Saturday, November 12, 2011

Benchmark for housing prices

An American told me that 30 years ago, the banks will give a mortgage to the borrower to buy a house for not more 3 years of the income of the breadwinner (and the income of the working spouse is disregarded). The bank also required the borrower to make a down-payment of 10% for the house.

If this rule is applied in Singapore today, the average price of a 4 room HDB flat should be $120,000 (assuming an average income of the breadwinner to be $40,000).

The price of HDB flat that is being charged is about 3 times of this benchmark - and a 4 room HDB flat is considered to be quite modest, compared to a typical house with a land in America. (See

This shows how costly are HDB flats in Singapore - and they are considered as "public housing". No wonder, both parents have to work and they still do not have enough money for retirement. The housing is far too expensive.

HDB flats are getting smaller and more expensive

MF Global Singapore clients

Mr Tan,
Your reader might be interested in this news.

My views
It is better for Singapore investors to keep their accounts with local brokerages, rather than foreign brokerages, due to this type of problem. The local brokerages are more likely to keep their money in Singapore. Even though the client's monies are kept outside Singapore, I believe that they belong to the clients and should be returned to the liquidators on demand. I don' think that the foreign banks or other institutions have the right to reject the request of the liquidators to return the monies. But, it seems that international finance is getting very complicated and risky.

Role of government in regulation

I read this interesting story about the problems faced by the regulators on regulating neutrality on the Internet

It is clear that there is a need for a neutral party, i.e. the regulator, to set the rules to ensure a level playing field for all the parties, and for consumers to have access to unbiased information. But the big businesses are challenging the role of the regulators, using their lobbyists and lawyers and will bring the matter up to the Federal Courts.

America has clearly gone too far down the road in letting the businesses have their way. Their economy is collapsing, and is now being propped up by massive debts. It is likely to lead to dire consequences.

The US government has failed to govern. I am worried that Singapore may be in a similar situation.

Friday, November 11, 2011

Danger to the world economy when growth stalls

Quote from Mohd El-Erian of Pimco, manager of the world's largest bond fund.

"The concept of stall speed is not something that's familiar to the markets," he said. "That's what I find is terrifying. We can talk about the probability of recession when unemployment is already too high, when the financial deficit is 9 percent of (gross domestic product), when interest rates are already at zero percent and when a quarter of the homeowners are already underwater on their mortgages. That is a terrifying concept. That is why everything must be done to avoid a slowdown in growth."

Interest rate on bank deposits

Which bank offers the best interest rate on fixed deposits in Singapore? The lowest interest rate for 12 month deposit is 0.075% (less than 0.1%) and the highest is 0.625% (less than 1%).
Find out from FISCA website,

Should you invest in foreign currency to earn a higher interest rate? Here are the tips. Remember to consider the cost of coversion from Singapore dollar to the foreign currency and converting back. After considering this cost, and considering that the interest rate is so low, it is not worth investing in foreign currency. Read this:

Managing your retirement savings

This article give a useful explanation on how to manage your retirement savings and point out to some financial calculators on the Internet that you can use.

Thursday, November 10, 2011

Occupy Wall Street - the issues

1. "#OWS is fighting back against the corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations." It goes on: "The movement is inspired by popular uprisings in Egypt and Tunisia, and aims to expose how the richest 1% of people are writing the rules of an unfair global economy that is foreclosing on our future."

2. Our current capital markets are structured around a dangerous lie -- that the sole function of the corporation is to return value to shareholders. Under this construct, every action undertaken by Wall Street traders, mortgage brokers and the rest make perfect sense and are morally unambiguous. It was their job to sell as much as they could, to grab as much value as possible, in order to return that value to shareholders. So long as shareholder-value-maximization remains our governing principle, no change in regulations will change the fundamental behavior. Executives are simply acting according to their incentives.

Itialy is too big to bail

Wednesday, November 09, 2011

IMF chief - world risk "lost decade"

Quote: "Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand... we could run the risk of what some commentators are already calling the lost decade."

Instant Photos

I need 2 color photos for a visa application. I went to the instant photo booth at SMU. The charge was $8. It seemed to be rather high. I wonder how the students could afford it. It seemed to be more costly that I had expected.

Americans move accounts to credit unions

Tuesday, November 08, 2011

High prices in Singapore

I went to the Challenger Store to look a laser presentation remote device. They should me a few Targus models costing more than $120 each. This was rather expensive, as my friend told me that he bought a device for less than $30 in Sim Lim Square.

I went online to search for this item. A few Targus controllers were offered at Amazon store at around USD 50 (excluding shipping). This seemed to be at about half of the price charged by Challenger. I finally decided to buy another brand and paid less than $20 including delivery charges.

This episode seems to show that prices are really expensive in Singapore! It must be due to the high rental and staff cost.

Forex trading - developing the skill

Here are some tips on how you can develop your skills in forex trading, without having to pay high fees to attend a course. It also warns you that trading is like gambling, similar to visiting a casino. But it can be fun.

Settlement without admitting wrong-doing

If big banks get to settle with the SEC without admitting or denying any wrongdoing, what good does a settlement do in the end?

By Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance
FORTUNE -- To admit or deny -- that is the question -- or one of them anyway, that the SEC will have to address when they respond to Judge Jed S. Rakoff's review of the regulator's recent settlement with Citigroup. Although Citi has agreed to pay $285 million and make minor reforms, the bank is neither admitting nor denying that they failed to properly disclose the risks of mortgage-related investments to clients in the run up to the housing crisis.
My comment: At least this is one step better than Singapore, where wrong doings go unchallenged - due to lack of regulatory action.

Warren Buffet and stocks

Warren Buffet is confident about investing in US stocks during the current global uncertainty. He takes a long term perspective.

Here is the fundamental to back his optimism. Profit of companies are at a record level.

Customers move to credit unions


NEW YORK (CNNMoney) -- Credit unions and small banks say they've seen big jumps in new account openings thanks to this weekend's "Move Your Money" and "Bank Transfer Day" initiatives, but do the big banks even care?
Digital Federal Credit Union, the largest credit union in New England with 330,000 total members, welcomed 133 new members on Saturday. That's 56% higher than the average 85 account openings it sees on a typical Saturday.
Note: Credit unions are member based organisations, like the cooperative societies in Singapore, that provide basic services to members, including savings and loans.

Scam - Delivery of Gifts

This is a new scam in Singapore, involving delivery of gifts.

Monday, November 07, 2011

Big increase in suicides?

I received a regular e-mail on suicide cases. It seems that there is a big increase in suicides in Singapore - Bedok Reservoir, MRT tracks, fall from HDB flats. This is suspected to be linked to gambling losses at the casino. 

Reduce cost through contract employees

Government employees are now being put on contract at half of the usual wages in the USA. The government has to take this measure to cut the budget deficit, because they are not able to collect sufficient taxes to pay the employees adequately. In other places, these measures are taken to reduce cost, but it is a form of exploitation of workers. The contract workers barely earn enough to pay their bills.

After the Fall

Kin Lian the link between Pinnacle, High Notes cases

Published in the Business Times. I hope that the top management of DBS reads the Business Times and decide to be magnanimous.

By GRACE LEONG(SINGAPORE) Two court rulings issued this week - one in Singapore and the other in New York involving Singapore investors of DBS High Notes 5 and Morgan Stanley's Pinnacle Notes respectively - couldn't have turned out more differently.But they have one thing in common - former presidential hopeful Tan Kin Lian. He was among those providing advice to investors affected by the bankruptcy of US investment giant Lehman Brothers, and organised petitions to the government to investigate possible wrongdoings by local banks in the sale and marketing of Lehman- linked products such as High Notes, Pinnacle Notes and Minibonds.He said that the Pinnacle Notes ruling highlighted the difference in legal recourse available to investors in Singapore and America.'In the US, a lawyer can bring cases under a 'success fee' arrangement, where the investors do not have to bear any legal cost, if they do not succeed in the case. The lawyer takes on such cases after studying the chances of success for the effort, time and expense he makes in undertaking the case. But it gives the small people a chance to seek redress.'So far, the Pinnacle Notes investors have not had to cough up a single cent in bringing the case against Morgan Stanley and its affiliates in New York. And even if they lost the case, they're not liable for the defendants' legal costs.But that's not the case for DBS High Notes 5 investors, who lost their appeal against the High Court's decision that the Singapore bank owes them nothing.'The investors already lost all of their investments. They now have to bear their legal expenses and, possibly, the expenses of the DBS lawyer,' Mr Tan said.The DBS investors, who collectively lost $18 million when the structured product failed with the Lehman Brothers' collapse in 2008, had sued the bank, arguing that the DBS High Notes 5 were void at the time they were issued.But the Singapore Court of Appeal, in a judgment this week, ruled: 'A person who signs a contract which is set out in a language he is not familiar with or whose terms he may not understand is nonetheless bound by the terms of that contract.'In contrast, the US federal court hearing the Pinnacle matter observed that warnings in offer documents do not always provide immunity.'While there is little doubt that the cautionary language warned plaintiffs that (Pinnacle) Notes carried some risk, it is inadequate to have put the reasonable investor on notice of the alleged fraud,' US District Judge Leonard Sand ruled.That finding is pivotal because it allows the issue to be examined at trial of whether issuers and arrangers of such products should have legal immunity through 'generalised warnings of risk' buried in many investment products.Now that the Court of Appeal has ruled, Mr Tan said that it would be a 'a good time for DBS to be compassionate and magnanimous in undertaking to bear the legal cost of both sides, so that their customers do not have to bear any further loss'.

Story of Singapore, Hong Kong and USA

This is an interesting account of how retail investors are protected, or not protected in Singapore, Hong Kong and USA. It is a sad account for the investors in the DBS High Notes 5.

Strange rules

Singapore has many strange rules to determine who qualifies for certain benefits. Here is an example about the income ceiling that qualifies for a BTO (built-to-order) or subsidised HDB flat.

