Young workers stuck in temporary jobs

This article describes a problem faced by young people in many countries. They are paid a low salary, in spite of spending a lot of money to get a good education.

This situation is caused by the failure of government around the world to set and enforce standards on worker's remuneration and their inability to provide a conducive environment for businesses to operate viably. Some businesses find it hard to survive, and cannot pay their workers well. Some businesses are highly profitable, but still exploit their workers. The government fail to do their job and prefer to leave matters to be sorted out by the market.

Allocating vehicle COEs through a ballot

I have written this paper to set out the case of using the ballot to allocate the available COEs to meet the demand. It takes the views of many people who have written in my blog and Facebook.

Why bid for the car COE?

Dear Mr. Tan
I spoke to numerous people, but did not get an answer that is acceptable. I have been struggling to understand the rationale for the COE bidding exercise. Surely, a balloting for the COE could achieve the same objective of limiting the no. of COE. That is, if the government fix the COE price at a reasonable amount (which could be adjusted periodically), and use balloting for the no. of COE, the same quota would be achieved as well. 

Why is there a need for Bidding, which for whatever reason result in the sky rocketing of the price. In other words, the control of the car population do not have to result in the people paying exhorbitant prices for a cars. Unless the government is all out to make money, which I thought that is not the intent.

REPLY
my personal preference is to have a balloting exercise, instead of bidding for the COE. But our Government believes that bidding (and money) is the best way to allocate scarce resources. I do not agree with their approach, but they are the Government!

If we go on the balloting exercise, there is still a problem. Many people will ballot for the COE and resell the car to the highest buyer. So, the Government decided that the best way to prevent this "black market" is to go bidding in the first place, and let the market decide on who gets the COE.

Visit to Sri Lanka

I plan to visit Sri Lanka next month. I searched Youtube for a video of Sri Lanka and found this excellent video. This is the marvel of Youtube and the internet.

Learn mobile development

If you have a diploma in I.T. and wish to have the chance to learn development on Android or Apple (IOS) without paying a fee, send an e-mail with your resume to inbox@tankinlian.com.  You will be given the facility to learn the platform at our office, projects that you can do, and a mentor to guide you. You need to spend at least two months on the learning, but you have flexibility to spend half of this time at your home.

Spreading work and reducing unemployment

I read a report that in USA, some workers are putting in  70 hours a week. They work hard, so that they can keep their jobs. But, when those with jobs work long hours, there will be less jobs for the unemployed to take up. This is the problem about the free market system.

Countries with caps on working hours (beyond which the employer has to pay premium overtime rate) allows the available work to be spread to more workers. They also have controls over their immigration. A good example is Australia.

How do small business survive in a competitive world, when they have to pay adequate wages to their workers? They pay less for their premises (and avoid the inflated property prices in countries like Singapore and Hong Kong). They also compete in areas where they have competitive advantage, such as the resource and agriculture sector in Australia. By giving adequate wages and employment to their workers, they have an economy that is more sustainable.

My friend, who developed property in Australia previously, told me the restrictions on property development in Australia. 50% of new developments can be sold to foreigners, but these foreigners have to sell their property only to Australians. This helps to control the inflation of property prices due to the influx of foreign funds.

Other countries, such as Singapore, compete by depressing wages.  This is why the situation in Singapore is rather bad.

Occupy Wall Street Protests Goes Global

The protests against corporate greed and failure of government goes global. See http://www.cnbc.com//id/44913817

Except in Singapore. The people are frightened by the strict laws against protest.

Bankrupcy law change could help consumers recover: Experts

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

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

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

 

California Teachers Pension Fund takes a stand

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

Trickle down economics

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

Here is an explanation of "Trickle down economics".

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

Stagflation

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

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

Lack of demand is cause of unemployment

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

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

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

Here is the direct link to the article.

Tribute to our teachers

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

Promoting fair competition

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

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

Oil speculation and cost of living

The financial industry claim that they help to make the market more efficient by getting the right price for each product - using the efficient market theory. This is theory. In reality, the speculation in the market gives the chance for the professionals to make large profits at the expense of the consumers. This article explains what happens and the effect on households. This is why I support the effort of the US regulators to place controls on financial speculation by large banks and hedge funds. Our leaders in Singapore need to realize what is really happening, when they promote Singapore as a financial hub. http://money.cnn.com/2011/10/13/news/economy/gasoline_cost_speculation/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

A better yield for CPF members

In 2004, Lee Hsien Loong, the then Finance Minister, promised a better yield for CPF members by introducing private pension schemes. This suggestion was covered in this report. http://tankinlian.com/admin/file.aspx?id=575.  If he had followed through with his suggestion, Singaporeans would have been better off today.

