Saturday, December 31, 2022

Wisdom of the Crowd - New Issues

1. Should countries screen travelers from China due to the covid outbreak?
2. Should a country enter into a long term contract for its energy needs?

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My positive view of the China government

Many people observed that I have a positive view about the government of China.

This is largely true.

But, I do not think that the government in China is perfect. There are negative aspects as well, but this probably applies to all governments.

I generally do not like to play up the negative aspect of any situation, unless it is systemic and cannot be changed.

I believe that the China government is working hard to improve the living standard and well being of the ordinary people, and they are doing it in an honest way.

They may have to adopt some harsh measures at times, but this is necessary to combat some forces that are intent on creating social disorder or to disrupt their progress.

On some occasions, they may have adopted the harsh measures wrongly. It may occur at the lower levels, due to the lack of experience of the officers. Mistakes are made. But they can be corrected.

I have less faith in other systems of governments which seek to enrich the elites and the super rich at the expense of the general population. They may claim to be "democratic" but I find them to be hypocritical and dishonest.

Tan Kin Lian

Introduce "common prosperity" in Singapore

I make these suggestions to introduce "common prosperity" in Singapore.
1. Provide an adequate wage for every worker that is sufficient to meet the cost of living. The wage should be guided by national statistics of the supply, demand and average wage for each job category. The wages should not be depressed by unrestricted entry of foreign workers from low cost countries.
2. Keep the cost of living low, by removing levies, GST and price gouging by suppliers.
3. Make education, health care and housing affordable to the average income earners.
4. Encourage people to save for the future and provide them with suitable non-speculative investments that offer a fair rate of return. They should get a better return than that offered by private banks or asset managers (who take off a large part of the returns).
5. Adjust the working hours according to the economic cycle to minimize unemployment and allow those who are unemployed to withdraw their retirement savings or access low cost government loans. This is in lieu of providing unemployment benefit.
6. Create suitable employment opportunities for every person who is fit to work until an advanced age, say 75 years. Allow the older workers to work for fewer hours and in non-strenuous jobs.
7. Manage the supply of housing to keep the prices in line with increase in median income, and avoid the excessive prices due to speculation.
8. Encourage a free market for small business, but keep large businesses under public ownership, e.g. energy, infrastructure, telecommunications, public transport, schools and hospitals. The capital cost can be funded by national savings and the operating cost by user fees.
9. Have a fair tax regime to collect tax on high incomes and luxury purchases.
I will elaborate more on this topic in separate articles
Tan Kin Lian 

Friday, December 30, 2022

Inequality dropped in 2022

How did it happen?

The collapse in the stock and crypto markets has wiped out $12 trillion of wealth. Divided by 8 billion people in the world, the average loss is $1,500 USD per person.

The top 1% own 43% of the global wealth. The same 1% will bear 43% of the $12 trillion loss. (I suspect that the loss of the top 1% will be more than 43%).

So, inequality will drop in 2022. But, it will still be quite bad.

Tan Kin Lian

WOTC - Blockchain technology

 Wisdom of the Crowd: 77 % of respondents said that the new crypto currency and blockchain technology is not useful, and has led to massive fraud.

How is e-CNY different from RMB?

China introduced the e-CNY as a central bank digital currency (CBDC). It has the same value as the RMB that is kept in bank accounts and e-wallets (e.g. AliPay and Wechat Pay).

Why does China introduced the e-CNY when they can promote the use of RMB, which is widely used as a digital payment.

I might have found the answer.

e-CNY is technically a different currency from the RMB. While it has the same value now, it may have a different value in the future.

What is the purpose?

The e-CNY is intended to be a currency for international trade. While it is being used domestically now, it is intended primarily to test the platform. Within China, the main form of digital payment will be the RMB in the e-wallets.

How can China promote the use of e-CNY for international trade?

1. For a start, China can ask its exporters to price its products in e-CNY, instead of USD or as an alternative to USD. The price in e-CNY may be slightly more attractive than USD, so that the buyers will opt to pay in e-CNY.

2. China will ask other countries to accept payment for their exports to China in e-CNY. This has already happened with the energy imports from Russia and the Middle East. This will be extended to other imports into China.

3. The exporters who receive the e-CNY can convert them into USD or keep them as e-CNY deposits. The China banks will offer interest on the e-CNY deposits that are as attractive as USD. This will encourage the foreigners to keep the money in e-CNY, instead of USD. They can use the e-CNY to pay for exports from China.

4. China may offer convertibility of e-CNY into gold. They do not need to offer 100% convertibility. A convertibility ratio of 20% would be attractive, as USD does not have any convertibility. This convertibility applies only to e-CNY and not RMB.

5. When the e-CNY becomes more attractive than RMB, the individuals and businesses in China may opt to convert their RMB into e-CNY. It is likely that China will set a limit on the amount of e-CNY that can be held by these individuals and businesses.

6. Some time in the future, the exchange rate between e-CNY and RMB may not be parity. It is possible that the e-CNY will have a higher value compared to RMB, as it is driven by supply and demand.

Some people think that China introduces the e-CNY to be able to track the payment made by individuals. I do not agree. If this is the intention, China already has the ability to track the digital payments that are now made through RMB payment platforms.

This is my personal opinion and forecast for the future trajectory of e-CNY. I will watch if it happens as I describe.

Tan Kin Lian

Thursday, December 29, 2022

Review of energy stocks

 Here are the financial fundamentals of the largest energy stocks - Saudi Aramco, Exxon Mobil, Chevron, Shell.

All four stocks have a dividend yield of about 3.5%. This is quite attractive.
Exxon Mobil and Chevron has a price earning ratio (PER) of 10 times. This is acceptable. Shell has a PER of 5 times. This is quite attractive. Aramco has a PER of about 18 times. This is somewhat high.
I will probably buy some shares of Shell, for the low PER and the dividend yield of 3.5%.
Tan Kin Lian
Note - this is a personal view. It is not "investment advice".

