Saturday, February 06, 2010

Tricks by property agents

Some property agents used unethical means to mislead the buyers into paying a high price for a property or sellers to sell the property at below the market. In some cases, they pocket the difference. There are other property agents who are honest. Share your experiences here.

15% discount at Internet Shop

Order now to enjoy 15% discount on the following items:

Practical Guide on Financial Planning ($12)
Rechargeable torchlight ($6.50)
Shape Quiz book ($6)
Note: the above prices are before discount.

Enter the Promotion Code - BLOG (valid for February 2010 only) to get 15% off the above prices.

Order here.


The steps to play the game are:

1. Register an account and create your user ID and password.
2. Login with your user ID and password
3. Read the Guide
4. Click Play to play a game. You will start at Level 1. Each game start with year 1 and continue to year 24. For each year, you have to view the Summary and Pick, select the stocks to invest in and click on End Year to see the results. Click on Next to go to the next year.
5. You should continue the game until year 24. However, if you reach a cumulative gain of $300,000 earlier, you will be upgraded to the next Level. If you have a cumulative loss of $300,000, you have to start the game again at the current level.
6. When you complete Level 9, you will be recognized as a Champion and have your name recorded. You can also share your experience. You will have greater confidence to apply for a job as a Fund Manager!

Click here to try the game.

Seek compensation for losses on the credit linked notes

Legal Action
The investors can take legal action on the following grounds:
a) against the distributor (i.e. the financial institution that sold the product to you) on the grounds that they have mis-represented the product or have failed in their duty to give proper advice.
b) against the issuer (i.e. the bank that created the product) on the grounds of mis-representation, fraud or other wrong doings.

If the investors take legal action, their lawyers have to prove the case in court. This is expensive and has an uncertain outcome. There are two class actions (involving the Mini bond and the High Notes 5) being heard in the Singapore court.  

Many investors have taken an adjudication case in FIDREC, which is rather inexpensive. Some investors were satisfied with the decision by the FIDREC adjudicator, but many were dis-satisfied with the outcome.

A US lawyer is holding a seminar in March to explain how investors can participate in a class action to recover their losses against the issuers in USA. More details are set out in a separate posting in this blog.

Tan Kin Lian

Residual values of credit linked notes

A few investors still do not understand why the residual values of the Mini bonds are better than the Pinnacle Notes, Jubilee Notes and High Notes 5. It is important that they put in the effort to understand what they have bought and why it has dropped in value. They should not continue to be ignorant.

Here are the differences in structure of these notes.

Mini bonds. They carry credit default swaps on a number of entities. None of these entities failed, so there in no call on the swaps. The underlying asset is still intact. The problem is that the issuer Lehman Brothers has gone into insolvency. The trustees appointed a firm to handle the liquidation of the underlying assets and pay the residual value to the investors. These values range from 23% to 75%, depending on the tranche.

High Notes 5 and Jubilee Notes. These notes carry credit default swaps on a number of entities. One entity is Lehman Brothers. When this entity went into insolvency, the swap was called and the total invested amount was taken away to pay the counter-party to the swap. There is no residual value in these notes.

Pinnacle Notes. These notes carry credit default swaps on a large number of entities. If a specified number of entities (say 13 out of 200 entities) go into default, the total invested sum is used to pay out to the counter party to the swap. A few tranches have reached this critical number and the value of these tranches is almost nil. Some tranches are approaching this number, and the value is now quite low, say less than 20%. The investors can only hope that there are no more credit events, to get back their original investment. The alternative, is to sell them at the current market value.

Sell at market value?
Should the investor sell the notes at the current market value? If I were an investor, I would hold on to the notes as the current market value is likely to be lower than the underlying value (whatever the value is). The market maker probably knows the underlying value, and will offer a value that represents a deep discount. However, each investor should make his or her own decision on this matter.

Tan Kin Lian

Strategy to pick the right stocks - low PE and high yield

I tried a new strategy to pick the right stocks based on low price earning ratio (PE ratio) and a high yield during the past year. It produced good results in this simulation game. The theory is quite attractive - buy the stocks that are relatively cheap, i.e. low PE ratio. If these stocks have performed well in the past year, they may be on a strong trend. And they are cheap.

Click here to try the simulation game. The prices are simulated to be reflective of the trends in prices in real life.

Picking the right stocks require practice. This simulation game gives you the practice. You can find the right strategy and apply it to the real life, to see if it works. You can get the real data for the past few years to try it the theory that you have discovered through this simulation game.

Click here to download a PDF document showing the screen shots of how to play this simulation game.

Fighting rejected health claims

In America, 1 in 14 health claims are rejected.

In this story, the insured has to fight for her claim to be paid. She went through an appeal process, involving an external, impartial expert.

Friday, February 05, 2010

Practice to pick the right stocks

The Pro-Investor is a simulation game that uses a model to generate the earnings per share, price earning ratio of 45 stocks based on the economic trends in various countries, industries and market segment. It aims to give the player the experience of picking the right stocks in this environment.

After many rounds of practice, I found a good strategy to pick the right stocks. Find out the country, industry and market segment that performed well during the previous year. Pick the stocks that from the country, industry and market segment. It is likely to perform better than average during the following year.

