Monday, December 21, 2009
Time to scrap the White Pages
The telephone directory is now unnecessary. It is time to scrap this directory and save the trees. Read this report.
Coping with unemployment
Many developed countries have unemployment benefits. Even America, which believes in individual responsibilty and the free market, have unemployment benefits. The leaders in these countries know that the unemployment benefits can be abused, but they still provide these benefits as, in their judgement, the good outweighs the abuses.
In the free, competitive market, people compete for jobs. Some win and other lose. The losers gets unemployed. They have families to feed. In a weak economy, it is not easy to find an alternative job that can pay an adequate wage for their needs. Should they have to borrow and pay a high interest charge? Do the family have to grow hungry? Some have to resort to crime to get some money. Is this a good outcome?
What about people who are lazy and will enjoy the unemployment benefit, without working? These countries have found many ways to overcome this problem. Some countries, fix a limit on the duration of the unemployment benefits. In America, this is usually 12 months, although it has been extended due to the extremely weak economy. In other countries, the unemployed worker is required to attend job training and interviews, and to accept reasonable offers. They can only get the unemployment benefits, when jobs are not available.
These measures are not perfect, but they work reasonably well. If this was not the case, they would have been stopped.
What about countries, such as Singapore, that do not provide unemployment benefits? It is important to have personal savings that can be drawn down to meet emergencies, such as unemployment. Most young people are able to get jobs. They should set aside personal savings of 15% to 30% when they are young. These savings should be invested in financial products that can be withdrawn easily, without paying a high penalty. They include stocks and bonds traded on an Exchange.
Tan Kin Lian
In the free, competitive market, people compete for jobs. Some win and other lose. The losers gets unemployed. They have families to feed. In a weak economy, it is not easy to find an alternative job that can pay an adequate wage for their needs. Should they have to borrow and pay a high interest charge? Do the family have to grow hungry? Some have to resort to crime to get some money. Is this a good outcome?
What about people who are lazy and will enjoy the unemployment benefit, without working? These countries have found many ways to overcome this problem. Some countries, fix a limit on the duration of the unemployment benefits. In America, this is usually 12 months, although it has been extended due to the extremely weak economy. In other countries, the unemployed worker is required to attend job training and interviews, and to accept reasonable offers. They can only get the unemployment benefits, when jobs are not available.
These measures are not perfect, but they work reasonably well. If this was not the case, they would have been stopped.
What about countries, such as Singapore, that do not provide unemployment benefits? It is important to have personal savings that can be drawn down to meet emergencies, such as unemployment. Most young people are able to get jobs. They should set aside personal savings of 15% to 30% when they are young. These savings should be invested in financial products that can be withdrawn easily, without paying a high penalty. They include stocks and bonds traded on an Exchange.
Tan Kin Lian
Investing in properties
Many people made huge gains by investing in properties in the past. This was achieved at a time when property prices were relatively low, compared to today. At today's prices, it will be difficult to expect further appreciation along the scale as was achieved in the past.
The trend of interest rate is also going against property investments. During the past twenty years, there was a decline in interest rate globally. This decline contributed to appreciation in property prices. For example, if interest rate dropped from 6% to 3%, the prices of properties will double.
Interest rate is very low now. At the short end, it is near zero. For longer terms, it is around 3%. In the future, it is likely to increase. This will result in a drop in property prices. It could drop by 50%, if the long term interest rate were to double from today's level.
Interest rate is expected to remain low, due to deflation, but may increase from the highly depressed level of today, so you can expect some correction in property prices in the year's ahead.
To learn about what can happen when the property market corrects, we have to look at what has happened in America and Europe. They have allowed the property prices to increase too much due to low interest rate, subprime mortgages and financial instruments. When these markets correct, the damage to the economy has been severe.
In all, it is a bad time to invest in properties as a long term investment. People still have to buy a property to live in, although they should consider the option to rent a property. Apart from interest rate, property prices will also depend on supply and demand and the economic situation. But interest rate does play a big part.
Be careful about investing in properties (other than for own occupation).
Tan Kin Lian
The trend of interest rate is also going against property investments. During the past twenty years, there was a decline in interest rate globally. This decline contributed to appreciation in property prices. For example, if interest rate dropped from 6% to 3%, the prices of properties will double.
Interest rate is very low now. At the short end, it is near zero. For longer terms, it is around 3%. In the future, it is likely to increase. This will result in a drop in property prices. It could drop by 50%, if the long term interest rate were to double from today's level.
Interest rate is expected to remain low, due to deflation, but may increase from the highly depressed level of today, so you can expect some correction in property prices in the year's ahead.
To learn about what can happen when the property market corrects, we have to look at what has happened in America and Europe. They have allowed the property prices to increase too much due to low interest rate, subprime mortgages and financial instruments. When these markets correct, the damage to the economy has been severe.
In all, it is a bad time to invest in properties as a long term investment. People still have to buy a property to live in, although they should consider the option to rent a property. Apart from interest rate, property prices will also depend on supply and demand and the economic situation. But interest rate does play a big part.
Be careful about investing in properties (other than for own occupation).