Price earning ratio and growth rate

 In this paper, I explain how a stock that has a high growth rate in revenue and earnings can justify a high price earning ratio (PER). I use Tesla stock as an example and why the price can recover to $250 in 2023.

WOTC - Reduce cost of living

 Wisdom of the Crowd: 83% of the respondents said that the best way to reduce the cost of living is to keep prices low through subsidy and removal of tax and levy, rather than to issue vouchers and give a cash subsidy to each family.

Wednesday, December 28, 2022

Review of stocks of car manufacturers

 I review the stocks of major car manufacturers - ICE and EV manufacturers.

WOTC - Temasek Holdings

 Wisdom of the Crowd: 67% of the respondents said that Temasek Holdings should not issue bonds to raise money for investments (speculation).

Tuesday, December 27, 2022

Crash of US dollar in 2023

 I expect the US dollar to crash in 2023 due to several factors and investors will rush to buy gold.

Review of my investment in Gold

 1. The following chart shows the gold price for the past 10 years. It was trading around $1,300 USD for several years up to mid 2019.It jumped by 50% to trade above $2,000 by mid 2020. It corrected to a low of $1,620 by mid 2022 and has since increased to $1,800.

2. Some analyst expected gold to increase in 2023 by 50%, perhaps to reach $2,700 or higher. The reasons are:

a) A recession in the US may cause interest rate to fall, and a rush to an alternative gold.
b) The central banks around the world increased their purchase of gold significantly during 2022.

3. I have $94,000 USD invested in Gold ETF (GLD) and a Barrick Gold (GOLD). It now shows a loss of $,500. I bought these stocks two years ago. At the worse point, I saw a loss of $30,000. It has reduced, with the recent recovery in the gold price.

4. I intend to invest another $100,000 USD in these assets.

This is a personal view. It is not investment advice.

Tech stocks lost $6 trillion in 2022

 I saw an article that reported tech stocks lost $6 trillion in 2022.

My rough estimate is that the tech stocks lost 33% in 2022, so the current value of the tech stocks is $12 trillion. I am not able to verify this figure.

I have this opinion.

Tech stocks were overvalued at the end of 2011. The price earning ratios of most of these stocks must be around 40 times. So, if the tech stocks dropped by 33%, the price earning ratio will, on average, be 26 times. This will still be too high.

The tech stocks did not lose its fundamental value. It lost a part of its bubble value. It is still overvalued.

The table below shows the largest tech stocks with a total market value of $8.8 trillion. The average PE ratio is 35 times.

If one looks at the high interest rate and a likely recession in 2023, the PE ratio is still too high.

The key point that I wish to make is this - we did not lose $6 trillion in market value in 2002 in the tech stocks. They were part of a bubble, and not the fundamental value of the stocks. The current market value is still too high. We may see a further drop in the market value, before it reaches its fundamental, long term value.

Tan Kin Lian

China stocks in 2023

 I have a large investment in China stocks. I monitor the China economy closely.

The China stocks were affected badly by the covid restrictions during 2022. Many of the stocks were undervalued. They are likely to do well when the China economy recovers. When will this happen?

China has now relaxed its covid restrictions and open up its economy. It is going through a large wave of covid infections. The western media reported that it caused a major breakdown of the health care system and large number of deaths.

From other sources, mostly from China but include some external sources, I conclude that the reports from the western media were grossly exaggerated and perhaps malicious.

The covid infections were indeed widespread, but the infections were mild. The virus had indeed spread rapidly through many parts of China, but many people have already been infected and recovered.

I expect that most people will no longer fear the virus and life will return to normal soon. The economy will recover faster than expected.

I will watch the China stocks to see if my assessment is correct.

Tan Kin Lian

WOTC - Digital payment platforms

 Wisdom of the Crowd: 88% of respondents said that there should be a single digital payment platform, or multiple platforms that are inter-operable.

Sunday, December 25, 2022

Liberalization of the retail electricity market

Singapore introduced liberalization of the retail electricity market on in November 2018. 

It allowed consumers to choose their retail supplier (from a list of approved suppliers) and to choose between fixed rate and floating rates for electricity. Those who do not wish to move to another supplier continues to pay the regulated rates charged by SP Services, which was the sole supplier prior to liberalization. 

At that time, the wholesale price of electricity had fallen by a lot. The regulated price remained much higher. Consumers who moved to an alternative retail supplier were able to get a discount of about 20% on the regulated rates. 

The water supply continued to be centralized under SP Services. The consumers, who changed their retail supplier, have to pay two bills. Most do.

Right from the start, I felt that the liberatization was a unnecessary, unproductive and costly exercise. The government could reduce the regulated rate (charged by SP Services by 20% to follow the wholesale rate). Instead, they chose to "liberalize" the retail market to allow consumers to enjoy the lower price. 

The retail suppliers obtained the electricity from the national grid. This was the same source as SP Services. They were not able to serve a purpose in finding a "more efficient" supply.

Each retail supplier had to incur a high cost to set up a separate operation, implement an accounting and billing system, arrange to collect the monthly payments, etc.  They also have to engage a team of marketeers to enroll customers. This was also another costly exercise.

I opted right at the start to choose one retail supplier to enjoy a discount on the regulated rate.

Over the course of the following months, I have been approached by the marketeers (working for the retail suppliers,  including the one that I had already chosen) to switch to them. They approached me at the shopping malls, bus interchanges and other public places.

It was a big hassle for me as a customer. It was also costly for the retail suppliers to pay their marketeers for their time and effort. 

Each consumer had to go through a complex exercise to figure out the different pricing plans offered by the retail suppliers, as the competition was based on small differences in the pricing plans.  They also had to judge the trajectory of energy prices to figure out if they would benefit from a fixed or flexible price contract.

I do not know how ordinary consumers can make a decision that have baffled energy traders coping with a volatile market. 

The retailers that charge lower rates were probably willing to accept a lower margin, or to incur an operating cost.

A year or two later, the wholesale price of electricity increased. The retail operators that offered a fixed price contract (fixed for 2 or 3 years) suffered a large loss. They decided to terminate their operations and leave the market. Their accounts were transferred to SP Services and the customers had to pay the regulated rates.

