, Apr 07, 2010 AsiaOneBy Tony NgFRENZIED activity characterised the first Certificate of Entitlement (COE) open bidding for April, also the first bidding where the much-talked about supply cut takes effect.Premiums rose by as much as 26 per cent for all COE categories.A piece of Cat A COE, used for small cars of 1,600cc and below, now cost $34,001, up by 19.8 per cent. Similarly a Cat B COE would now cost $45,501, a 26 per cent rise from its last price.Premium for the open category, used largely for cars, closed shy of the $50,000 mark, at $49,000.Premiums for commercial vehicles and motorcycles weren't let off either. Both went up to finish at $36,551 and $1,221 respectively.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. High Housing Cost : Blame the people! What is worse than a govt that implements bad policies? A govt that implements bad policies then blame the people who suffer from their bad policies for its negative effects. Sickening isn't it? But the PAP govt has done it again."Unrealistic expectations are a reason for some unhappiness about flats" - Straits Times, 7 April 2010..The PAP govt opened the floodgates to foreign labor and did not expand the supply of housing accordingly causing the price of flat to escalated by more than 50% in 4 years. Yet it blames the problem on ordinary Singaporeans for having unrealistic expectations. The Straits Times article "Mr. Minister, a nice home, with nice view now please" is extremely insulting - it rubs salt on the wounds of ordinary Singaporeans who are now struggling with the high cost of living and belittles the financial pain ordinary Singaporeans suffer to own a home. .Please read the whole article to pick up flaws. One especially serious one is the chart of median household income vs housing prices. It was meant to illustrate that rising house price is due to rising household income. Using household income is extremely misleading as it has risen because more married women are pushed into the workforce due to the rising cost of living i.e. higher housing prices can drive household income up. Also, rising housing prices can cause couples with difficulties owning a home to share a place with their parents causing household income to rise. Our median worker income rising far slower(median income in 2000[Link] and median income in 2009[Link]). The Reform Party pointed out the discrepency why using household income can be misleading because of the effects of large number of PRs:."Firstly though he omits to tell us, he probably means residents (which include PRs) and not just citizens when he talks about Singaporean households. Over the past decade the resident population grew by 15% while the resident labour force grew by approximately 25%. This was undoubtedly due to the surge in new citizens and PRs as a result of the government’s liberal immigration policies. The majority of these new residents did not have dependents (hence the much faster rise in the resident labour force than the resident population) and all of them would have had jobs so the proportion of working adults in the average resident household would have risen. As a result we would have seen an increase in real median income per household member without any real increase in the median incomes of Singaporean citizens who were already here before this period began, i.e., the majority of us. Another reason why the Minister’s figure is misleading is that it excludes households consisting solely of non-working persons over 60. If their incomes fell during this period or their numbers increased as a proportion of total households), due not only to the aging population but also because of the diminished employment opportunities for senior citizens as a result of the government’s open-door foreign worker policy, then excluding this group would distort the figure for median income per household member and make it look better than it really is" [Link] .The article uses "resident household income" instead of "Singaporean household income"- to tell how badly affected were Singaporeans by rising housing costs, you have to use Singaporean incomes as a measure. Using misleading statistics to push the blame for the housing situation to ordinary Singaporeans who are finding it increasing hard to cope with rising cost of living is highly irresponsible. The Minister should address the problem directly instead of denying responsibility.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Homeless in Singapore.... Al Jazeera should be commended for keeping the location of these homeless people a secret so that the police cannot raid them. What happens when the police raids a tent occupied by a poor desperate homeless person at one of our parks:-----------------------------------Jailed for living in illegal tent [Link]By Sujin ThomasHOMELESS and unemployed, Noor Mohammad Yassin Ismail pitched a canvas tent at East Coast Park in May, 2007, and lived there for almost a month - without a lease or licence to do so.He was discovered on June 26 of that year, after he was apprehended by park rangers.In court on Tuesday, Noor was asked to produce his Identity Card or passport but he said that he had lost both items. It prompted District Judge Mr Shaiffudin Saruwan to retort in jest: 'I suggest you use a bicycle chain to tie yourself to a tree or you may lose yourself as well.'Pleading for leniency, Noor, who is tanned and skinny, said that he seldom ate, only doing so if friends gave him food. He added that his mother is paralysed and looked after by a younger sibling, while an elder sister does not care about him.He was fined $800 but could not afford to pay the fine so he was jailed four days instead. He could have been fined up to $2,000-----------------------------------------“If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you.” - Vivian Balakrishnan [Link]Apparently nobody delivered food to Noor who was jailed for pitching a tent at East Coast Park without a permit. A jail cell technically is a roof over your head... so are run down overcrowded shelters. Those 'meals on wheels' programmes are run by volunteers at the YWCA[Link] and not something by the govt. They cover only a small area in Singapore and don't have the resources to help everyone who needs assistance. Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Fly by night spa operators.... I wrote a number of articles over the past few years about runaway lawyers who fled with clients' money meant for property purchases[Link]. The Law Society finally fixed the problem[Link] by taking away the rights of law firms to hold money for property deals - the money has to go to SAL (Singapore Academy of Lawyers) or banks.Most of the time when you buy something, you get the goods the same time you hand over your money. There are however exceptions - spa packages, tour packages, gym packages etc. What is in place to stop owners of the businesses from running with your money or using your money to offset the operating costs then going bankrupt? Not much really.Many years ago, we had property developers that went bust leaving hundreds of homebuyers in limbo. These developers had other businesses such as contruction, trading etc and after buyers payup, something would go wrong, usually with one of the other businesses, causing the developer to go bust. This was fixed by the requirement for developers to hold homebuyers money in an escrow account that cannot be touched until the homes are completed and delivered to buyers. The effectiveness of this measure was seen in the collapse of Amcol Holdings. If you drive along ECP westwards towards the Singapore Flyer, you can see a large condo development called Costa Rhu[Picture here] developed by Amcol Holdings. While it was developing Costa Rhu, the company went bust due to fraud but buyers of Costa Rhu were unaffected. Customers of the now notorious spa Wax In the City(WITC), however, are not so lucky:WITC has about 2000-3000 customers who paid for spa packages that cost between $500-$2000. That is a lot of money. What the owner of WITC, Alex Zhou has done with the money is not so clear. We will probably get to see some of the (ugly?) details once investigators start doing their work. Customers may or may not get their money back. But the question on my mind is whether the govt will again take the hands off approach and simply say "buyer beware" until the next 'outbreak'.Some people get the wrong impression that having less regulation always lead to more competition. That is not the case and we can use spas to illustrate this. Because spas go bust and leave customers holding the bag, spa lovers will now only go for well established spas although the price may be more expensive. This makes it much harder for honest smaller spa operators to start and grow their businesses. Over time the market will be dominated by a few big names. Before the govt put in place the new regulation for property purchase, people hesitate to go to smaller law firms even though they charge a lower amount for conveyance.Singapore is not unique in having problems with lawyers, spas and tour agencies. What is unique is we have a very expensive govt that is slow in implementing common sense regulation that will improve protection for consumers and create an environment that will foster greater competition that will be conducive for small business upstarts.Problem with spas? Many countries have problems with unscrupulous spa operators and were quick put in place very simple measures - requirement to put up performance bonds before they are allowed to offer packages, requirement to show financial responsibility, escrow accounts etc. When did they do this? 5 years ago? 10 years ago? .....In Britain, they were put in place in 1978 i.e. 32 years ago[Link]...in the US, 30 years ago [Link][Link]. "Buyer beware" is just an excuse to avoid doing work and here we have an expensive govt that is not doing work, that is why the customers are hurt:"Meanwhile, the Consumers Association of Singapore said customers should be careful when they buy packages involving instalments. Seah Seng Choon, executive director, Consumers Association Of Singapore, said: This pre—payment packages arrangement is totally unregulated and customers need to understand that. They need to be mindful of this and take steps to protect their interests for the time being. There are several disadvantages for consumers to sign up for packages." - Yahoo News [Link]CASE once again resorts to the "blame the victims" approach.... "customers should be careful"..."customers need to understand". Why doesn't CASE press the govt to have proper regulations so that such sad stories don't repeat! Have they learnt nothing from all these cases?! It is really quite amazing that someone can set up a business in Singapore, collect hundreds of thousands from customers then close down without delivering the services/goods ...and when you go to the authorities, they tell you there is nothing they can do about it...Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Income Gap is not important : PM Lee Singapore has the biggest income gap among developed nations. Instead of treating this serious problem with priority, our PM trivialises it by saying it is not important:"What's important is not the absolute gap between the top and the bottom, but whether those at the bottom are being helped to move up. Prime Minister Lee Hsien Loong made this point at a dialogue yesterday with contributors to the Government feedback" - Straits Times Article, A lot done to help needy : PMA lot done to help the needy? Bottom helped to move up? We not only have the biggest income gap, the PAP govt is also doing the least for poor people among all developed countries by any measure - social safety nets, unemployment benefits, welfare, etc. So PM Lee's govt failed to live up to his own assertion that what is important is helping the poor - since Singapore's inequality is the highest, help for the poor should also be the highest but it is actually lowest among all developed countries. This is something like his justification for GST - GST is to help the poor (by taxing them?)....saying one thing and doing another. His policy to import cheaper foreign labor in large numbers is a major factor in depressing the wages of the lower income. Singapore has no minimum wage, independent unions and during his leadership, we saw retrenchment benefits & healthcare benefits for lower echelons in the civil service disappear. He increased his ministers' pay which was already the highest in the world to new record levels. It is obvious that he cares little about the large income gap and will not be adopting policies to bring about greater equality in our society."'Supposing the world's richest man, Carlos Slim, comes to live in Singapore. The Gini coefficient will get worse. But I think Singapore will be better off. Even for the lower income Singaporeans, it will be better," - PM LeeCarlos Slim? If Carlos Slim comes to Singapore, every good thing he does will cause the Gini to fall and every negative thing he does for ordinary Singaporeans will cause the Gini rise. If he comes to Singapore and gives a large part of his wealth to the poor here, the Gini Index will fall instantly. If he comes here with 100,000 low cost workers from Mexico hiring no Singaporean in his business it will depresses the wages of our workers, the Gini Index will shoot up. If Carlos Slim comes here with 10,000 rich relatives and start snapping up property using his billions, that will drive up the cost of living for ordinary Singaporeans and cause wealth of richest Singaporeans with multiple properties to go up, thereby increasing the Gini. PM Lee does not even understand his own example....------------------Home > Breaking News > Singapore > Story Mar 27, 2010A lot done to help needy: PM By Sue-Ann Chia , SENIOR POLITICAL CORRESPONDENTWORRIED about income inequality? What's important is not the absolute gap between the tops and the bottom, but whether those at the bottom are being helped to move up. Prime Minister Lee Hsien Loong made this point at a dialogue on Saturday, in response to a question on income inequality in Singapore. 'Supposing the world's richest man, Carlos Slim, comes to live in Singapore. The Gini coefficient will get worse. But I think Singapore will be better off. Even for the lower income Singaporeans, it will be better,' he said. This is because people like Mr Slim, a businessman and philantrophist, could start businesses here and create more jobs and prosperity for Singaporeans. The Mexican tycoon heads this year's Forbes list of the world's top 100 billionaires. He beat Americans Bill Gates and Warren Buffet. The Gini coefficient measures the income distribution within a country. Singapore's has been inching up in recent years but government aid measures have also brought it down somewhat. Mr Lee pointed out: 'What really matters is whether we can benefit the low income Singaporeans so that they have a decent standard of living, and hope for a better future, for themselves and their children.' Read the full story in tomorrow's edition of The Sunday Times.Back to topThoughts of a contented Singaporean who has lived in Singapore for 40 years. Spreading the Prosperity Gospel in Singapore... I'm going to disable comments for this one because somehow I know what some of you are going to say. Treat this as a general knowledge posting to foster greater understanding of the teachings of some of our (mega) churches."Prosperity theology (also known as prosperity doctrine, the health and wealth gospel, or the prosperity gospel) is a religious belief found among "tens of millions"[1] of Christians centered on the notion that God provides material prosperity for those he favors.[2] It has been defined by the belief that "Jesus blesses believers with riches"[1] or more specifically as the teaching that "believers have a right to the blessings of health and wealth and that they can obtain these blessings through positive confessions of faith and the 'sowing of seeds' through the faithful payments of tithes and offerings."