The actual trends in each year can be used to pick the stocks for the following year. The stocks that are picked will rotate, but the overall results should be positive.

Will this strategy produce good results in real life? I like to have the data (EPS, PER, Price) for the past 50 years of actual stocks that have lasted for this period, together with a code to indicate their country and industry. If you have the data, you can pass them to me, so that I can use the simulation based on these real data.

If you wish to try Pro-Investor, click here. This game is best played with Internet Explorer 8.

Palindrome - the Lost Generation

A palindrome reads the same backwards as forward. This video reads the exact opposite backwards as forward. Not only does it read the opposite, the meaning is the exact opposite. This is only a 1 minute, 44 second video and it is brilliant. Make sure you read as well as listen forward and backward.

This is a video that was submitted in a contest by a 20-year old. The contest was titled "u @ 50" by AARP. This video won second place. When they showed it, everyone in the room was awe-struck and broke into spontaneous applause.

So simple and yet so brilliant. Take a minute and watch it.

Medan is a nice city with nice people

Hi Mr. Tan,
I'm your blog reader. Sorry to hear about the experience you had in Medan, my home town. This practice could exist in many entry ports in Indonesia.

If I may suggest, exchanging the currency in Changi Airport is better compared to the money changer outlets in Indonesia airports knowing you're foreigner/tourists. We just might bump into business that is trying to survive for the day, hence the cheating come in place.

I have a good impression of Medan. It is a nice city with nice people. The bad experience with the money changer does not reflect badly on the people. I also change money in Jakarta many times, and I have no problem with them. They offer good service and a fair rate.

I did not want to change money at Changi Airport as they will change my US dollar to Singapore dollar and then change it to Rupiah, so I have to pay the spread two times. They are also not fair to customers.

Rechargeable torchlight - 15% discount

The rechargeable torchlight ($6.50) is also eligible for 15% discount, together with my books. Postage is $1 only. Enter the promotion code BLOG to enjoy the discount. Click here to order now

Seminar on class action

More than 90 people have indicated interest to attend the seminar in March that is being organised by the US lawyer on class action in America. If you wish to attend, please give your particulars here.

I am still waiting for details from the lawyer on the date, time and venue. I will give the details when they are finalized. The seminar is free. The proposed class action is on a "success fee" basis, i.e. the investor will share a part of the proceeds with the lawyer for their work. Typically, the share will not exceed 35% of the amount recovered, but could be less, depending on the work that has to be done. However, the lawyer will bear the cost (i.e. expense and time)  if there is no recovery.

However, the American lawyer will only take up the case if the chance of success is fair (and not weak), and there is sufficient amount to be recovered and the culpable party is still solvent. There is no certainty that all these conditions can be met. But it is worthwhile to attend the seminar and hear the lawyer.

I did not organize this seminar. The US lawyer approached me for assistance through their Singapore representative. I am willing to help, as it may be useful to the Singapore investors, especially the holders of the Pinnacle and Jubilee Notes, who wish to seek compensation from the issuers of these notes.

Tan Kin Lian

Immoral profit

Some financial institutions offered partial compensation to the investors and took over the Minibonds. These notes now have a recovery value that is higher than the compensation given. The financial institution had made a profit.

Take this hypothetical example. The financial institution offered 50% compensation on a $50,000 bond and took over the bonds. The bonds now have a recovery value of 70%. The financial institution made a profit of 20% or $10,000, while the investor lost 50% or $25,000. It would be immoral for the financial institution to keep this profit. I hope that they will be honorable and refund the profit to the investor.

Tan Kin Lian

A positive approach towards taxation

Read my views here. Give your views by email to or in the comment here.

Thursday, February 04, 2010

GST is a costly exercise

I attended a 3 hour briefing on GST. My worse fears were confirmed. GST is complicated and costly. For every transaction, the GST taxpayer has to go through a complicated table of rules to decide on the classification, timing, and many other issues. It is so easy to make a mistake and be subject to an offence with penalty.

I hope that GST be scrapped soon. We should go back to higher income tax to collect the revenue needed to run the country (and avoid two layers of taxation, with the complicated rules and compliance cost). In fact, GST is more complicated than income tax.

A businessman should focus his attention on running the business, rather than on collecting GST for the government. He should not be required to spend money to recruit accountants, who are costly, to keep the records to comply with GST.

The accountants love GST as it means work, business and profit for them. The civil servants love GST as it means more job and opportunities. But these means additional cost and hassle to businesses and consumers. What a waste, to spend so much resources on unproductive activities.

Tan Kin Lian

Need for a minimum wage policy

MY HUSBAND is 50 this year. We had a comfortable life until he was retrenched a few years ago. He has been trying to get a job as a driver for the past two years, but lacks the experience.

We have two teenage children and my husband's current job in the security sector does not pay enough.
My husband is willing to learn and similarly, employers must be willing to offer opportunities and reasonable salaries. My husband may be 50, but he still has a lot of good years left in him and is able to contribute to society.