This was most unfair to the consumers. If the electricity price had dropped, they were forced to pay the fixed price agreed in the contract that they had signed. If the electricity price increased (as it had), they could not enjoy the fixed price, as the retail operators ceased to operate. 

The affected consumers where not compensated adequately for the loss that they suffered. It is a case of "head, the retail operator wins" and "tail, the consumer loses".

What would have been a better arrangement in November 2018? This is what it should be:

a) The government could reduce the regulated price by 20% to follow the wholesale market. There is no need to "liberalize the retail market" to lower the price. 

b) If the government wishes to give consumers the opportunity to enter a fixed price contract, they could have asked SP Services to provide this option. This would be a more efficient way for consumers to smooth out their energy bills and be protected from big fluctuations. Over the term of the 2 or 3 year contract, they were expected to pay the average cost, as it was not intended for them to be subsidized or exploited.

The above issues were obvious to me right from the start. I am surprised that the ministers in the government (who made and approved the decision to liberalize the retail market) could not see the ramifications of their decision. This appears to be quite common sense, and should e easily understood by ministers who are the top scholars of our education system. 

Tan Kin Lian

WOTC - Digital payment

 Wisdom of the Crowd: 54 % of respondents said that MAS should introduce digital payment if it is less costly and more convenient than cash. 46% prefer to keep to cash payment for familiarity and privacy.

Saturday, December 24, 2022

Property tax for 2023

 This article shows an average increase of 16% in property tax in 2023 for the 3 properties that I own.

Wisdom of the Crowd - New Issues

1. How should wages for each job be determined?
2. What will happen to the covid infection in China?

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Friday, December 23, 2022

What is the difference between e-CNY and RMB in wallets?

The e-CNY is a digital currency operated by the central bank of China. How is it different from the RMB that exists in private wallets (i.e. AliPay and WePay)?

In my opinion, there is no difference between the e-CNY and the RMB in private wallets.

When a consumer in China wants to pay to a merchant in a physical store, he can pay with RMB in his private wallet or with e-CNY in his central bank wallet.

He can also pay an online merchant in the same way, i.e. using a private wallet or a central bank wallet.

If this is the case, why does the central bank in China wants to issue the e-CNY?

I cannot see any useful purpose in issuing the e-CNY as a different currency from the RMB in the private wallets.

Some people say that the central bank has better control over the e-CNY, compared to the existing RMB. I do not think that this is the case for the following reasons:

a) The private wallet platforms need to be approved from the central bank
b) The RMB in the private wallets are transferred from the RMB in the bank accounts under the control of the central bank.
c) The central bank is already able to monitor the digital payments using the RMB, without creating a new currency (i.e. e-CNY).

The only reason for the issue of e-CNY is that the central bank can allow foreigners to hold the e-CNY and prevent them from holding the digital RMB.

I am not able to understand the logic. Surely, the central bank can allow foreigners to hold the RMB in the banks or the private wallets and still monitor the payments?

My conclusion is - there is no need for the central bank to issue the e-CNY as a separate currency from the RMB that now flows through the bank accounts and private wallets.

Maybe, there is a real purpose that I am not aware of.

Tan Kin Lian

WOTC - National Service

 Wisdom of the Crowd: 69% of respondents said that National Service should be shortened or abolished.

Potential benefits and limitations of blockchain technology

 Potential benefits and limitations of blockchain technology

I share my views about the potential benefits and limitations of blockchain technology.

I became interested in blockchain technology when I learned that it is the underlying technology that is used for processing bitcoin. The key features are:

a) It uses a distributed ledger
b) It does not rely on a central database, avoiding the risk of manipulation by the people who have access to it.
c) The distributed ledger is validated by a large number of validators (also called miners).

I enrolled for an online course on blockchain technology and paid the appropriate fee. After attending the two lessons, I felt that I knew enough of the technology to understand its potential benefits and limitations.

I did not want to attend the other lessons, as they contained technical details that are best left to younger people who have the passion and time to master it.

If I need technical knowhow to develop a blockchain application, there will be many qualified people who can take care of the work. I do not need to be that expert.

My key findings are:

a) Blockchain technology is useful for crypto-currency and NFT (non fungible tokens), but there does not appear to be any use for this technology outside of crypto assets.

b) The technology appears to be trying to solve an problem that does not exists, i.e. the use of a distributed ledger to enhance "trust". The integrity of the system can be enhanced by its proper design, and not by using a distributed ledger.

c) It is costly to process transactions using blockchain technology. It also has several shortcomings and risks that are not adequately addressed. (I shall not talk about the shortcomings here).

The most successful use of blockchain technology is in the managing of crypto assets, i.e. crypto currencies and non fungible tokens. Even so, many of these crypto assets have failed. There are still a few crypto assets that are still being traded, but their future is bleak. I do not see them surviving over the long term.

Beyond its use in crypto assets, blockchain technology is still being explored by several governments and businesses.

I personally remain skeptical about their potential benefits. However, I am aware that I might be wrong, and that the powerful brains behind the projects might produce something useful in the future.

The central bank of China embarked on a project to develop a digital currency, called e-CNY, based on blockchain technology in 2014. They committed substantial resources behind this project. They have a strong motivation to introduce the e-CNY as an alternative to the US dollar in international trade.

After 7 years, the central bank has decided not to use blockchain technology for the e-CNY. See this article. It stated: PBOC officials have confirmed that it does not use distributed ledger, or blockchain, technology because it would be unsuited to handle anticipated transaction volumes.

This finding is in line with my common sense and understanding of the technology.

I searched the internet for examples where blockchain technology has been used by businesses to better manage their processes. I came across a few websites listing these examples. These websites are managed by consultancy and technology enterprises that markets the blockchain technology.

They mentioned a few examples of success applications. I read these examples. I could not find any mention of the cost of implementing the blockchain technologies and the advantage over the traditional technologies. I am not convinced that these are real successes.

