Saturday, October 15, 2011

Bankrupcy law change could help consumers recover: Experts

Some experts have recommended a change in bankruptcy law in the USA to forgive the debts of consumers (i.e. student loans, mortgage loans and consumer loans) and help the economy to recover, as stated in this report.

This is a dangerous suggestion that has moral hazards, but should not be written off entirely. Already, matters have become very difficult and bad! Anyway, the banks will not agree to write off the loans and will fight hard against such a law.

But I like to suggest this way out. If we study what is happening in Greece, the solution is for the banks to take a haircut and be paid say 50% of what they are due. In the case of consumer loans, the bankruptcy law could allow them to apply for a special fund from the state to pay off the loan at a 50% discount. The money borrowed from the state will have to be repaid in the future, but at a low rate of interest (instead of the usury rate charged by the banks). This will give consumers time to pay off their loans gradually and to rebuild their lives.


California Teachers Pension Fund takes a stand

I congratulate the California teachers pension fund for taking a stand against the obscene practices of over-paying CEOs of large companies. Read this report.

Trickle down economics

Quote in my blog: Republicans (in the USA) are fervent supporters of 'Trickle-down Economics' which is proven to be a fraud. Guess who else is also a die-hard believer of this economic nonsense? 

Here is an explanation of "Trickle down economics".

Question: Who is the "die-hard believer (in Singapore) of this economic nonsense"?

Friday, October 14, 2011


America is expected to see a period of stagflation, similar to the 1970s. It is a period of economic stagnation, i.e. no economic growth, high unemployment, coupled with a high rate of inflation. The lack of economic growth means that the high rate of unemployment will continue to be high, and the cost of living will increase, due to inflation. It will be a difficult time for many people. The problem is that this stagflation is likely to spread to other countries, due to the global environment.

What is the cure for stagflation? The economic stimulus adopted during the past three years did not seem to work. We need a new approach.

Lack of demand is cause of unemployment

The Republican politicians blame Government regulations for hampering the creation of jobs. Business owners disagree. It is the lack of consumer demand. Read this report

Broker's calls on the 30 stocks of Straits Times Index

The FISCA website has a summary of the recommendations of brokers (buy, sell or hold) on the 30 stocks in the Straits Times Index.  These are the blue chips of Singapore. This is now available for viewing by members and non-members. In future, this type of information will be provided only the members of FISCA, after they have logged in.

Here is the direct link to the article.

Tribute to our teachers

What does a teacher really do? Here is a tribute to our teachers. 

Promoting fair competition

When a few maid agencies get together to agree on the salary for maids, the Competition Commission in Singapore came hard down on them for infringing the competition law.  I wonder if action is being taken against the small businesses that cannot afford expensive lawyers to fight their case. I also wonder if the illegal practices are being following by big businesses that have a much bigger impact on consumers.

Read this story about the call by the law makers in USA to ask the Attorney General to investigate the practice of the banks.  Maybe our law makers and regulators in Singapore can also be more active in looking after the interest of the people, so that the cost of living (which touches the pockets of all Singaporeans) can be moderated?

Oil speculation and cost of living

The financial industry claim that they help to make the market more efficient by getting the right price for each product - using the efficient market theory. This is theory. In reality, the speculation in the market gives the chance for the professionals to make large profits at the expense of the consumers. This article explains what happens and the effect on households. This is why I support the effort of the US regulators to place controls on financial speculation by large banks and hedge funds. Our leaders in Singapore need to realize what is really happening, when they promote Singapore as a financial hub.

A better yield for CPF members

In 2004, Lee Hsien Loong, the then Finance Minister, promised a better yield for CPF members by introducing private pension schemes. This suggestion was covered in this report.  If he had followed through with his suggestion, Singaporeans would have been better off today.

Remaining anonymous

I suggested in my Facebook that people should give their views with their names, rather than anonymously. Walter Oh replieed:

 "This is not any ordinary state, the regime here is hypocrite to the core. They may laugh/smile at face value, but behind your back, planning otherwise ... Under such climate. it is better for people to remain annonymous, until a day, where Singapore is really democratic, and the regime willing to listen to alternative voices ... Take the recent President election as an example, why must Singaporeans vote for PAP sanctioned candidate, the brain washed electorate here cannot even distinguish between sincere people willing to go the extra mile from those who just want to keep/maintain status quo ... End up, who's at the losing end, Singaporeans ..."