Mary Wee (Mrs)
Reply With Quote

High Notes 5

Dear Kin Lian
Like Minibond payouts can DBS HN5 investors also expect similar payouts.  DBS has been silent and also the case of 200+ invetors who are suing DBS has not come for hearing at the Courts. Any idea when the case is expected to be heard?

You have to check with the lawyer or the members of the class action on HN5. The underlying assets in High Notes 5 is nil, as the money has been used to pay the credit default swap (of which Lehman Brothers was a reference entity that was insured under the swap). Do not expect any settlement like Minibonds.

Financial institution benefited from the settlement

Hi Mr Tan,
I am happy to hear that the residual value for Minibonds are finally out and for some Series, the value are surprisngly as high as more than 70%.

However, I questioned the fair deal in MAS for handling the whole saga. Many victims, whom I know, were awarded less than 50% after the judgement in Fidrec. They had transferred all the Minibonds to the FIs. In that case, should Singapore FIs gain from this saga ? Unlike HK, the FIs have to refund back to and not profit from anything. What should we do in this case ?

For my case, it is very clear in the ground of hearing (verdict) that Maybank did mis-sell the Minibonds to me. Now, with all my Minibonds transferred to Maybank, as ordered by Fidrec's judge, Maybank is better off than me. In additional to the costs I have to pay Fidrec, we have to go through all the stress through the hearing, but end up less well of than FI. What should victims like us do ?

You should ask the Financial Institution to refund the difference back to you. It is only fair and honorable for them to accede to your request.

Pinnacle and Jubilee Notes

The Minibond investors are able to get back a fairly satisfactory payback on their investments because the underlying asset has some value, in spite of the insolvency of the issuer Lehman Brothers.

In the case of the Jubilee and Pinnacle Notes, the values of the underlying assets has depreciated as Lehman Brothers was named as a reference entity or the designated number of entities have entered into a credit event. There is little hope of recovery from the underlying assets.

The issuers of these notes are still around. The investors can participate in a class action in the USA to see if there was wrong doing by the issuers. You should attend the seminar that is being organised in March. Click here.

Tan Kin Lian

Voting in general elections - survey results

This survey is highly popular. 93 people participated within 6 hours. Results are shown here.

Voting in the general election

How will you vote in the next general election? Give your views here.

Overcharging by lawyer

There was a case of a lawyer who overcharged the client on handling a divorce matter. The client complained to the Law Soceity. The lawyer agreed that the fee should be $X and that he had billed the client for more than twice the amount. What can be done to deal with this type of issue?

The Growing Underclass - Jobs Gone Forever

Read this article. Some jobs are gone forever, and will never come back. The workers need to have new skills but that will take a long time to acquire, and new jobs (with the new skills) are uncertain. Home ownerhship adds to the problem, as they cannot afford to sell their existing home (due to drop in value) and take the financial loss. While this happens now in America, it tell us that Singapore may face the same situation.

Improve productivity in Singapore

The Minister for Manpower has said that Singapore firms need to improve their productivity and should not rely on low cost foreign workers. If they are unproductive and cannot survive, they have to move out of Singapore.

There has been talk about improving productivity for the past two decades. How far have we gone in this area? What can be done to have a sustainable improvement in productivity?

Let us identify some of the issues to be addressed:

a) Many organisations improved their productivity by pushing the work on to their customers. Many government agencies adopt this approach and pushes the burden to the citizens. For example, by asking the taxpayers to do e-filing, the work is done in a less productive way and take more time by the taxpayer who are not familiar with the website.

b) Many problems are not solved effectively because of the fine lines that are drawn between one agency and another. Much effort is spent on identifying who should be dealing with the problem, rather than how the problem can be dealt more effectively.

c) There is excessive emphasis on security and audit, which cause a lot of unproductive work. Most people want to play safe, and forget that these measures add to the cost, especially in paying consultants who exaggerate the risks.

If these issues can be addressed, we can reduce a lot of wasted work. The easiest and most effective way to  productivity is to cut down waste.

Please share your views.

Tan Kin Lian

Wednesday, February 03, 2010

Rechargeable lamp (with locator) - delivery $1

You can now buy the rechargeable torchlight (with locator lamp) for $6.50 from internet shop and pay a delivery charge of only $1 (previously $7). You do not need to spend money on battery as the rechargeable battery can be recharged using electricity (12 hours of charge to last about two weeks). You can switch on the locator lamp at night, to make it easy to look for the torchlight. Suitable for use at home, for travel, and for seniors.

You can also buy books at a special discount of 15% during February. Order here.

Calculate the rate of interest

Here is how you can calculate the rate of interest using Excel XP
Insert > Function > Rate
Enter the following
Number of periods
Regular payment
PV (i.e amount of loan)
FV (i.e. accumulated amount)
Type (0 - payment at end of period, 1 - payment at beginning of period
Enter negative amount for PV and FV and positive amount for regular payment
This will give you the interest rate per period. You can convert to an annual rate by multiplying the number of periods in a year.
The function in Excel 2007 is different, but the concept is the same.

Minibond Payout

Hi Mr Tan
Upon hearing the news that MB is paying all the investors some amount next Friday, I did a search and found this web page about the percentage for each series.