[3] - Wikipedia, "Properity Theology".I guess that if you have faith, every single good thing that happens to you has to be a gift from God. My browser crashed when I typed this post...hmmm....Thoughts of a contented Singaporean who has lived in Singapore for 40 years. CPF for housing = Miserable Retirement? The average amount a person on pension draws when he retires is >50% of his last drawn salary in other developed countries. A Singaporean would draw between 8% to 26% of his last draw salary (See report below) according to a research paper by Ng Kok Hoe. The reason for this? 68% of the of annual CPF contribution is spent on housing and 18% on health leaving only 14% for pensions.Remember in Nov 2009 Mercer reported that the CPF is poorly ranked for inadequacy, and a govt expert came out to defend the CPF? [Link]. The govt expert's defense of the CPF was that home equity can be unlocked to achieve adequacy[Link]. Minister Balakrishnan recycled this argument in yesterday's debate with Ng Kok Hoe. This argument is incorrect because other countries don't require its retirees to lose their home to raised funds for retirement...and the fact that Singaporeans have to mortgage or sell their homes in order to retire properly reinforce the point that many netizens have raised that the cost of housing is too high in Singapore and it will lead problems later on. If home prices become unsustainable due to an ageing population which we will inevitably face, we will see a decline in home equity which will worsen the retirement problem.------------------Mar 29, 2010Spirited debate on CPFBy Marissa LeeTHE workings of the Central Provident Fund (CPF) and whether it provided enough for retirement fuelled a spirited debate at Monday's inaugural Ee Peng Liang Seminar on Aged.The spark came from a paper presented by National University of Singapore (NUS) social work graduate Ng Kok Hoe, which highlighted that a Singaporean would draw between 8 per cent and 26 per cent of his last drawn salary from the CPF at age 65.Mr Ng, who is pursuing his doctorate in social policy at the London School of Economics, questioned if this was enough, as other countries seemed to hit 50 per cent or more through their pension schemes.Mr Ng's paper showed that 68 per cent of annual CPF contribution is spent on housing, while health took up 18 per cent and pensions 14 per cent. Debating it were Minister for Community Development, Youth and Sports Vivian Balakrishnan and Dr Lee Soon Ann, senior fellow at the department of economics at NUS. Dr Balakrishnan took the point there was no perfect balance to how CPF should be spent, but noted that Singaporeans had 'by and large got it right so far'.As to whether the payout was enough, he said one should not discount the equity tied up in housing. There are schemes which allow Singaporeans to sublet their homes or downsize for cash, letting them 'extract liquidity out of equity', he said.Thoughts of a contented Singaporean who has lived in Singapore for 40 years. "The govt is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat" UPDATE: There's actually a YouTube video of PM Lee explaining what the govt is trying to do:Read the article below on how the govt plans to 'tie a person's CPF to the purchase and sale of flats'. There is plenty of euphemistic language including this 'the government wants to strengthen the CPF route in the buying and selling of flats'. What it is say is simply the govt is looking at plans to require sellers to return all (or most of) money from the sale of HDB flats to CPF including profits in excess of what was withdrawn from CPF. What you can take out of a sale is likely to be the cash (+some interest) you use to service your loan. We will probably see more details soon.The main reason given for this change is :"It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit." - PM LeeFirst of all, how many people are actually doing this? Why are they doing this? If there are many, isn't the bigger problem indebtness rather than PAP MP's problem of helping people to apply for rental flats?I'm not sure if you remember this but a year ago, I posted a clip from 93.8Live programme about long queues for rental flats (waiting time 4 years). One person called to say that he had to sell his flat to pay for his debts. After he did that he didn't have much left and was still in bad shape financially so he applied for rental flats but had application rejected "because he had recently sold a flat". There are already all sorts of rules in place to reject applications for rental flat- in this case the person probably needed a rental flat badly but was rejected anyway.In Singapore, there is no social safety net for those who lose their jobs, fall seriously ill or have an accident. Many are forced by circumstances beyond their control to borrow. Besides the banks, our GLCs have gotten into the act of providing unsecured loans - SingPost (with GE Money called EzyCash)...even NTUC have gotten into this business with something known as Smart Credit. A few days ago while I was at a SingPost branch, I saw 3 applicants at the EzyCash counter - one of them brought his wife and child along. When the loan officer asked him why he needed to borrow, he said his mother has been hospitalised and he needed the money urgently. We know the demand for these unsecured loans is very high - credit card rollover debt is about $4B ($3.3B in end 2008[Link], $3.6B in end 2009). The unsecured non-credit card debt is probably higher because the interest on those are about 17% compared with 24% on credit cards so people start to rollover their credit card debt only when they max out their unsecured loans. Banks promote these loans aggressively - you see the ads at MRT stations, telemarkets call frequently and they advertise frequently on the newspapers.When the unsecured debt mounts, the borrower pays a hefty interest which is great for bank profits but strains the individual financially. When this happens, the most prudent thing a person in debt should and can do is sell his HDB flats to clear the debts so that he can start over again, hopefully without meeting any personal misfortune that forces him to borrow. Without the ability to raise some cash with his HDB flat, he will be enslaved by the loan and that will be highly detrimental for him in the long run."When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?" - PM LeePeople in debt will eventually lose their homes if they get sick or lose their jobs. Prevent people from settling their debts will result in them carrying a heavy debt burden compounded by ridiculous interest rates over a long period of time. It just doesn't make sense that PM Lee sees the solution to people selling their flats to pay their debt is to lock up the money in the CPF so they can't touch it when they actually need it to give themselves better odds going ahead. Why do the solutions to so many problems involve locking up more money in the CPF for longer and longer periods?......