Tan Kin Lian
Understanding fund brochures
The language used in fund brochures look impressive. But, what do the words really mean? Here is one person's explanation. Be careful before you invest. Understand what you are investing in.
Sunday, December 20, 2009
Why pay Singapore TV licence?
Dear Mr Tan
This subject has been brought up many times. Occasionally, the authorities would give replies, including at least once in Parliament, but they failed to convince the public.
Personally, I do not object to the Government collecting money from me because they need to pay the service providers too and, in this case, for "funding public service programs on TV and radio". However, I have always had an uncomfortable feeling as to how they actually spent $8 million a month.
Just my own thoughts.
Bonus of bankers
America should set caps on the bonus of bankers, just like UK and France. Read this report.
Pearl Shaol Falls in Jiuzhaigou, China
Here is a video of this beautiful waterfall in Jiuzhaigou, China.
Take care of customers
Here is the ranking of various types of businesses based on how well they take care about their customers.
Saturday, December 19, 2009
Climate summit in Copenhagen
An agreement has been reached, although it has limited impact. Still, it is good progress and is an important step towards the long journey. Read this report.
Goldman Sachs to give up Life Settlement business?
Read this report. The financial institution will buy the life policies from the owners for a cash amount (which is usually higher than the cash value given by the insurer) and maintain them to collect the proceeds on death.
UK: High Court action to shut down five "Land Banking” companies
Dear Mr. Tan,
Watch out for these companies setiing up in Singapore soon !
http://www.whitehallpages.net/
High Court action to shut down five "Land Banking” companies.
Action taken in the public interest
The Secretary of State for Business, Innovation & Skills has presented petitions in the High Court to wind-up, in the public interest, five companies involved in marketing plots of land as investment opportunities.
The application to appoint a provisional liquidator was first heard on 8 October 2009, but at this hearing the companies, through their directors (see notes below), offered to give undertakings to the Court as to their future conduct and to cease trading pending the determination of the petitions. The Court accepted that these undertakings were sufficient to protect the public interest pending trial of the petitions.
The undertakings however were not fully complied with and accordingly the Secretary of State returned to Court on 17 December 2009 with a further application to appoint a provisional liquidator. The companies did not oppose this further application. The Court accepted there had been a failure to comply with the undertakings and ordered the appointment of the Official Receiver as provisional liquidator of the companies.
Watch out for these companies setiing up in Singapore soon !
http://www.whitehallpages.net/
High Court action to shut down five "Land Banking” companies.
Action taken in the public interest
The Secretary of State for Business, Innovation & Skills has presented petitions in the High Court to wind-up, in the public interest, five companies involved in marketing plots of land as investment opportunities.
The application to appoint a provisional liquidator was first heard on 8 October 2009, but at this hearing the companies, through their directors (see notes below), offered to give undertakings to the Court as to their future conduct and to cease trading pending the determination of the petitions. The Court accepted that these undertakings were sufficient to protect the public interest pending trial of the petitions.
The undertakings however were not fully complied with and accordingly the Secretary of State returned to Court on 17 December 2009 with a further application to appoint a provisional liquidator. The companies did not oppose this further application. The Court accepted there had been a failure to comply with the undertakings and ordered the appointment of the Official Receiver as provisional liquidator of the companies.
Friday, December 18, 2009
Challenges for global economies for 2010
This article in the Economist magazine said that the global economies was helped by the government stimulus spendings and bailouts in 2009. The challenges lie ahead in 2010 as many underlying problems are not solved and new problems are being created, e.g. asset bubbles in emerging economies.
Financial planning - buying a property for own occupation
Here is a financial planning tip that applies to most families. If you buy a property (for your own occupation) at age 30 and repay the mortgage loan over 25 years with 25% of your monthly income, you can take a loan of up to 5 years of your income. If both spouses are working, you can use the combined income, but deduct $1,000 for the cost of employing a maid and other expenses.
If the family income is $5,000 a month, you can buy a property of up to $300,000. If you buy a more expensive property, the repayment will take up more than 25% of the income, leaving less to save for retirement or for current expenses, or the repayment will take more than 25 years.
Although most people expect a working career to be 35 years, it is useful to plan for 25 years of repayment, to allow for some disruptions in the income stream during your working career, caused by unexpected events, such as unemployment or disability.
If you really need to pay more for the property, you can stretch up to 6 years of family income, after you have done your budgeting carefully.
Tan Kin Lian
If the family income is $5,000 a month, you can buy a property of up to $300,000. If you buy a more expensive property, the repayment will take up more than 25% of the income, leaving less to save for retirement or for current expenses, or the repayment will take more than 25 years.
Although most people expect a working career to be 35 years, it is useful to plan for 25 years of repayment, to allow for some disruptions in the income stream during your working career, caused by unexpected events, such as unemployment or disability.
If you really need to pay more for the property, you can stretch up to 6 years of family income, after you have done your budgeting carefully.
Tan Kin Lian
Thursday, December 17, 2009
Workers like flex-time
This article shows the appeal of flex-time. I had advocated pay by the hour, instead of monthly salary. It allow flex-time to be implemented easily.
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