Please do me a favor and publish this on your blog, I don't know how to reach everyone to tell them the good news. When they click the link below, they will know how much they can get back.

Thank you for your help to all of us these long days, I believe that all of us will forever remember you. I still lose about $35K and don't know what else I can do to get back my "blood and sweat" money ???


Class action in America

An American legal firm, specializing in class action suits, is holding a seminar in Singapore in March to explain their service in assisting investors to seek compensation under US securities laws for their investment losses due to wrong doing by the financial institutions. More details about this service is shown in this video.

This firm will only collect a fee based on successful outcome of the legal action. If there is no recovery, no fee is payable. More details of the seminar will be announced later, when details are finalized.

Please provide your particulars in this form, if you are keen to attend the seminar.

Two casinos

Here is an upbeat assessment of the two casinos. Hope that it materialises.

Interest payable on loans

I am doing some research on interest rates payable on home, car, computer, study and other loans.

Can you send to the details of loans that you have been offered recently as follows:
Date of offer
Financial Institution
Amount of loan
Purpose of loan
Number of repayments
Amount of monthly repayment

I will analyse the effective interest rate that you are paying for the loan.

FISCA - Member's benefits

FISCA will be organising a talk on "Coping during a Financial Crisis" for its members. Each member will be given a free copy of my book, "Practical Guide on Financial Planning". The talk will be for 1 1/2 hour, including questions. Details will be sent separately to members on date, time and venue. A talk will be held once each month.

I wish to thank FISCA members for your support. So far, the activity of FISCA is rather limited due to lack of resources. I hope that the talk and book will be appreciated by members. We can also organise members in groups to get to know each other.

Tan Kin Lian

Good response for Financial Planning book

I have received many orders for my Financial Planning book. I wish to thank the buyers for our support. One person bought the book to present to a nephew. This is a good idea, as the young will find it easy to understand, practical and useful. It can save them from wasting a lot of money by buying the bad products.

I am offering my books at a discount of 15% under the promotion code - BLOG. Several buyers did not enter the code, and had paid for the full price. I am sending to them my Shape Quiz (retail price $2) for each book that they buy at the full price. I hope that they will enjoy it.

A few people have indicated that they wish to show their support by buying my book. I thank them for this fine gesture. Help me to give the book to your family and friends, as it will be useful to them.

To order, click here.

Tan Kin Lian

Practical suggestions to improve a call center

Many customers find it difficult to access the call centers of large organisations, such as banks, telephone companies and government departments. They have to wait a long time for the call to be answered, and had to go through a maze of automated messages.

Here are some practical tips to improve the situation:

a) Have different telephone numbers for different languages. There is no need to ask someone to indicate the language, as it is identified by the specific number.

b) The first question for the automated message should be "press 1 to talk to a person or 2 to go through the automated system".

c) The next question should be optional "Enter your account number if available, press 0 to bypass".

With this simple change, the customer experience would be improved tremendously, without any additional workload for your call center.

Here is another tip, Train your call center staff to identify the routine inquiries (which they can handle) and the specialized inquiries (which they cannot). For the specialized inquiries, get the name and contact number of the customer and get the specialized staff to call back. Most people have mobile phones and would be happy to receive the return call.

Tan Kin Lian

Practical ideas to improve a corporate website

I had a difficult time in filing my GST return. I had to go through the IRAS spiderweb (a new term introduced to me by a commenter in my blog) that involved a few dozen clicks before one comes to the correct webpage. I could not find the webpage to submit my return, even with the guidance of an IRAS helpline officer. She could not find the webpage also, after guiding me on two attempts.

I was able to access the webpage later in the day, through the help of the another more experienced officer in IRAS. The most probable reason for the earlier failure was that the form was not yet activated earlier. Why is there a need to "hide" a blank form, i.e. to submit the GST return, through complicated structure of access security?

This type of spiderweb is not unique to IRAS. It applies to big organisations, such as banks and most government departments and agencies - such as LTA, CPF.

I wish to give some simple tips for these big corporations, which need a complicated website to serve many purposes and that need more than 100 forms.

a) Have 1 tab called FAQs. This should drop down a list of all the FAQs needed to guide your staff and customers in the work of your organisation. Each FAQ is identified by a number and description for easy asess, such as "GST23: Filing a GST return" or "IR8A: Filing your personal income tax".

b) The forms that are required to complete any task can be linked to the relevant FAQ. A click on the FAQ will display the form.There is no need to ask the customer to log in (which is another big hassle. Just give them the relevant form to fill in.

c)  The form (including the particulars of the person who prepared it) can then be stored in the server with the SingPass of the person who is required to sign the form. This allows a staff or outsourced accountant to prepare the form and for another person, e.g. the director, to sign the form.

d) This signing person can log in with the SingPass and locate all the forms that require his signature.  This is similar to the real world. The director has someone to do the work and presents the physical form at his desk for signature. The director does NOT type the entries in his form or search the filing cabinets to get the form.

I hope that these suggestions will be useful for big organisations to make it easy for their customers, including unwilling customers such as taxpayers, to access their website easily and conveniently.

