Saturday, June 16, 2012

Reduce the occupancy cost

12 June 2012

Forum Page
Straits Times

The Government has announced that the tenure on industrial sites will be reduced from 60 years
to 30 years to make them more "affordable" to industrial users.

I urge our Government leaders to get away from the "asset values" mindset and to think about
operating cost. The cost of doing business is determined by the occupancy or rental cost
of the premises and not the cost of owning the property.

The proper way to reduce the occupancy cost is to increase the supply of industrial property
or reduce property tax, development charge and other levies. Changing the tenure of the lease does
not, by itself, impact the occupancy cost.

As the largest landowner in Singapore, the Government can reduce the occupancy
cost more effectively by releasing more land. This has to be done through a deliberate policy of the
Government, as the officials responsible for the use of state land have to operate under the target
of achieving the highest possible return on their assets.

Tan Kin Lian

Student misled into buying a life insurance policy

Hi Sir,
I would like to ask how to get justice for the loss that I suffered on my Prucash endowment policy bought in 2007.

My objective was to have a saving plan. I was induced by my agent who told me that I could earn interest of 3% p.a. but this rate was not guaranteed. 

After paying more than $4,000 in premium for the past four years, I was shocked to learn that the surrender value was only $1,000. As an undergrad student, I found it difficult to service this policy.

I felt cheated by the misrepresentation made by the agent. I wanted to get back all of my savings from Prudential, but it was not possible. I face a difficult decision whether to terminate the policy and loss the $4,000 or to continue till maturity and get a low return. It seemed to be a lose-lose situation for me. Is there any way for me to mitigate my damages?

Who was the agent who sold the policy to you? How did you know this agent? Are you able to find the agent now and ask for an explanation?

Students should not commit to a life insurance policy. It may not suit their needs and they face the risk of losing a large part of their savings.

Friday, June 15, 2012

Thursday, June 14, 2012

Invest for the long term, and avoid speculation

Hello Mr Tan,

I  am now serving my national service. I am new to stock investing using fundamental analysis. I am saving up this two years of my NS pay to fund my university studies. I am looking to get into a investment course to learn the basics of stock investing and one day, work for a big investment firm. I want to start reading on stock investing now. I would really appreciate it if you can suggest a few book to start off. 

I recommend long term investing and do not encourage trading, through technical analysis or other methods. Read this FAQ to learn about long term investing.  If you want more articles, read a selection here

Wednesday, June 13, 2012

We have enough Singaporeans

Here is a hard hitting article about the bad deal for Singaporeans. Article

Another bad news for Facebook

Less people are now playing games on Facebook. Article.

Nursing home in Bishan

Residents in Bishan are against the building of a nursing home near their high value HDB flats. Article. So are residents in other parts of Singapore. What is the solution? I urge the Government to build a retirement village in Lim Chu Kang and to make it a car fee zone. Local buses and taxis can operate within the village, and express buses can bring the residents to other parts of Singapore or their children to see the old folks. 

Myths from the Financial Meltdown

This is a long article, but it is worth reading a few times. Article.

Singapore is an expensive city for travellers

Here is another worrisome news. Singapore is becoming more expensive, even for travelers. Article. With all these big challenges, are our Government ministers really competent to deal with them?

Bursting of the property bubble

Many people think that the Government will be able to control the property market to keep it from a collapse. I have seen the property market burst a few times - so I shall share with you what is a possible scenario, and why the Government will not be able to stop a collapse.

Suppose there is panic with the Euro or the US dollar, due to the economic crisis in Europe or America. We have read about the big and unsustainable deficits and the printing of money to support the economy. Many analysts are predicting various types of possible dire consequences.

You may say - well, that is Europe and America. It should not affect the Singapore property market. In 1998, during the Asian Financial crisis, interest rate shot up to 20 percent in Singapore. People, who borrowed money from the banks were suddenly asked to pay back the loans. They have to sell their properties at distressed prices.

If there is a financial crisis in 2012, which is possible, the people who have to dump their properties at distressed prices could be the foreigners and local speculators who were over-stretched and had bought expensive properties at astronomical prices. When they dump their properties at distressed prices, can the rest of the property market hold up?

During the 2004 crisis, the Singapore property market was saved by a smart move by the Government to allow borrowers to re-pledged their properties to the banks at higher priority over the CPF savings. This allows the bank to report the mortgages as safe, so there was no need for the properties to be foreclosed.

The next crisis could be different, as the properties prices are much higher now, and many borrowers could be foreigners or local speculators who do not have this CPF cushion. This is just a random thought - and I might be wrong!

Government should be accountable and transparent

This writer has raised some concerns that Singaporeans should be aware of. Article. While I believe that our Government is basically honest, it is better for them to be more accountable and transparent, rather than to allow doubts to be raised.

Tuesday, June 12, 2012

Property bubble

It is easy to create a property bubble. The owners of land can collectively create a shortage of supply. The higher demand, relative to the short supply, will push up the price of the properties. This will create a panic  among the end users that the property prices will soon become unaffordable, so they rush to buy the properties now. Speculators come in to drive up the prices faster and make a trading profit. The buying is fueled by low interest rate and easy credit terms offered by the banks. There - you have got a property bubble.

In Singapore, the supply of land is under the hands of a few land owners. The state is the largest owner. Most of the land available for development came from the sale of state land. The property developers who bought the state land at a high price on tender have a vested interest to control the supply and maximize their profits.

The structure of the land ownership and the Government policy adopted in Singapore have resulted in an escalation of the property prices to unaffordable levels. The average price of a 4 room HDB flat in a remote area in Singapore is now higher than the an average house, sitting on a large piece of land, in most towns in America.