---------------Govt to explore ways to increase use of CPF for buying HDB flatsBy Hoe Yeen Nie Posted: 27 March 2010 2131 hrsGovt to explore ways to increase use of CPF for buying HDB flatsSINGAPORE: The government is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat. The aim is to strengthen the message that property is an asset for one's old age. Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government's feedback unit. It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit. Prime Minister Lee said this goes against the aim of these homes as assets for life. "When we help people to own a home, it's really for you for life," Mr Lee said. "When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?".Hence, the government wants to strengthen the CPF route in the buying and selling of flats. "Like what we've been doing with the Additional Housing Grant - that grant we give you into your CPF, you can use it to buy a house," explained the Prime Minister. "If you sell the house, the money goes back into the CPF. So if you're buying another house, you can use that for another house. If you're not buying another house, the money is there for your old age." On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off. Access to a good education and a high rate of home ownership are two of the best things the government has done. However, Mr Lee noted there are some people who will be left behind. "And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle," he said. "The government will help them, but you must help them too." Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: "It's not just about dollars. It's how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children. "If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can't afford it, we will have meals delivered to you. You will get healthcare. "Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help." The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles. In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted. The dialogue session is part of a forum on securing Singapore's future. - CNA/yb Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Stock Market Update.... In my 05 Feb 2010 posting[Why the stock market will rebound and why you should try to get out anyway....] and the subsequent update, I wrote: FURTHER UPDATE 6:20am 10 Feb 2010 - Markets have rebounded sharply since I posted this last Friday. Based on my models, they market will rally until May 2010 before it sees another correction. After that we will see one last peak in Aug 2010 before a more sinister downturn - you should get out in May or Aug...really! If you look through the recent "noise", the economic numbers and corporate earnings have been very good. In previous posts, I said that the closest "matching" and similar rally to this one is the 2003-2004 rally. For the next few months, I believe blue chips will show much greater strength than poorer quality stocks compared with the runup of past few months. In the next few days, you will see bad news suddenly moving to the background (surprise..surprise) and good news being played up ...investors will return with enthusiasm as if the last 3 weeks never happen! UPDATE: 4:51pm 5 Feb 2010 - Extremely scary headlines on Bloomberg's home page : •Stocks Plunge, Euro Falls, Bond Risk Soars on Jobless Claims, Country Debt •Trichet Struggles to Convince Markets of Europe's Solidity Amid Greek Woes . Suggesting great instability in the markets. Will the market exhaust its downside selloff as I suggested or are the so-called fundamentals so precarious we are on the precipice of a new crisis? Scary times isn't it?Despite the huge scares on the stock market in Feb 2010 due to the Greek debt and inflation fears, the market rebounded and are hitting new 52-week highs around the world. Many analysts are warning that the market has gone ahead of itself and urging investors to be cautious and technical analysts lament the lack of volume in the markets and the VIX (volatility index) hitting new lows signalling complacency. I have a completely different view from them - when has markets rationally discounted fundamentals and reality reliably? Despite the widespread warnings by pundits on the market, and serious worries that the market is due for a selloff (soon , say like next week!), I believe things will turn out different. But before I get on to put forth a summary of my thoughts, I want to say I'm not a professional and you should take what I do with a pinch of salt.The market often makes fools of those who try to predict it. Indeed most of the time, it behave unpredictably in a random manner like Brownian Motion - the Efficient Market Hypothesis. However, we are not in usual times post-financial crisis and there are a number of things I noticed and I'll put some of them in this posting to explain what I see in the coming months.The chart