Tan Kin Lian

Tuesday, February 02, 2010

Social services and taxation

The citizens of a country have to decide on the types of social services to be provided by its elected government and how the cost of these services should be paid for. In some countries, the government provides generous social services, such as old age pension, unemployment benefit, health care, education, and collects high taxation to fund them. In other countries, the government has a low rate of tax and provides minimal services, leaving the people to pay for these services in the private market.

There are various ways of collecting tax to pay for the social services and other cost of government. The most popular form is income tax (on earned and investment income) and levies but an increasing portion is now through consumption tax (such as Goods and Services Tax).

Many countries provide generous benefits but collect insufficient taxes to pay for these benefits, leading to a budget deficit. Some countries collect a lot of tax but provide low benefits, leading to a huge budget surplus (such as Singapore).

What are your views on social benefits and taxation? Give your views in this survey.

Order for Financial Planning book

You can place an Order for my book, "Practical Guide on Financial Planning" at the Internet Shop now.  I have received many orders during the past two days.

 Enjoy a 15% discount when you buy this book or other books during February by entering the Promotion Code - BLOG. Click here.

Help the singles with affordable housing

Letter from Joseph Ang

Under the existing HDB policy, singles are not allowed to buy or rent flats directly from the Housing and Development Board (HDB), unless they partner with another single person and apply under the joint-singles scheme. In times of such economic uncertainty, when the economy has not fully rebounded, should such a policy be re-visited, so that singles can remain independent and maintain their sense of dignity?

I hope HDB will re-consider this policy and allow individual singles to rent or buy directly from HDB with minimal waiting time between application and allotment of flats (3 – 6 months at most). The sense of security of having roof over the head is very important to all Singaporeans – whether they choose to marry or remain single.

I personally know of a number of cases where singles rent from the open market as their extended family is not able to accommodate them for various reasons both personal and economic. The open-market room rental which is $450 per month, is very high to a single who is earnings may be limited. Many usually will suffocate for having to pay for public transportation, meals, and other daily needs, on top of the rent from the open market. And what’s worst is they don;t know where to go for help. The families in crisis can go to the family service centres, but where do the singles go to?

Being single is by no means easy, but it is nevertheless a lifestyle we have chosen for ourselves.

While I appreciate the pro-family policies of the government, the government should not forget singles in the process of being pro-family. Singles after all, do contribute to the economy of Singapore as well. Despite this, we are discriminated as ‘third-class’ citizens, and treated worse than a foreign worker, who at least has a dormitory to go to at the end of his hard day’s work.

With only a single income (as compared to at least double incomes in a family) and the ever rising valuations and cash-over-valuations, many singles will find it extremely difficult to buy a HDB flat from the open market.

Of course, HDB has the joint-singles policy for HDB rental flats; but what happens if a single person is not able to find another suitable person to co-share the rental flat with him? Should he be homeless because of this?

I personally know of quite a number of singles who are already at their wit’s end. Most are earning less than $1700 per month. How can they survive if they continue to rent from the open market? What about the singles who earn even lesser?

The newspapers reported recently that there are two block of flats made available for the foreign workers who will be coming here – presumably to work in the Integrated resorts. It does not make sense that foreigners will have ready HDB flats to move in to when they come to Singapore, but a single Singaporean like me is denied affordable housing.

The government should stop only talking about the ‘Singaporean first’ policy, but more importantly make it a practice – whether they be in a family or are just singles by choice!

Joseph Ang

Crackdown on Tax Avoidance

America is suffering a big budget deficit. It is not collecting enough taxes to pay for the cost of government and the social programs. The deficit is partly due to the weak economy, which reduces the tax revenue and the cost of the economic boost the economy.

An important contributing factor (which the Obama Administration is now targeting) is the tax avoidance by American companies which use a variety of ways to avoid tax, using "tax vehicles" and taking advantage of tax loopholes. They shift their profits to countries with low tax rate, including Singapore.

By reducing our income tax rates to attract these companies, Singapore has to introduce the Goods & Services Tax to make up this shortfall. It has its other negative consequences for the people and for the cost of doing business. GST is another layer of tax and is wasteful and costly to administer.

America and other developed countries are taking action on the tax avoidance. While Singapore will lose its value as a tax hub, I believe that it is better to have a fairer world, and countries do not try to compete on offering "tax incentives" to businesses to reduce or avoid paying tax.

I hope that Singapore can go back to the days of higher income tax and removal of the wasteful Goods & Services Tax (GST)

Tan Kin Lian

What the General Election is about

Read this view by Dr. Wong Wee Nam.

Filing my first GST return

I "volunteered" to be a GST-registered business. I had to file my first GST return by end January (deadline has since passed). I had a difficult time.

I had a lot of trouble to figure out the complexity of classifying my sales into three categories - taxable, zero-rated, exempt. I also had to figure out which of my purchases are allowable to be deducted. I had to fill in figures into 13 boxes. They are explained in a 8 page Guide.

Finally, I got the figures sorted out. I tried to lodge my return last week, before the deadline (failing which I had to pay a fine).