I will continue to research and follow up on this subject. Meanwhile, I remain skeptical.

Tan Kin Lian

How to preserve the benefits of globalization

 Globalization has its benefits and shortfalls.

The shortfalls, which have not been adequately recognized and addressed over the past three decades, have resulted in a massive reaction by ordinary people in developed countries who were badly affected by globalization through a loss of jobs.
Many countries have started to de-globalized. This will lead to disruption to the supply chains and possible conflicts between nations.
There is still a chance to preserve globalization, but still protect jobs in developed countries. It will allow international trade to continue in an orderly and beneficial way (but not like before).
This approach is to allow countries to levy import tariffs and provide subsidies to their domestic manufacturers to remain competitive.
It requires the World Trade Organization (WTO) to update their existing regulations.

Covid situation after relaxation of restrictions

 Several reports from the western media, and from Channel NewsAsia and SCMP of Hong Kong said that the wave of covid infections had overwhelmed the health system in China and covid deaths were soaring.

They suggested that the official statistics of covid deaths in China was grossly under-reported due to a change in definition by the China authority (which they suggested was unjustified).

Several media mentioned that the daily covid deaths in China has probably reached 5,000. If this is extrapolated for 365 days, the death would be between 1 to 2 million (which was carried in several reports).

There was a positive observation by a German journalist (from the DW media, I think) that the situation is returning to normal in Beijing. There is no more queues in front of fever centers and drug stores. He thinks that the wave is probably over in Beijing. He said that the challenges could lie ahead for the other provinces that do not have the medical facilities in the cities.

I will monitor the reports and make a critical judgment between reliable and smearing reports. Each comment represents the opinion of a journalist based on what he saw and hear. The journalist may or may not be honest in his or her reporting, or may analyze the situation wrongly.

Let me take the figure of 5,000 covid deaths. I consider it to be normal. This figure may persist for several weeks, not will not continue for 1 year. If I take 8 weeks, the figures will reach 250,000 deaths.

Without covid, there are 10 million deaths in China. With the spread of the covid infections, it is likely that some of these "normal deaths" would be from people who are infected by covid. It is also possible that the covid infections accelerated their deaths. The 250,000 projected deaths represent 2.5% of the normal deaths. This is not an alarming figure.

Even if the covid deaths reach 1 million, it represents 10% of normal deaths. Again, I would not be alarmed.

If it passes 2 million deaths (based on a wider definition of covid deaths used in western countries), I might be worried.

Tan Kin Lian

Thursday, December 22, 2022

The paradox of globalization

 During the past 30 years of globalization, one cardinal rule under the World Trade Organization is that a country should not subsidize its domestic manufacturers and that global competition should be open.

America has been criticizing China for its "industrial policy", i.e. that China subsidizes its domestic manufacturers to become more competitive in global trade.

The recent legislation by America to subsidize its semiconductor industries has drawn complaints from European countries.

I wish to point out a paradox.

I believe that globalization will thrive better when a country is allowed to subsidize its domestic manufacturers. This is necessary to allow each country to mitigate the disadvantage from the higher wages in that country, ensure that there is sufficient jobs for the people in that country and keep essential production within the country.

My concept does not mean that international trade will be totally stopped. Many countries will still want to have international trade to get better quality products at lower prices.

However, the "protectionist" measures will ensure that some of the production and jobs remained in the country.

There is no need for there to be too much international trade. It is better to have a balance - some of the products are produced domestically and other products are imported.

Tan Kin Lian

Review of Tesla (TSLA)

I hold 2,100 shares of Tesla at an average cost of $251. At the current price of $137, I see a paper loss of $240,000 USD (SGD 324,000). This wiped out most of the profits that I realized on Tesla during the previous two years.

Part time work for workers above 65 year

Many people think about retiring at 60, or 65 or 70.

Actually, it is better that they do not retire, but instead work part time (say 4 hours a day), provided that they are still healthy. They keep their mind alert, and keep in touch with their professional knowledge.

When I started work in the 1960s, people retire at 55 and pass away at 65 (on average). Today, people pass away at 85 (on average). So, they can continue to work until 75. Some may prefer to continue working until they die, but at a slower pace.

We should make it possible for older people to continue to work in useful jobs that are suitable for their age. It should be not strenuous, not mentally stressful and should be for a few hours.

This will also solve the problem of a low birth rate, and an aging population.

My friend in Australia, who is 75 years old, spends 4 hours a day on several days in the week to take care of an older person who is probably 10 years older. He gets an allowance from the community to do this care work.

I read an article that retired doctors in China are now being called back to help in taking care of people who are mildly infected with covid.

These are examples of how "retired workers" can continue to do part time work and be useful to the community.

The part time work should be provided by and funded by the community (i.e. the government). The rate of pay can be modest. The "retired" workers usually has reduced financial commitments as his children would have grown up.

Many countries provide a state pension to people who passed the retirement age. However, they find the pension to be a financial burden on the state. It is also difficult to change the terms of the pension as it becomes an "entitlement".

An alternative to providing a state pension is for a country to create part time work for retired people. This scheme will probably cost the same or less than a pension.

The part time worker will be doing work that is useful to the community, such as taking care of older people or young children, or being a mentor, companion or guide.

These services can be useful to parents who are busy at work and are not able to give sufficient attention to their young kids.

I hope that Singapore will pursue this suggestion actively.

Tan Kin Lian

WOTC - Temasek Holdings

 Wisdom of the Crowd: 71% of the respondents said that Temasek Holding should not invest in startups. These investments should be left to hedge funds.

Wisdom of the Crowd - New Issues

1. What will happen to China after it relaxed its covid restrictions?
2. Will China achieved strong economic growth for 2023?
3. What is the economic prospect for Singapore in 2023

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WOTC - Communist Party of China

 Wisdom of the Crowd: 46% of respondents said that the Communist Party of China (CPC) should keep its present name. 42% said that it should change its name to the People's Party of China (PPC).