above shows the Baltic Dry Index[Link] BDI. The BDI shows the price index of shipping costs of raw material. The index is non-speculative in nature and frequently used by economists to indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers. It shows that while demand has firmed, it is nowhere near the what it was in 2008. In a speech by Premier Wen a few weeks ago at China People's Congress, he spoke of the risk of double dip recession[Link]. It really becomes quite tricky for China as they are seeing inflation due to their massive stimulus but insufficient export growth to maintain GDP growth. Jim Jubak's recent column talks about this problem of galloping inflation in developing countries & tenuous anaemic growth in developed (western) economies.A few months ago, I wrote this rally is liquidity driven and will rally against bad news on the economic front. As this rally is driven by liqudity, it doesn't matter how good the economic news gets once the liquidity is shutoff (interest rates rise, monetary policy tightens), the stock market rally will end. I won't go through all the details because there is a lot of statistical data I go through and some amount of modelling that I do in my spare time - a lot of relates to how much leverage traders have taken either on carry trades or margin trades. Here is what I believe will happen, we can revisit this later when various events on the stock market occur and I'll try to find some time to explain how these results were obtained:1. Despite naysayers saying this is a market is 'double topping' (the first top was in the early Feb and we are at the 2nd top and poised for a fall), there is enough liquidity to drive this market higher. In fact, I believe the market will rise and the rate of rise will increase.2. The market will peak in mid-May 2010 (12 May 2010 as the best estimate) and fall abruptly.3. It will fall until roughly the 1st week of July 2010 before it attempts to rebound and peak in the last week of Aug 2010. This 2nd peak may or may not be higher than May peak will mark the end of this rally.I would be selling off most of my stocks in May 2010 and that will be the end of my financial adventure that lasted for more than a year. We can come back to revist this post in the later part of May. My models should have greater visibility on (3). The forecast are based on market liquidity and cannot take into events like 911 that throw things completely off. Other issues like European debt will fall into the background and based on initial jobless claim figure we should see the single most worrying economic issue that of 'jobless recovery' start easing, that will help to propel this market higher...driven by ample liquidity in the system and to its peak by drawing money at the side waiting for the economic picture to turn for the better....Thoughts of a contented Singaporean who has lived in Singapore for 40 years. Mega-churches ....Mega-finances... "Now when Jesus heard these things, he said unto him, Yet lackest thou one thing: sell all that thou hast, and distribute unto the poor, and thou shalt have treasure in heaven: and come, follow me. " - Luke 18:22 .When I was in secondary school, I helped out at a Christian charity. I was not a Christian but the Christians in the group liked me so much, they made me their student rep. As the rep, I had to attend workshops, seminars, organise activities etc. What was deeply etched in my mind was the idea of helping the poor and distributing (all) your wealth which was so much a key part of the religion. Distributing ....not accumulating. .I guess these days things have changed somewhat. New style churches collect tens of millions, invest hundreds of millions in real estate deals including shopping centers & restaurants[Link] and start to look like business enterprises. How much goes to charity?City Harvest in 2008[Link]:.Local Community & Charity Work : $2.9MStaff Salary and Allowances : $9.29M.City Harvest is now involved in $310M real estate deal [Link]. They are not building a shelter for the homeless or hospital for the sick....“For Singapore Expo, we are in a lease-only business model. As such, what is being paid out does not have any returns or profit-sharing for CHC. The Board and the Building Committee discussed and concluded that with an ‘ownership-and-license’ business model, the rent we pay out will be recovered by CHC in the form of profits and dividends. It’s perfect for our church”- Senior Pastor Tan Ye Peng[Link].City Harvest Church will fund this mainly through donations from its church goers[Link]. I'm sure CHC will be able to raise the funds given its enthusiastic congregation. What they willingly give out of their own free will is none of our business - many probably consider the religious experience (joy, happiness) invaluable and they will have their spirits elevated to a high every weekend by inpiring sermons. The issue really is it is registered as a charity and enjoys a tax-exempt status because of this. CHC, however, pays out 3 times more as salaries to its staff than it gives to charity. These days it is impractical to expect religious leaders to live in modest homes and take public transport and honour a vow of poverty so they can give out more to those who are poor and sick knowing that what is important are the treasures that await them in heaven...we should, however, have the same level of transparency, accountability and regulation as big business enterprises because some of these mega-churches operate like businesses.Thoughts of a contented Singaporean who has lived in Singapore for 40 years.