I found that I could not file my GST return as IRAS insisted that it has to be done by e-filing. Sorry, I need to apply for an "access code" which would be sent by mail to my registered office in 4 days time. The mail did not arrive and I had to call IRAS to check. Finally, it arrived at my registered office , which is different from my operating office (sorry, cannot send by e-mail for "security reasons"). I had to authorize my registered office staff to open my mail and send the access code to me by SMS. Forget about security!

I tried to submit my GST return today, and it was "hell". I had to navigate through a complicated IRAS website. I found "myTaxPortal", which asked for my NRIC, company GST ID and IRAS PIN. I tried a few combinations and failed. I had to call the IRAS helpline.

Well, you know about IRAS helpline. You had to listen to a few minutes of automated messages, before you get to talk to a person. Often, you are unsure if you can ever get to talk to a person!

Finally, I talked to a person. She guided me through the complicated IRAS maze (sorry, website). It was impossible for an ordinary person, like me, to ever get through this maze on my own. She led me through one click and another. Finally, she said, "Can you click on the form called GST return". There was no such form.

Sorry, she had to check and call me back. She did. Another round of guiding through the IRAS maze. Got stuck again. A document that was supposed to be there could not be found. She said that it must be "intermittent" problem.

I asked her, why can't IRAS allow the taxpayer to fill up a form and fax it to IRAS? Surely, it is not expensive for IRAS to employ people (and there are many unemployed people keen to have a job) to do data entry? Why force the taxpayer to go through this type of trouble in submitting a GST return?

IRAS insisted that a volunteer GST taxpayer has to attend a 3 hour course. I was registered for the next course due in a few days time (i..e. after the deadline for submission has passed). I could not attend an earlier course as it was fully taken up.

I hope that the government officer who monitors this blog will take this feedback and pass it to senior people in IRAS and Ministry of Finance.

Tan Kin Lian

ST Online Forum: Hit hard by insurance policy termination

I BOUGHT three policies from Prudential for my children 15 years ago. Recently, due to a need for cash, I decided to terminate one of the policies.

To my shock and disappointment, the amount I am getting back upon surrendering the policy equates to less than 50 per cent of my contribution in the last 15 years.

I can understand if the early termination results in an 80 per cent return, but 50 per cent?

The customer service officer told me that given the crisis last year, policyholders did not have good bonuses and therefore the drop in value. So my questions are:

How can the year's bonus affect 50 per cent of my investment because a good bonus does not double my principal sum.

Is there an organisation in Singapore that ensures that policyholders are being protected?

As much as there are risks, what about those who have invested for 30 years hoping to get a good return only to be given the same answer?

Will the authorities please look into this so all of us who hope to retire well by investing in insurance policies will not lose a substantial amount of our hard-earned cash.

Sabrina Tan (Mdm)


MAS should be the body that is responsible to look after the interest of consumers and make sure that they are fairly treated, especially on the declaration of bonus. I hope that MAS will ask Prudential to given an explanation and check if the explanation is acceptable. I am surprised that the cash value is only 50% after 15 years. It should have "broke even" by now.

MAS should not refer this matter to FIDREC. It should be investigated by MAS, as it is the core of the operation of the insurance company.

Car loan for 60 months

Dear Mr. Tan,
I am responding to your post on your blog - which is always a great pleasure to read and to follow, by the way.

Date of offer: July 2009
Financial Institution: (insurance company)
Amount of loan: $55,000
Purpose of loan: car loan
Number of repayments: 60 months
Monthly repayment: $1,031 for 59 months, and $1,048 for the final month.

The interest rate which they quoted me was 2.5%, and I would like to find out what is the effective effective interest rate.

The total amount that you have to repay is $61,877. After deducting the loan of $55,000, you are paying interest of $6,877 for the 5 years. This works out to a FLAT interest rate of 2.5% per year.

However, as the loan reduces over the period of 5 years, the effective interest rate is higher, at 4.73% per year. I consider this interest rate to be acceptable for a 5 year loan.

Adopt a consistent approach

This simulation game shows that if you adopt a consistent approach in picking stocks, you will be able to get better results in the long run. There may be ups and downs in some years, due to volatility, but the consistency will produce positive results. Some good approaches are:

a) choose the stocks that perform well in recent years, as they are likely to continue to trend
b) choose low PE stocks as they are likely to revert to the average

These are theories that need to verified by practice. This simulation game allows you to try the theory over many years, and see if they work for the model. In real life, you also have to test the model that works well and stick to it.

Click here to try the simulation game on stock picking. Read the guides and share experiences of the Champions (i.e those who reach Level 9).

Foreign currency payments on credit cards

When I pay in a foreign currency by credit card, I trust that the bank will charge a fair conversion rate. But, I never spend the time to check on the conversion rate that they use. Someone told me that the conversion rate is rather high for the consumer. Do you have any information about this? Please share it.

Football on Pay TV

I am glad that Singtel and Starhub are working together on a joint bid for FIFA World Cup. I hope that they can reach an agreement with FIFA so that the World Cup can be broadcast to Singapore homes through both platforms. That would be good for soccer fans in Singapore.

If the operators and FIFA cannot agree on a fixed price,  I suggest that they work on a percentage sharing of the revenue from each subscriber or an agreed amount per subscriber (to be paid to FIFA).