Wednesday, December 21, 2022

Wisdom of the Crowd - New Issues

1. Does increase in GST help the poor?
2. Does abolishing of estate duty help the poor?

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Why GST is wasteful and should be abolished

I share this example to explain why I oppose GST strongly.

a. When I sold my office property, I had to collect GST from the buyer and pay GST to IRAS (the tax authority)
b. The buyer does not mind paying the GST, because they can recover it from the IRAS.
c. I have to pay GST on the lawyer fees, and can recover the GST from IRAS

Basically, it is a game of collect GST, pay GST and get GST refund. It is a waste of work. It is unproductive and wasteful. Many people have to spend time to do the wasteful work.

This does not apply only to the occasional transactions, such as the sale of office property.

It applies to all transactions that occur everyday, most of which attract GST. It creates a lot of accounting work to bill GST, collect GST, pay GST to IRAS, get GST refund.

The large companies can computerize the accounting. Even so, they required manpower to identify and sort out the transactions that require GST or are exempt from GST.

Smaller companies have to employ staff to manually manage the GST accounting.

The small companies that are exempt from GST do not get away either. They have to pay GST on their purchases or supplies, and that add to their cost of operations.

Many people ask for essentials, such as food and medicine, to be exempt from GST, to reduce the impact on people with lower income. The government does not like this suggestion as it would complicate the GST accounting further. (Although, I must point out that many countries manage to exempt these essential items).

For the past three decades, I held the view that GST is a very bad tax and is also costly and troublesome to administer. As time goes by, GST becomes worse and more costly.

I hold the view that the government needs to collect sufficient revenue to run the country, to provide public services, to build a credible defense and to build infrastructure.

There are better ways to collect the tax revenue. GST happens to be a very bad way. I held the view, for three decades, that GST should be totally abolished.

Tan Kin Lian

Tuesday, December 20, 2022

WOTC - Help to cope with higher mortgage payments

 Wisdom of the Crowd: 69% of the respondents said that the government can help home owners who face higher mortgage payments due to increase in mortgage interest rates in two ways.

WOTC - Increase in mortgage interest rate

 Wisdom of the Crowd: 76 % of respondents said that the home owner should be allowed to keep to the same monthly repayment and to repay the loan over a longer period when mortgage interest rate rises sharply.

WOTC - Moderation of social media content

 Wisdom of the Crowd: 73 % of respondents said that social media platforms should exercise moderation to ensure that the content are truthful and stop the spread of harmful content.

Wisdom of the Crowd - New Issues

1. What is the best way to reduce cost of living in Singapore
2. Was it a good strategy to develop crypto currency and blockchain
3. Why was the DPMs not allowed to be acting PM?

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Monday, December 19, 2022

Review of Sinopharm (1099.HK)

 I hold 30,000 shares in Sinopharm. My average cost is HK$21.2. The current price is $20.3. I have a loss of SGD $5,500 on this holding.

Sinopharm hit a low of $14.6 on 7 Oct. It has recovered 40% from this bottom.

The current price earning ratio is 6.77 times and the dividend yield is 4.2%. Sinopharm is expected to report better profit for the current financial year.

With the surge in covid infection in China, following the recent relaxation of covid restriction, I expect an increase demand for Sinopharm's products.

I will buy another 15,000 shares.

Note - I am sharing my personal investment decision. Do not treat it as " investment advice".

Sunday, December 18, 2022

Wisdom of the Crowd - New Issues

1. Should Temasek Holdings issue bonds to raise money for investment?

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Relaxing the covid restrictions

Recently, the China authority relaxed the covid restrictions rather hastily, in response to the large scale protests by residents against the strict restrictions (practiced over three years).

They have have managed the relaxation differently, and prepare the people for the change.

I give this suggestion with the benefit of hindsight. This is how they could have managed the change.

1. They should announce that the relaxation would be implemented in 2 weeks time. This would allow the residents to prepare for the change.

2. They should distribute the necessary medication and test kits to the residents. This would avoid the rush by residents to overstock the supplies and leave nothing for the late comers.

3. They should educate the residents about the possible outcomes, namely:

a) The virus could spread, but they are likely to be mild and not cause much harm
b) The virus would be more severe than expected, in which case, the covid restrictions would be reimposed.

4. They can advise the residents to continue with their personal protection, but it would be voluntary.

By giving 14 days notice of the change, the residents would be better prepared to face the possible outcomes in a calm manner.

I do not know if the China authority had indeed taken the above measures before relaxing the restrictions. Anyway, I just want to give this opinion based on my limited knowledge.

Tan Kin Lian

WOTC - Increase in mortgage payments

 Wisdom of the Crowd: 47 % of the respondents said that the govt should ask the bank to keep the existing mortgage payments and allow the loan to be repaid over a longer period.

Saturday, December 17, 2022

Wisdom of the Crowd - New Issues

1. Should MAS introduce digital payment to replace cash?

2. What is a more convenient form of digital payment?
3. Should we have multiple payment platforms?

Vote in

WOTC - Moderate cost of living

Wisdom of the Crowd: 84% of the respondents said that the PAP govt will not be able to moderate the cost of living for the people.

Proof of concept for a central bank digital payment platform

 The central banks in many countries are trying to promote digital payments to replace cash payments (i.e. paper notes and coins).

The goals are:
a) To reduce the cost of handling paper notes and coins
b) To combat counterfeit and fraud
c) To improve efficiency in handling retail payments.

So far, none of the central banks have succeeded. The central bank in China and a few other countries have made some progress, but they are still far from achieving their goals.

I offer this suggestion to a central bank to achieve their goals.

Digital payment by central bank

 I have written several articles on how a central bank can promote digital payments.

I am now looking for a central bank that is interested in my solution.

Friday, December 16, 2022

Pricing of new HDB flats

There is a lot of controversy over the pricing of new HDB flats (also know as built-to-order or BTO flats).

Recent figures released by the government showed that the land cost comprises about 60% of the total cost, while construction and other costs takes up the remaining 40%.

The government provides a "subsidy" and prices the new HDB flats at below cost. I do not know how much is the subsidy, but it appears to be less than 15%. After the subsidy, many people still complained that the prices are too high and unaffordable.