Thursday, October 13, 2011

Spending education dollars wisely

In America, many college graduates chalk up a study loan of US$30,000 and could not find a job. The amount of bad student loans is becoming another problem for the banks.

In Singapore, the local students are able to get subsidised education in the polytechnics and universities, so a large part of the cost is borne by tax payers. However, the students are also worried about their ability to find a suitable jobs.

We face a different type of problem in Singapore. There is high job hopping, during good times. It is wasteful for employers to hire local workers, train them and lose their services in a year or less. Another source of wastefulness is that many young workers do not work in the area of study. For example, many engineers work as insurance or property agents!

We need a better system of  managing our education dollars and fitting students into the right jobs, so that their education and skills are put to good use. This is how a competent and productive workforce is developed. Our current approach is quite wasteful.

CPF scheme - proposed changes

We used to have a scheme that Singaporeans were proud of in the earlier years. Over the years, the CPF scheme had became convoluted, confusing and produced bad outcome for the citizens. It is time to review our CPF system.

Here are my suggestions to make the CPF scheme more attractive, simple and flexible to serve the needs of Signaporeans. 

Taking care of the elderly

This article shows how different countries take care of their elderly. We need to review the approach adopted in Singapore, which is complicated, convoluted and not effective.

Low mortage rates are a ruse

This article explains that the low mortgage rates that are being advertised in America are deceiving the public. Only the higher income people are able to enjoy them. Most borrowers, especially at the lower income groups, end up paying higher rates or are not able to access these low mortgages. This is another example of the failure of the free market system and a case for stronger government regulation.

Excessive risk taking by hedge funds

Hi Kin Lian,

I've read your articles on hedge funds. I agree with them. Many of them take excessive risks to register profits for their funds. When these fund managers make a huge profit, they do get rewarded handsomely with a big bonus.

However during years when they make huge losses(they usually do), their clients bear the brunt of these loses. Fund managers never have to give back their bonuses. They may or may not be fired. If they are fired, they can go to another fund and advertise themselves as making millions years ago.

These fund managers probably do not have to declare to their new employers  their huge loss. This is due to the secrecy of many hedge funds.

Book review - Get Value from Your Life Insurance

Here is a book review by an ex-Investment Banker.

The book is available from

Wednesday, October 12, 2011

Meaningful jobs for a developed economy

Here are the meaningful jobs for a developed economy - to teach the young and to take care of people of all ages, including the elderly. They add value to the lives of people and do not make earnings at the expense of other people (i.e. by making them poorer). We need to have fewer people working the the financial and property sector - creating asset bubbles, and more people doing real, meaningful work. Here is a message to our political leaders!

The goals of the Occupy Wall Street Protests

The goals of the Occupy Wall Street Protests can be summarized in this statement: Some protesters are upset about taxation; for others, the big issue is the high unemployment rate. Or corporate greed. Or the distribution of wealth.

These goals apply to Singapore as well. Read this report for more details.

What to look for in an endowment policy

At the CNA program on financial planning, a panel speaker said that consumers should look at the guaranteed and the non-guaranteed portion of the benefits under an endowment policy.

This is only partly true. The consumer should also look at the following figures (available from the benefit illustration):

a) The distribution cost
b) The effect of deduction.

The consumer will be shocked that the distribution cost is usually more than one year's premium. What is this figure? It is the amount taken from your savings to pay the insurance agent. Imagine that you work hard to save $6,000 a year. Do you want more than $6,000 of your savings to be taken away to pay the agent?

What does the agent do for the consumer to earn such a large sum of money? Frankly, the agent does not help the consumer to get a higher yield. The consumer can get a higher yield on his or her own by investing in other more appropriate investment products - as explained in my book on financial planning.

To understand what happens when you buy a life insurance policy or an investment linked policy, you can read my book on life insurance.

These books are available from You enjoy a discount when you buy from i-shop. More importantly, you can save a lot of money by avoiding the wrong financial products.

FISCA Research on bank services

The FISCA website has an analysis of the interest rate offered on fixed deposits and the interest rate charged on HDB and private properties charged by the banks in Singapore. It also shows the terms offered on their credit cards. This information is available to FISCA members after you have login.