Perhaps, Singtel and Starhub can get together to discuss how to make the English Premier League available to many homes who are cuurrently on Starhub. Starhub has offered to do the broadcast for free. I hope that Singtel will take up this offer. It will avoid the pain to Singtel of installing so its new set top boxes to many homes, which is likely to cause a lot of technical and capacity issues.

Tan Kin Lian

Bubble in commodity funds

This article explains a potential bubble in commodity funds. It involves complex financial engineering, created by investment banks to earn a fee. This is similar to the debacle on the credit deriviatives.  It is better to invest in indexed funds that invest directly in the underlying stocks. Derivatives should be avoided.

Lessons from Canada about banking

Read this report. Canada has a strong agency to product consumers on financial matters. This has kept Canada away from the mistakes made by other countries.

Monday, February 01, 2010

Pricing of HDB flats and subsidy

Read this letter.

Political risks in Asia

This article explains five key political risks in Asia.

Personal savings

This writer wants to take care of his own money, rather than let the Government decide on how the money is to be spent.

Cash loan - 16% effective rate

Dear Mr. Tan,
Financial Institution: (bank)
Amount of loan: $1500
Purpose of loan: Personal use
Number of repayments: 12
Amount of monthly repayment: $136.10

You are paying a total interest of $133.20. This works out to 8.9% of the amount that you have borrowed. However, as you have to make monthly repayment, the outstanding balance of the loan reduces monthly. Based on the average amount that has been borrowed, the effective interest rate is 16% per annum.

The bank pays 0.5% to its customers on their savings. They charge 16% on loans given to other customers, giving a hefty margin to make a good profit for the bank.

Creating productive employment

Someone said that the selling of financial products, e.g. insurance, properties and investments, is necessary to create employment. Unfortunately, these activities are unproductive. They do not improve the outcome for the economy or lead to a better life for the people. They may create asset bubbles, which make some people rich. But, at a future date, the asset bubble will burst and many people will become poorer.

What are productive work? Here are my views:
- build houses for people to live in
- build roads and public transport
- more teachers to give proper education to the young
- more doctors, nurses and carers to take care of the sick and the weak
- more policeman to ensure security, law and order and reduce crime (including cheating)
- more people to work in restaurants and food courts
- more artists to provide leisure, culture, art, entertainment
- fewer bankers to manage the savings and investments for the economy
- farmers, fishermen, factory workers, retailers

We still need bankers, but we do not need an over-sized financial sector that is based on speculation and trading.

We also need to change the competitive system, and ensure that the available work is distributed more fairly. It is better to have more people working (for lesser hours), rather than fewer people working (for longer hours) while a high percentage is unemployed. We also need more people to have sufficient income, so that they can spend and create useful employment for others.

If people have more time and financial security, they are able to send their time on family, friend, art, culture and religion. They will then be willing to raise children for the future generation - a KPI that Singapore has fared poorly.

Tan Kin Lian

GST - who benefits and who loses?

Who benefits from GST:
- accountants, lawyers, civil servants, as more jobs and business are created for this wasteful work
- big businesses and high income earners, as GST is accompanied by lower income tax (personal and corporate)

Who loses from GST?
- consumers, as GST adds to the cost of living through wasteful and unproductive work
- lower income people, who has to pay GST and do not benefit from lower income tax
- the economy, as the increased cost of doing business reduces competitiveness.

Someone told me that many businesses that were engaged in entreport trade decided to move their activities outside of Singapore, after the implementation of GST. I do not understand why, as there is no GST involved in exports. Perhaps, it is due to the fact that compliance with GST adds to the cost of doing business.

I hope that the Finance Ministry can carry out a review on GST in Singapore - is it really necessary or is it wasteful (as I have claimed)?

Tan Kin Lian

GST is wasteful

Question: What is worse than income tax?
Answer: Income tax and GST.

It is wasteful for a country to have both income tax and GST. It lays a heavy burden on businesses to keep two sets of accounting records to report their earnings (for corporate tax) and for GST. This adds to the cost and complexity of doing business. It is wasteful for a country to collect tax (GST) on every item of transaction every day.

IRAS claims that GST is simple. That is not correct. You can read the GST instructions in IRAS website to know that it has many rules that have to be followed to prepare a GST return - similar to the complex rules needed to prepare income tax returns.

Critics argue that GST is unfair to the lower income group. I agree, especially as they do not earn enough to feed a family. To top it up, GST is also an inefficient  tax, adding unnecessary cost to business, that has to be passed to consumers.

I am aware that any Government needs to collect enough tax revenue to fund its operations and take care of the country. Tax is necessary and important. But, we need to have more efficient and fair ways to collect tax. GST is one of the worst methods that has been devised, especially as it is implemented as an additional layer on top of income tax (personal and corporate).

Tan Kin lian

Character building

Singapore Management University has a statement, “Character building, an integral aspect of the SMU education, aims to build the values of ethics and social responsibility.”

Character is the aggregate of features and traits that form the individual nature of a person. It refers to the moral or ethical quality of a person. They include qualities of honesty, courage, integrity.

Ethics, also known as moral philosophy, seeks to address questions about morality, that is, about concepts of good and bad, right and wrong, justice and virtue.