The government also provides additional grants to eligible home buyers, based on a complex system that depend on many factors peculiar to the individual buyers. I find it difficult to follow and understand the grants. But the figures released by government, after applying the appropriate grants, show that the actual prices are "more affordable".

Some people, which I will describe as "the other side", argued that the government should not apply the market value of the land, as the land were acquired at extremely low cost in the past.

The government ministers argued that it would be unfair to use a lower value, as it would badly impact the value of the existing HDB flats already owned by the earlier buyers.

It appears to me that "the other side" wants the new HDB flats to be priced lower, so that they can enjoy a capital gain when they sell the flat in the future, as the previous generation had enjoyed.

To make the issue more complicated, some people argued that the "owners" do not "own" the flats, but they are just "lessees". I find this argument to be not helpful.

I will now give my personal view on this controversy. I do not wish to take any side - not for the government, nor for the "other side".

I want to suggest that both sides are giving answers to the wrong question, which is "what is a fair price for a new HDB flat".

In my view, the correct question should be - how can the government provide affordable housing to the people.

It should not be the role of government to help people to make a capital gain on "owning" a HDB flat. This was the approach taken in the past, but it is the source of the current controversy.

To provide affordable housing, the government should offer suitable flats on rental that takes up 20% (say) of the median family income. The rent can be adjusted every one or two years according to changes in the median family income. The rent is market related, minus the speculation in property prices.

As the government owns most of the vacant land in Singapore, they can build the affordable rental flats to meet the demand of the population, especially to the young people who start families every year.

The rentals can still yield an attractive source of recurring revenue for the government. It is not as large as land sale, but it is more sustainable and stable.

People who believe passionately in investing in property can still opt to buy a HDB flat or private property and pay the market rate. They cannot complain that it is unaffordable, as they have the choice of renting an affordable HDB flat.

I wish to offer this idea as a solution to the controversy.

Tan Kin Lian

Breakdown of internet connection

 If we rely on digital payment and stop cash payment, we need to deal with the incidents when the internet connection is not available. This is how it can be handled.

Anonymous wallet

Some people do not like digital payment because they are afraid that the government can trace their spending.

I do not understand this concern. Here are my reasons:
1. If the spending is legal, there is no need to fear that the government can track the spending.
2. There are several hundred of million people spending every day in a large country. The government does not have the reasons to track the spending.

The consumer may be afraid of being tracked, if they are spending the money for illegal purposes, such as money laundering, financing of terrorism, paying bribes, buying of prohibited goods.

These are not ordinary transactions.

Perhaps some people want to keep their payments confidential for some special reasons, and these payments are not illegal.

For these cases, the customer can use an anonymous e-wallet. This is a e-wallet that is not linked to a bank account, or a mobile phone or other forms of identifying the owner.

The customer can top up the anonymous e-wallet at a kiosk or retail outlet that provides the top up service. They can also transfer money into the e-wallet by a bank transfer.

The e-wallet can be used to make digital payments, without disclosing the identity of the payer. The e-wallet can be transferred to any person.

Apart from its use to make anonymous payments, the anonymous e-wallet can be issued to children or older people who do not have a bank account.

To prevent illegal payments, there is a cap on the daily limit that can be paid out of an anonymous e-wallet, e.g. $500 or less.

I believe that this will provide an avenue for making confidential legal payments. It should dispel the concern that digital payments can be tracked by the government.

Tan Kin Lian

Land banking scams

Land banking scams have occurred in Singapore on many occasions in past years.

The promoter sells plots of agricultural land in western countries at a price that is a small fraction of residential land prices in Singapore. A typical plot is $5,000 sf and is sold at a price of $80,000 or $16 psf.

These land schemes are promoted at high profile marketing events in Singapore. The potential buyers are told that the land will be worth 3 to 5 times of the current price, when the promoter gets approval from the authority to convert the land into residential use. This would typically take 3 to 5 years.

Many buyers bought the land on that promise. They found, after waiting for 3 to 5 years, that the approval was not given, and that the land that they bought was useless. They were not able to sell the land at their cost, as they have paid a high price for the land.

The typical value of agriculture land at the time of purchase was $1 psf. They had paid 16 times of the actual market value.

What can the government do, to stop this type of scams?

Here are the typical responses from well educated people:

1. There is nothing that the Singapore government can do, as the land is located outside Singapore and is outside the jurisdiction of the Singapore law.
2. The best way is to educate the public about these scams, so that they do not fall in the trap.

I disagree with these views. Here are my reasons.

1. The Singapore government could pass a law to require marketing of certain types of investments, e.g. sale of land in overseas countries, to be approved by a relevant authority. This could also apply to certain types of investments that are the subject of frequent scams.

As most of these transactions are marketed in Singapore, the requirement to obtain prior approval could act as a deterrent to prevent these activities.

2. It is easy to suggest the approach to "educate" the public not to be "greedy". This approach has been suggested for several decades. They do not work. While some people may be able to detect these scams, there will be a large segment that will fall for the scams. It has happened many times over the past years.

In my view, it is the primary duty of the government to pass laws to stop criminal activities. While some of these laws cannot stop the crimes completely, they will be able to prevent them to a large extent.

All laws cannot stop the crimes totally. For example, murders still happen, when it carries a severe penalty. We cannot argue that there is no need to have a law against murder, just because it does not prevent the crime totally.

I apply the same reasoning for a law to stop land banking and other scams.

Tan Kin Lian

WOTC - Anwar Ibrahim's government

 Wisdom of the Crowd: 77% of the respondents expect Anwar Ibrahim's government to be stable as it has the support of the major political parties.

Thursday, December 15, 2022

Digital payment under a central bank

 I wrote this paper to suggest how a central bank can implement a digital payment system. This approach applies to MAS in Singapore as well.

Why is a low usage of e-CNY in China

China introduced its central bank digital currency (CBDC), also known as e-CNY a few years ago. They implemented it in phases in several cities to test the system.