As the property bubble continues to grow, the Government can proudly say that they are enhancing the value of the assets of Singaporeans. But, this economic strategy is unwise.

How long can the property bubble continue to grow? Not much longer, in my view. It has reached a crazy level and is being sustained by fear, greed and speculation. There are foreign buyers, including speculators hoping to make a profit. When the bubble burst, it will be the local Singaporeans who will be holding the can.

If we study the experience of property bursts in Japan, Ireland, Spain and America, the conclusion is that it will take a long time for the property to recover. This will be a big drag on the banking system and on the people who face negative equity on their property.

Monday, June 11, 2012

In a recent keynote speech to the Economic Society of Singapore, PM Lee Hsien Loong talked about the strategy on economic growth. Full speech.

 There are two points in his speech that I dislike:

a) He referred to "targeted assistance". This means writing rules on which gets and who does not get. These rules are usually arbitrary, complicated and unfair to those who are excluded at the margin. Those who benefit are happy; but those who are excluded are not. This divides our people and create a selfish culture.

b) He said that the government may not be able to boost the income, but they are able to boost the value of the assets. It is easy to inflate asset values, e.g. build a property bubble, but it has cannot be sustained and has to burst one day, with serious consequences. Even if it is supported at a high level, the younger generation will pay for it through high prices and 30 year loans. This strategy is bad for the people.

Competition in education

I do not like the competition in the schools to get top grades and to win scholarships. This is unfair to children from poorer families and breed the culture of "self first". It also destroys the childhood of our young. Here is a view from a parent.

Sunday, June 10, 2012

FISCA Educational Talks

Here are the educational talks organised by FISCA over the next few months. Please register early. Spend time to educate yourself and avoid losing a lot of money on bad investments, including life insurance policies.

An App to improve your vocabulary

Here is an app to improve your vocabulary. It can run on an iPhone or iPad.

The app is called Bright Words. It allows several people to compete and
find out who can get most of the words correct. It can also be played in a
single player mode, to improve your vocabulary.

The Free version test words up to 4 letters. The paid version test words up to
8 letters.

The webpage also shows other apps developed by Tan Kin Lian & Associate.
Besides being fun, it allows you to develop a flexible mind and develop your
skill of problem solving.

You can try with the free version, and upgrade to the paid version.

Please help me to forward this letter to your friends.


Dear Kin Lian:
This youtube video features syndicates that prey on the old and unemployed. They use tactics from other industries such as real estate investment, forex trading, app building,etc....
I hope you can share it with readers of your blog. We need to tell retirees and unemployed that can ill afford to lose their money.

Regulate the Internet

Many people will be appalled by the proposals to regulate the Internet that are being considered by China. Article and will condemn China for this additional "repressive" measure.

In my view, these measures are necessary and sensible. The new law will require the websites, blogs and micro-blog owners to ensure that the people who contribute their opinions are registered with a true identity. It is important that people act in a responsible manner towards other people, in the Internet and in the real world. Many of the behaviors in the Internet by anonymous people are not acceptable.

At present, China banned many social media blogs and websites. This is too harsh a measure, but they found it to adopt this measure to control the irresponsible behavior - which could incite hatred and violence.

After the new law is implemented, I expect China to take the bold step or allowing the social media to develop. This would be a clear statement that China is not repressive, and can show a good example to the rest of the world on getting the right balance between free speech and responsibility.

But, I could be wrong in my optimism. Let us wait and see.

Scope for minimum wage in Singapore

This article reported that a few government leaders and pro-establishment bodies are now in favor of setting a minimum wage for certain occupations. It takes a long, long time for these people to realize the harm that is being caused to our society by the lack of such a basic measure to protect the citizens.

The article failed to mention the Public Forum that was held yesterday (9 June 2012) by a non-government organization. Article. This forum featured passionate speakers who have spoken on this issue on many occasions in the past. It is quite sad to see the media ignore people who have not been in the forefront of this issue, and give prominence to other people who were not really passionate about this matter but happened to be pro-establishment!

We need a more independent and unbiased media to improve the engagement of the citizens in Singapore.

Protect the citizens

Dear Mr. Tan,
It seems that HK not only beats Singapore in term of more competitive in economic ranking yet manage to protect its citizens from investment fraud.   Unlike our MM & SM of that time saying that investors go in with their eyes open or PM was reportedly saying "let the buyer beware" instead of admitting that MAS failure to regulate, banking malpractice and government inaction were to blame.   The current Education Minister is the CEO of MAS at that time. 


Bailout for Spanish banks

Spain needs US $125 billion to bail out its banks, due to the collapse in the property market. Report. Other countries, e.g. Ireland, America and Japan, have also suffered similar difficulties due to the bursting of the property bubble.

Many people may not realize that the financial crisis is caused by the ridiculous accounting policy called "mark to market". When the property prices appreciate, and this is called a bubble, all owners and the banks report billions of dollars of "wealth" being created. When the property prices fall, we have a financial crisis!

We are destined to have financial crisis, so long as the ridiculous accounting treatment called "marked to market" is still being followed. Many decades ago, it was the practice to keep assets at book value and to provide for depreciation in the value of the assets. It was not prudent to mark the assets to their "market value", until the assets are sold. This is a more sensible approach.

This will force the asset owners to sell their assets to realize their market value. They will find that the so-called market value is not the real value, as there are limited buyers for the large holdings of assets among the owners who are keen to realize their profits. This is the real world, and it will not show the asset values appreciated madly, and will not encourage over-investment that will lead to the banking crisis now faced by Spain, but was quite common in the other countries.

To have a more stable financial system, we need to remove the ridiculous practice of "mark to market".

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