Social Responsibility
Social responsibility is a responsibility of government, business or individuals towards society at large. There is the responsibility to avoid breaking the law and also to act proactively to benefit society.

My Personal Values
I wish to share five values that define my personal character. They are:
Public Service.

I shall write more about these values in subsequent postings.

Improve your negotiating power

Someone said that the car salesman charges a higher price if you pay by cash and a lower price if you take a loan to buy a car. This is the ruse used by salesman.

The consumer should exercise your negotiating power. If the salesman wants to charge a higher price for paying cash, go and look for another car dealer. There are many salesmen who are hungry to get an order. Do not allow the salesman to force you to take a loan and pay interest, when you have the cash to pay outright.

Before you buy any product, always shop around and get a few quotes. You will have a stronger negotiating power.

Tan Kin Lian

Sunday, January 31, 2010

Practical Guide on Financial Planning - book available now

My book, Practical Guide on Financial Planning, will be in the major bookstores by 15 February or earlier. The retail price is $12.

This book is written for the ordinary consumers, so it is easy to understand. It gives tip on saving and investment. More importantly, it advises consumers to avoid financial products that can take away two years of their savings - amounting to several thousand dollars. Invest $12 and 4 hours and have a better financial future.  I have just read the printed book, and it looks better than I had earlier expected.

It is available now for purchase from Internet Shop (

Tan Kin Lian

Pressure to develop the financial market

The pressure to develop the financial market caused the fiasco in the credit linked notes, according to this article. This is true, not only in Hong Kong but in Singapore as well.

Low cost housing - a model for economic development

The Singapore experience is a useful lesson for developing countries in their economic development.

During the initial two decades, the Government built low cost housing for the people. It creates employment and gives the people a chance to work hard to own a property. The economic growth generated by the housing sector flowed to other sectors of the economy. The Government enforced a high savings rate to generate funds for this sector. It even implemented land acquisition to facilities the development. These were tough policies, but they produced a good outcome. This was leadership at its best - to set the priority for the country and to mobilize the people towards the priority goal.

The next two decades is a lesson on what to avoid. The Government decided to free up the property market under the "asset enhancement" policy, which created a bubble in housing prices. The ordinary people, who own only one property did not benefit from the appreciation, as they still need a place to live in. Only the few who emigrated or downgraded to a smaller property were able to enjoy the appreciation. Young people have to pay a higher price for a property which take away a larger share of their earnings.

The parties which benefited are the property developers and owners of land and capital. They enjoyed the  appreciation in property prices and become billionaires on the debt burden carried by the rest of the population.

Life would have been much better for Singaporeans, if the property prices had been kept stable, rather than be allowed to appreciate in the "free" market. Actually, there is no free market, as the supply of land is held by a few parties, properties are too costly to be transacted freely, and consumers have insufficient information  (leading to speculation caused by greed and fear). This is the worst case of a "free" market that is not controlled and exploited by certain parties.

Tan Kin Lian

Universal coverage for health care

Thailand has an interesting and useful experience in implementing universal coverage for health care in a pragmatic way. They adopted a lot of common sense ideas. Read this article.


If you sell a product that earn you a high commission and you know is bad for customers (e.g. you would not buy the product for your own use), it may still be legal (i.e. you have observed the law strictly to the letter), but you are acting immorally (i.e. to know right from wrong, good from bad).

Many years ago, society observed moral and ethical values. Today, society has accepted immoral values in the pursue of the capitalist profit. They created terms such as "caveat emptor" and "open your eyes" to justify the immoral pursuit of profit. Even the leaders set a bad example by benchmarking their salaries to the top corporate profits, which may be obtained through immoral ways.

Tan Kin Lian

Small country can find its niche

Hi Mr. Tan,
In view of global competition and Singapore's small size, is it really possible for Singapore and its citizens to slow down?

Can we really afford to work at a much slower pace like the Europeans? Isn't it better to work hard and hence improve our learning curve on how to work more efficiently and effectively? Can one learn how to be more efficient and effective by working at a slower pace? (I do agree that balance is good, but can we afford to do so?)

Will the MNCs choose Singapore over China or their home countries if we do not offer them a competitive advantage?

While a lot of Singaporeans would like to have a "slower pace" of lifestyle. In the long term, can we really afford to do so? If we do so, will we need to return to Malaysia?

I am really not sure. It is a 
constant dilemma. Competition vs Coorperation. Environmental Conservation vs Rapid growth and innovation. Drive and Industry vs Balance and Comfort.

But I am sure about a few things:

1. We need to have the best brains to run the country - Especially for a small country like Singapore. Let's face it. Some people can never think as well as others. Even if the desire to serve at the top level is strong. One has to realize his strengths and weaknesses. Otherwise, it might bring about long term and irrecoverable damage to the country. But whether or not, the best brains' values and attitude towards certain things need to be changed, I'm not sure. Maybe that can be improved on.

2. Unnecessary and excessive competition that leads to resource wastage and detoriation of ethics should be frown upon.

Mr. L

There are many small countries in Europe and they do well without using the competitive policies that are adopted in Singapore. I think that a small country can do well by finding its niche.

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