They launched the e-CNY for tourists in the Beijing Winter Olympics in January 2022.

There was little report of the usage of the e-CNY. I suspect that the usage is quite low.

How does China implement its CBDC?

 This article explains how China implements its central bank digital currency (CBDC). It is an excellent article.

Earlier, I had the impression that the CBDC is implemented using blockchain technology. I was mistaken. 

This article explains that the retail CBDC uses a centralized database, which allows it to handle a large volume of transactions. This centralized database is similar to what is implemented by the private payment platforms, i.e. AliPay and WePay.

It also explains that the CBDC is integrated with the private payment platforms. 

It reinforced my earlier belief that the people in charge of the financial system in China know their business. They do not blindly follow the fad of the day.

The article explains that China has a separate project to implement smart contracts using the blockchain technology. This may be used by the payment platform at a later date, in areas where they technology is useful.

Still, there is a question. Why is the e-CNY (i.e. the currency promoted by the CBDC) not taking off? Why is the usage low?

I will share my thoughts in a separate article. 

I believe that the China government will be able to solve this challenge and that the e-CNY will become the successful model to be followed by other countries. 

Tan Kin Lian

Cost of a National Service army

Many people have the impression that a National Service army is less costly than a professional army.

I think that they may be mistaken.

It does cost a lot of money to train a full time NS army for 2 years (maybe it is slightly shorter now by a few months), and to keep them trained during the years when they are called up regularly for reservist duty.

While the full time NS men receive only a modest allowance (which some people described as a slave salary), the Singapore Armed Forces (SAF) need a large number of full time soldiers to do the training. This can be quite costly.

The advantage of the NS system is that it produces a large army of trained reservists, that are combat ready in times of hostility.

But some experts say that modern day warfare does not require a large manpower of soldiers to serve as "cannon fodder".

Modern war are fought and won with precision hardware, such as fighter planes, missiles, long range artillery. They are handled better by full time professional soldiers who accumulate skills through regular practice and years of experience.

There is also the question of the loyalty of conscripted soldiers, who may feel that they are disadvantaged in competing for good jobs against foreigners, especially if their employers prefer to employ foreigners who are not disrupted every year to receive reservist training.

There is a large cost to the conscripts in the time that they have to spend on full time training and reservist training, for which they are not adequately or fairly compensated. They are urged to do it for the "sake of the country", but they see their sacrifice being enjoyed by foreigners who do not have to contribute to the sacrifice. This cost is ignored.

I am in favor of a strong military defense. Our national service strategy had worked well for us in the first few decades of our independence, but is probably not suitable in recent years. It is time for us to review the strategy, and examine the true cost and effective of the various options to secure our national defense.

Tan Kin Lian

Wednesday, December 14, 2022

Democracy, human rights and freedom of the press

 Kishore Mabubhani made the following statements in his book (Can Asians Think) about democracy, human rights and freedom of the press.

1. American journalists do not believe in the Christian rule "Do unto others as you would have others do unto you" or "Let he who has not sinned cast the first stone". It believes that the infidelities of a politician are public property, to be exposed in every detail. But infidelities seems about the same in all sectors of society, whether in Congress or in the press corps.

2. Power corrupts. The absolute power of the western journalists in the third world corrupts absolutely. On arriving in a third world capital, the American journalists believes that he has arrived as a lone ranger battling an evil and corrupt government. He did not realize that he is behaving like a colonial proconsul demanding attention from the officials of the third world government.

3. A free press can serve as the opium of society. The American media prides itself on the ability of its investigative journalism to uncover the real truth behind the stories put out by government, big business and other major institutions. It could never stomach the proposition that it could serve as the opium of American society. But it has.

4. A free press need not lead to a well ordered society. A free press can lead to good government, but it can also lead to bad government.

5. Western journalists are conditioned by both western prejudices and western interests. the claim of "objective" reporting is a major falsehood.

6. Western governments work with genocidal rules when it serves their interest to do so.

7. Western governments will happily sacrifice the human rights of third world societies when it suits their interest to do so.

8. The west has used the pretext of human rights abuses to abandon third world allies that no longer serve their western interest.

9. The west cannot acknowledge that the pursuit of "moral" human rights policies can have immoral consequences.

10. An imperfect government that commits some human rights violations is better than no government, in many societies.

Tan Kin Lian

How fraudsters can exploit complicated schemes

Finance minister LW and his ministry create many convoluted schemes to hand out some sums of money (which TKL describes as bits and pieces) to the beneficiaries. There is the risk that some of these schemes could be exploited by smart scammers.

Here is how it can work.

Each convoluted scheme pays out a small sum of money to the recipients based on multiple conditions - income, housing, etc.
When they compute the scheme, they will say x million people quality and will receive a total of $Y million.

But the people who qualify do not know that they qualify - because the schemes are complicated.

So, when they hand out the money, the person in charges give out the benefit to a smaller number of recipients (i.e. the beneficiaries who were left out do not know that they had qualified in the first place). The money is siphoned somewhere, and nobody is the wiser (except for the scammer).

If the fraud is discovered later, it will probably be covered up, or some excuse would be created to explain why it was unavoidable.

Remember. There are many complicated schemes, with different conditions of eligibility. Many people find it difficult to keep track of these complicated schemes and to know if they qualify or not. They just have to trust that someone in the government will send them the money, if they qualify for it.

In this confusion, it is easy for the fraudster to exploit the system to siphon off some of the large sums of handouts.

There were a few high profile cases in the past where scammers had taken advantage of the government schemes to exploit the loopholes. These include:

a) Claiming large sums on GST refunds
b) Claiming large sums from Skill Credit for training of workers.

These scam show that the crooks are quite smart in exploiting the system.

The best way to avoid this risk is to device simple schemes that everybody understands, e.g. every citizen gets $X as a benefit. Everyone knows if he is a citizen or not, and if he qualifies or not.

Hong Kong adopts the simpler approach (suggested by TKL) to pay out their financial aid. It is not a perfect system, but it is simple and the risk of fraud is reduced considerably (although it is probably not totally eliminated).