Remaining anonymous

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


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

Spending education dollars wisely

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

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

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

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

CPF scheme - proposed changes

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

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

Taking care of the elderly

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

Low mortage rates are a ruse

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

Excessive risk taking by hedge funds

Hi Kin Lian,

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

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

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

Book review - Get Value from Your Life Insurance

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


The book is available from www.tankinlian.com/ishop.

Meaningful jobs for a developed economy

Here are the meaningful jobs for a developed economy - to teach the young and to take care of people of all ages, including the elderly. They add value to the lives of people and do not make earnings at the expense of other people (i.e. by making them poorer). We need to have fewer people working the the financial and property sector - creating asset bubbles, and more people doing real, meaningful work. Here is a message to our political leaders!
http://money.cnn.com/magazines/moneymag/best-jobs/2011/fast-growing-jobs/1.html?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

The goals of the Occupy Wall Street Protests

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


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

What to look for in an endowment policy

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

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

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

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

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

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

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

FISCA Research on bank services

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

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

CPF - my views

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

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

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

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

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

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

CPF - views by Lucky Tan

Lucky Tan gives a rebuttal to the points made by Minister of State for Manpower - Tan Chuan Jin.
http://singaporemind.blogspot.com/2011/10/cpf-new-face-new-media-old-ideas.html

 Share your views here.

Occupy Wall Street - Paul Krugman

This is how Paul Krugman views the "Occupy Wall Street" protest.
http://www.kurandatrading.com/archives/occupy-wall-street-blog-from-ny-times/?utm_medium=twitter&utm_source=twitterfeed

Inequality in Singapore

The title of this article suggested that it is about America. But Lucky Tan is talking about Singapore and how conditions in Singapore are so much worse than in America. I agree with his views, which are quite close to my views. http://singaporemind.blogspot.com/2011/10/speeches-from-cnbccom-speakers-corner.html

Drop in US income

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


http://www.cnbc.com//id/44840144

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

Earnings of US companies

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

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

Avoid investment scams

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

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

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

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

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

Tips for young people

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

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

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

Invest for the long term - applying the idea

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

• The stock market had dropped by 20% from its peak
• I am investing for the long term, more than 10 years
• Warren Buffett had said that the companies under Berkshire Hathaway's portfolio were showing good results (except for those involved in the housing market).

A few people asked if it was safe to enter the stock market, and I gave the same view.

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

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

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

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

 

Top 20 REITS - October 2011

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

Yield on a life insurance policy

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

Distress with an investment linked policy

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

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

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

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

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

To attend the talk, you should register now at http://easyapps.sg/assn/Org/Event.aspx?id=5

Prepare your Financial Plan

Here are sample financial plans for people at various ages:

Age 25
Age 35
Age 60

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

You can prepare your own financial plan using this tool.

Hedge funds can make big losses

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

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

Financial planning test

How much do you know about financial planning? You can do this test.
http://tankinlian.com/admin/file.aspx?id=458&PK=67932871ae14102ea52e240ed918ec56

The economic collapse

Watch these videos:
http://www.youtube.com/watch?v=d2tgHW1w1lE&feature=related
http://www.youtube.com/watch?v=aG3zylFeRxk&noredirect=1

Financial Planning Tool and Handbook

You can use this financial planning tool to carry out a projection of your savings and investment yield, net of inflation. This tool helps you to make the right decision for your future. You can read the handbook here.

Unemployment insurance in USA

Unemployment insurance in USA is managed by the states through the state trust funds. Here is a glimpse of what is happening.

..... spending on unemployment benefits fell by 24%, as fewer claims were filed and a temporary $25 weekly increase in benefits expired.
At the same time, businesses paid $12 billion more in unemployment insurance taxes in 2011. Many states have raised unemployment taxes on companies to replenish their depleted UI trust funds.

My view: An alternative to unemployment insurance is for the state to offer a low cost interest loan to unemployed people. They have to pay back the loan, but it will be at a low interest rate (and not the high rate of interest charged by the banks). Some of the loans will have to be written off, but a large part can be recovered from the lenders when they find their jobs in an economic recovery, or when they sell off their house in the future.

Beware of a new type of motor insurance scam

Here is a new type of motor insurance scams that target motorists - and not the insurance companies.

Mr X's car was hit by a van. He reported to an reporting centre. An agent of the workshop approached him and told him that the workshop can handle his third party claim - so that he does not need to lose his No Claim Bonus. Mr. X agreed and sign a few forms given by the workshop.

Six months later, the workshop told him that they could not proceed with the third party claim as the other party had a witness that Mr. X had turned into is lane. The workshop asked Mr. X to pay for the repairs at about twice of the estimated cost. If Mr. X did not pay, the workshop would get a lawyer to sue him. It seemed that the forms signed by Mr. X gave this legal right to the workshop.