Here is the direct link to the research page - available to non-members who provide their email address.

CPF - my views

Many years ago, I was proud of our Central Provident Fund system. It was simple and good for the people. It allowed them to accumulate their savings for old age. Later, it was used to purchase a HDB flat at an affordable price.

The CPF system started to be changed, for the worse, after 1985. Many changes were introduced that had negative impact on the scheme and produced worst outcome for the citizens. Today, I can only say that our CPF scheme is complicated, convoluted, confusing and is not producing the right outcome.

I will be writing on what the changes that I like to see in our CPF scheme, that will make it good for the people, and for the Government. 

I want to say something about why things had turned out to be so bad for the CPF. The people who manage the CPF, i.e. the Ministry of Manpower (and its predecessor ministry) and the policy planners (i.e. the scholars) were not practical people. They were planners. 

Worse, they were too arrogant to consult the experts in the field. As an actuary and the head of a life insurance company, I could give them some useful ideas - but they were too proud to ask me or to discuss my suggestions (even after I wrote to them). They prefer to find their own solutions - in their ivory tower. These planners later become recruited as ministers in our Government and continue the same approach. 

This is the type of system practised in Singapore that has produced convoluted systems, not only in CPF but in health care, immigration and many other areas of our life.

CPF - views by Lucky Tan

Lucky Tan gives a rebuttal to the points made by Minister of State for Manpower - Tan Chuan Jin.

 Share your views here.

Tuesday, October 11, 2011

Occupy Wall Street - Paul Krugman

Inequality in Singapore

The title of this article suggested that it is about America. But Lucky Tan is talking about Singapore and how conditions in Singapore are so much worse than in America. I agree with his views, which are quite close to my views.

Drop in US income

The full 9.8 percent drop in income from the start of the recession to this June — the most recent month in the study — appears to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline “a significant reduction in the American standard of living.”

My comments: Income has continued to fall for most people. The gap between the rich and poor is widening. More people are finding the cost of living to be unaffordable, This is the failure of the current economic system and need to be addressed.

Earnings of US companies

Will earnings of US companies be good or bad for the reports that are coming out in the fourth quarter?  According to this report, the analysts are quite divided on this matter. I will make a guess that the earnings will be good,. Why? I remember a statement from Warren Buffet that the companies in his group are doing well, except for those involved in the housing sector.

I will take this as a test to see if this is a good indicator. It may be possible that Warren Buffett's companies are doing better than the rest of the economy, but this is not likely to be the case., I think that his companies can be a good gauge for the economy. Be watchful!

Avoid investment scams

Older people have a lot of money obtained through their hard earned savings, profit from sale of a property or from CPF withdrawal. It is easy for these people to be cheated in the investment scams that are quite common in Singapore,.

There are so many scams and many of them are being advertised regularly. It is easy for the ordinary people to be misled into thinking that, if they are allowed to be advertised, these investments are approved. It is hard for them to imagine that they could be cheated.

I know of these scams because many of the victims approached me for help - land banking, wine, guaranteed buyback arrangements. They could even be cheated by life insurance and investment linked products, as the insurance agent hide some of the essential facts from them - i.e. the high distribution cost, annual charges and high penalty on withdrawal.

When the victims complained about losing a lot of money on these scams or bad investments, IT IS TOO LATE. There is little, if any action, that can be taken to recover the loss.

I talk about these scams and bad investments in the Financial Planning Workshop organised by FISCA. I encourage the older people to attend and learn how to avoid these bad investments. 

Tips for young people

I gave a talk on "Financial Planning for the Young" at the National University of Singapore. My key points are:

1. Save 15% of your earnings after you start work
2. Keep the earnings in a bank account until you have accumulated an emergency fund of 6 months earnings
3. It will take you about 3 years to accumulate this fund. Just keep your savings liquid. Do not think about investing the money.
4. You should avoid investing the money in a life insurance policy or investment-linked policy - as you may need the money in an emergency and there is heavy penalty on early withdrawal.
5. You do not have to worry about buying life insurance until  you start a family. But, if you wish to have life insurance earlier, you should buy a term insurance and pay not more than $30 a month for $300,000 of insurance cover.
6. When you are ready to invest, you should invest in a low cost investment fund, such as the Straits Times Index ETF (exchange traded fund).
7. You should attend the 6 hour workshop organised by FISCA to get more details,

I also told the students to tell their parents and older siblings and relatives to attend the Financial Planning workshop organised by FISCA. They have money and are likely to invest in the wrong products and lose a large part of it. When they found that they were misled or cheated, it is TOO LATE for them to recover their money. They have to spend some time and a small sum of money to get educated to avoid losing BIG MONEY.