This type of rules apply to many other areas, such as means-testing, access to welfare assistance, etc. This is what life is like in Singapore:

  • Convoluted
  • Wasteful in spending time in rationalizing and managing these complexities 
  • Creating a selfish and self-centered people, fighting for their self interest.
A better system is to manage the economic and social life so that the wages are in line with the cost of housing and cost of living, so that all these convoluted rules are not required.

Banks selling off bad loans

This is an interesting investment for cash waiting to be invested, to buy off the bad loans from banks at a hefty discount. However, the problem is in finding the right honest manager to manage the funds that are invested in these bad loans. It could be a solution to the mess involving the bad mortgage loans on properties that have now fallen in value.

Honest way to get rich

There is an honest way to get rich - an example shown by Steve Jobs. He is highly respected, even by the 99 percenters. Read this:

Another well respected man is Warren Buffett. He is the among the few multi-billionaire that stick with President Barack Obama during his difficult time as President.

Revenue of telephone companies

Telephone companies are getting less revenue from voice service, and are relying more on data services for their revenue and profit.

Sunday, November 06, 2011

FISCA Financial Planning Workshop - 26 Nov 2011

The next workshop will be held on 26 Nov 2011. Please register early.

Investing and speculating

The Sunday Times carried a story about young people who were investing in stocks and CFD (contract for differences). Some made trading losses but are still keen to continue "investing" in the market.

It is important to use the correct term to describe the activity. It should be called "trading" or "speculating" and not "investing".

When one "invest" in a company, one has to study the fundamentals of the company with the intention of holding it for many years to earn its dividend and the long term capital gain. I  know of people who bought blue chip shares and kept them for 40 years. That is "investing".

Those who buy and sell shares to make a short term gain should be called "speculators" or "traders" and not "investors". There is nothing wrong with speculating or trading in shares, or gambling in the casino, if the speculator is aware about the risk and is mentally prepared for the consequence of making a loss, while pursuing a gain. It would be wrong to be deluding that they are "investing" in the stock market.

I hope that our financial journalists will use the correct term to describe the activity, so that the speculators are not deluded into thinking that they are carrying out an "investing" activity.

Capitalism is in crisis

Many people still think that capitalism is a good economic model. The truth is - it is the cause of many of the bad things that are happening around the world - greed, cheating, high cost of living, stress, low birth rate, crime. Read this article to get a similar view:


The economic system underlying empire-building today has a name: capitalism. Or, more precisely, a predatory corporate capitalism that is inconsistent with basic human values. This description sounds odd in the US, where so many assume that capitalism is not simply the best among competing economic systems but the only sane and rational way to organise an economy in the contemporary world.
Although the financial crisis that began in 2008 has scared many people, it has not always led to questioning the nature of the system.
"Although the financial crisis ... scared many people, it has not always led to questioning the nature of the system."
That means that the first task is to define capitalism. It is an economic system in which:
  • Property, including capital assets, is owned and controlled by private persons;
  • Most people must rent their labour power for money wages to survive; and
  • The prices of most goods and services are allocated by markets.
"Industrial capitalism", made possible by sweeping technological changes and imperial concentrations of capital, was marked by the development of the factory system and greater labour specialisation. The term "finance capitalism" is often used to mark a shift to a system in which the accumulation of profits in a financial system becomes dominant over the production processes.
Today in the United States, most people understand capitalism in the context of mass consumption - access to unprecedented levels of goods and services. In such a world, everything and everyone is a commodity in the market.
In the dominant ideology of market fundamentalism, it's assumed that the most extensive use of markets possible, along with privatisation of many publicly owned assets and the shrinking of public services, will unleash maximal competition and result in the greatest good - and all this is inherently just, no matter what the results.
If such a system creates a world in which most people live in poverty, that is taken not as evidence of a problem with market fundamentalism but evidence that fundamentalist principles have not been imposed with sufficient vigour; it is an article of faith that the "invisible hand" of the market always provides the preferred result, no matter how awful the consequences may be for real people.
How to critique capitalism in such a society? We can start by pointing out that capitalism is fundamentally inhuman, anti-democratic and unsustainable:

Calculation of interest rate

Courts advertised a 42" HD LED TV for a cash price of $799 and gives an option to pay in weekly installments of $7.91 over 48 months. What rate of interest is included in this plan? Do you calculation and check your answer here.

Interest rate on installment payments

This article shows how to calculate the interest rate on installment payments, and how to save on the heavy interest charges. It is advisable for those who buy expensive items on installment payments, especially young people, to realize the heavy cost of this payment plan. The interest rate has increased from 36% previously to 48% per annum now. It is quite expensive!

Unemployment benefit in USA

This article gives a good explanation of the system of unemployment benefits in the USA. The benefit is given for a short period, to help the unemployed people to tide over a short period so that they can find the next job. This usually works well, except in a prolonged recession (which is happening now). Apart from helping to relieve hardship, the unemployment benefits help to spur economic growth. The question that the USA has to face is how to cope with the prolonged recession. President Obama wants to extend the unemployment benefit, but needs Congress to approve the additional funding (as the US debt is already too high!).

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