Tan Kin Lian

CBDC - a new approach

 Many central banks wanted to implement a digital currency (CBDC). They blindly followed the suggestion that CBDC should be based on blockchain. That was a big mistake.

There is no need for CBDC to follow blockchain (which was the platform used for cryptocurrency). If they adopt a traditional (i.e. non blockchain) platform, they would be able to implement CBDC more quickly.

Blockchain is expensive to implement and to process. It also complicated and requires special devices, which is not available for ordinary people.

Google told me that the most widespread use of CBDC is in Nigeria. My Nigerian friend told me that the eNaira is hardly used.

China has tried to implement eCNY for several years. It also did not take off. The eCNY was officially launched at the winter olympics in early 2022. There was no further report of any wider rollout. I think the eCNY, based on blockchain technology, was not well used.

If the policy makers in the central banks, including MAS in Singapore, realize their mistake and adopt CBDC based on a traditional platform, they are more likely to succeed.

There are still many challenges to be overcome, but moving out of blockchain is the first step.

Tan Kin Lian

Wisdom of the Crowd - New Issues

1. Should the Communist Party of China change its name?
2. Should National Service be continued in its present form?

Vote in

Time to review National Service

For a few decades, I have been against the current practice of National Service. Here are my reasons.

1. It is too long.
2. It imposes a burden on our male citizens and make them loss in competition for jobs against foreigners and females.
3. It is costly to train NS men and keep them trained as reservists.
4. It is more effective, and perhaps cheaper, to have professional army, who can develop their professional over a full time career.

I support an effective defense strategy, but prefer it to be based on a professional army.

We can provide basic military training for our male citizens but this has to be for 6 months only. When there is hostility, they can be called up for refresher training. This is not perfect, but is a workable option. Several countries adopted this approach.

The recent deaths of NS men reminds the citizens at large that our current approach is not working well. Sadly, this will soon be forgotten, until the next accident and death occurs. Singaporeans respond to the news at the moment, but have short term memories.

It is time for Singaporeans to wake up. We need to re-look at our approach towards national defense. We should not continue to foster a heavy burden on our male citizens.

Tan Kin Lian

How will China solve its property bubble?

I am watching how China acts to solve its property bubble with great interest.

China is not the only country with this problem. The problem over inflated property prices also affects many developed countries, including America, UK, Australia and Singapore.

The citizens of these countries were led to believe that property assets are an excellent form of investment. When property prices rise, they expectations turned out to be correct. Properties were a great form of investment.

However, the property prices can go up to unrealistically high levels, which are beyond the reach of most citizens based on their earnings. These prices become a bubble.

We have to watch how China deals with the bubble. How can they bring down their prices to a reasonable level, without crashing the market and causes large losses to the existing home owners?

I read an article that described a possible solution. The China authority has been working on this solution for the past decade. It is not a solution that they cooked up in a hurry.

According to this article, China will be creating real estate investment trusts (REITS) that will buy the existing properties and offer them for rental to tenants.

I believe that this approach will work. Here are my reasons:

1. It is possible to set the rentals at a fair level that reflect the average earnings of the tenants. When the earnings increase, the rentals can be adjusted accordingly.

2. The rentals will be market related, but will avoid the wild swings caused by speculation and temporary shortages or over supply.

3. This mechanism will provide a fair return to the investors of the REIT and make the housing affordable to the tenants. It is market based, but exclude the excessive market speculation.

4. There are still many challenges that need to be overcome, but I find the general approach to be appropriate.

Tan Kin Lian

Tuesday, December 13, 2022

Helping the poorest in our society

A respected top civil servant, now departed, said "We should concentrate helping the poorest 5 to 10 percent of the population, instead of handing out a general largesse. .... Why tax the lower-income and then return it to them in an aid package? It demeans human dignity and creates a growing supplicant class who habitually holds out their palms. "

Someone ask the question - how do you help the poorest 5 to 10 percent without giving them financial assistance?

The departed civil servant is not around to answer this question. I will answer it on his behalf.

We can help the poorest in our society by giving them suitable and dignified jobs with a decent rate of pay.

I suggest that this rate of pay should be $12 an hour. Suitable jobs can be created for older people that are useful to the community at large, and gives them dignity. Examples of these jobs are security, guides, care givers, waiters, cleaning.

These jobs should also be made available to the unemployed, who lose their regular jobs due to economic circumstances.

These jobs can be for shorter hours, and not be physically demanding. By paying them an hourly rate, the work schedule can be adjusted to suit the service to be provided and the physical ability of the worker.

It is not costly for a community to provide these jobs, and they are helpful to the people who need these jobs to earn an income. They do not need to be unemployed and be the poorest in the community.

Tan Kin Lian

Sustainable global population

What is a sustainable population for earth?

The global population is now at 7.8 billion people. Will the earth be able to produce enough food and other resources to feed a growing population? Will the water resources be adequate?

Should the global population be allowed to grow to 10 billion, 15 billion or 20 billion?

With the current state of our technology, including agriculture, water and energy technology, we appear to be able to feed a growing population, and have enough to spare for emergencies.

We are not suffering any food shortages for the immediate future, except for the supply chain disruptions caused by the conflict in Ukraine.

However, some people argue that the population has already exceeded a sustainable level, and that the current population is causing challenges to the environment, climate and other forms of life.

It may be necessary to plan for a smaller global population to protect the environment. Maybe, a sustainable global population could be 5 billion.

This approach does not mean that we need wars and genocide to reduce the human population. Already, many people do not wish to produce children. It may be possible to plan for a smaller population, without making drastic changes to the preferences of most people.

We need a new mindset. We should not aim for more economic growth. Instead, we should aim for adequate production to meet current needs.

It also mean that people should be working less hours. They should not be competing for a bigger market share, or to acquire more wealth than others.

Life can be more meaningful, if people feel a sense of security and work to produce just enough for their needs. They will have more time to live a fulfilling life.

Tan Kin Lian

Monday, December 12, 2022

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