Invest for the long term - applying the idea

Recently, I decided use my spare cash, which was earning a low rate of interest, to invest in the stock market. My reasons were:

  • The stock market had dropped by 20% from its peak
  • I am investing for the long term, more than 10 years
  • Warren Buffett had said that the companies under Berkshire Hathaway's portfolio were showing good results (except for those involved in the housing market).
A few people asked if it was safe to enter the stock market, and I gave the same view.

I was quite surprised that the stock market did recover strongly the past few days. It was unexpected. However, it does not really matter for a long term investor.

I asked my stockbroker for a list of blue chip shares and REITS showing the drop in their prices since their recent peaks and the dividend yields. I was surprised to find several blue chips that gave a yield of more than 4%. I picked a few of them for investment. The  list of blue chips and REITS can be found here.

Another good investment is the Straits Times Index ETF offered by SPDR and DBS which gives diversificaton.. 

I wish to emphasize that while the stock market may be strong for the time being, the situation could turn around easily due to the uncertainty in the global economic environment. But, if you are investing for the long term, you can ignore the short term uncertainty. The situation will be sorted out in a few years' time.


Monday, October 10, 2011

Top 20 REITS - October 2011

Here are the top 20 REITS available in SGX. It shows the current price, the drop from the recent high, the dividend yield and the gearing ratio. Several of the REITS look attractive as they have fallen by more than 20% from the recent high, have an acceptable gearing ratio of less than 35% and gives an attractive dividend yield. Before investing, you should consult your own stock broker. 

Yield on a life insurance policy

You can calculate the yield on a life insurance policy by using an Excel spreadsheet as explained in this article

Sunday, October 09, 2011

Distress with an investment linked policy

A consumer approached me for advice. He invested his CPF savings and regular savings in an investment-linked policy sold to him by a friend. After some time, he found that the value of his savings had depleted by nearly 40 percent. He was concerned and approached me for advice - should he terminate his policy. The friend who sold him the policy had since left the insurance company.

He showed me the names of several funds that he had invested in. He had bought a recurring single premium policy, I told him that the loss could be due to the following factors:

- expenses deducted from the savings to pay commission to the agent
- high annual fees deducted from the fund
- decline in the market.

I am not familiar with the charges that are taken away from each recurring single premium, nor the annual fees deducted from the fund, and for the insurance coverage. But the deduction seemed to be quite high.

I had advised consumers many times to avoid investment-linked policies that have high deductions. I advised them to attend the financial planning workshop and the life insurance talk organised by FISCA. Many consumers did not heed my advice, and went to invest in the wrong products, causing them to lose many tens of thousand dollars. It is a very painful experience.

To attend the talk, you should register now at

Prepare your Financial Plan

Here are sample financial plans for people at various ages:

Age 25
Age 35
Age 60

This financial plan shows how much you can withdraw from your savings at retirement to last for a lifetime, net of inflation. It allows you to see the effect of changing your savings and investing them to earn a higher return.

You can prepare your own financial plan using this tool.

Hedge funds can make big losses

When you invest in a hedge fund, you are giving money to a fund manager to speculate for you. The fund can speculate in any type of assets - shares, currencies, commodities. They can borrow money, i.e. leverage, to speculate in bigger stakes. The fund manager can make a lot of profit, but can also make a humongous loss. The hedge fund charge high fees, usually 3% or more of the invested assets, and can also take a large part of the profit, e.g. 20% of the gains. But, when the hedge fund loses big on the bets, they do not compensate the investors for the losses. Hedge funds managers can be multi-millionaires.

It can be reckless for trustees of trust funds or corporate funds to invest their money in hedge funds. But many of them do. This is why hedge funds are so successful. Here is a story of a hedge fund that performed badly this year. 

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