Mr. X approached his insurance company to handle the claim, but the insurance company refused - as Mr. X did not meet the policy condition of getting his own insurance company to handle the repair in the first place.

Mr. X is now in a dilemma - having to pay for a claim that should be covered by the insurance policy and now having to pay for twice of the actual cost. Mr. X suspected that the workshop was acting fraudulently and was targeting him in the first place.

Lesson - always leave it to your insurance company to handle the repairs. Do not try to save on your No Claim Discount. It is not worth the unexpected trouble.

Unstable employment and fall in fertility

Lucky Tan wrote this article about the impact of unstable employment on the fertility rate. When people are unsure about their employment, they are reluctant to get married and start a family. In my view, the situation is worse in Singapore than in other countries, so we have one of the lowest birth rate in the world. This is a key reason why the measures taken by the Government to boost the birth rate during the past 25 years have failed to produce the desired results - as they do not address the underlying causes - the unstable employment and increasing cost of living. 

Affordability of housing

IMF figures show that a 70 square meter home in Beijing costs about 20 times the average annual household disposable income, quadruple the national ratio and almost seven times higher than in the United States. Definition: Disposable income is total personal income minus personal current taxes.  

Word Power Vol 1

This is the soft copy of the book. It gives exercises to allow you to improve your vocabulary. It contains 80 puzzles of 20 words each. You can record the time taken to solve each puzzle and the number of correct words.    By carrying out the fun exercises regularly, you can learn more words.

Deceptive practices and hidden fees

President Obama has criticized the bad practices of the banks on deceptive practices and hidden fees. He faced an uphill battle to get the reforms to pass through the US Congress due to the strong lobby of the large banks. I hope that he will get the strong support of the American people.

Means testing is bureaucratic and difficult

Jack Welch wants to introduce means-testing for entitlement to welfare benefits. I do not like this approach. It is better to give the same entitle to everybody, based on age, and to tax those who are well off at a higher rate to pay for the benefits.

It is bureaucratic and costly to implement means-testing, and it can have unfair results. We only need to see how it is being implemented in Singapore. The means testing is based on many criteria, such as income, type of residence, etc. Some retirees - who are not well off - found that they are staying in a landed property bought many decades ago, but are excluded from some government subsidy.

Retirement - Canada vs Singapore

Wing Lee Cheong, a Singaporean who has migrated to Canada, share this story about retirement in Canada, compared to Singapore. He said that retirement is not scary - it can be fun! He wants Singaporeans to be able to enjoy life!

Pinnacle Notes Class Action

The US lawyers told me that the a hearing was held on 28 Sept 2011 on whether the case should be heard in US Court. The judges have not given their decision yet. The lawyer will keep me posted when a decision is made. For Pinnacle Note investors, keep your fingers crossed!

Salute to a visionary

Steve Jobs has passed away. Here is my salute to a visionary.

Orbituary to Steve Jobs.
10 ways Steve Jobs changed the world.

Website - make passive income

Hi Mr Tan,

I came across your blog after reading your book - Get value from Your Life
Insurance. I think the book is very informative and has given me more
insights into insurance planning. I also like your posts on your website
about investments and personal finance in general, very informative. I am
also very passionate about personal finance as you can see on my website.

If you don't mind, we can exchange links. My website is about Making
Passive Income. Check it out at
http://www.investinpassiveincome.com

If you are ok, I will place your link on my website and you can place my
link on your site too. I think your blog is very beneficial to readers
from all walks of life.

Calvin
http://www.investinpassiveincome.com

Top 20 blue chips

I asked my stock broker for the top 20 blue chips in Singapore, showing the fall from the recent market highs and the dividend yield. The results are shown here. I shall be investing in the blue chips with high dividend yields, especially if they have shown a drop of more than 20% from the recent high. It should give good value for the long term investor.

Avoid synthetic ETFs

There are two types of ETFs - physical and synthetic ETFs. Physical ETFs are invested in the underlying shares. Synthetic ETFs are invested in derivatives to mimic the index returns. 

Investors should avoid the synthetic ETFs. Some issuers take the cash and replace them with illquid, hard to value products as collaterals. If the investors rush to liquidate their positions, the issuers might not be able to raise enough cash to pay off the investors. The synthetic ETFs also face the counter party risk where the other party to the derivatives may not be able to honour their obligation.

The Straits Times Index ETFs marketed by SPDR and DBS are physical ETFs - which do not have the risk of the synthetic ETFs.

Read this article.

Forex trading courses

I have received a report that some people have paid several thousand dollars to attend a forex trading course on the expectation that they can learn some trading techniques to make money. Most of these people earn up losing money on the trading activities. And they are too shy to admit that they have made a big mistake in entering into this line.

If you have been misled into paying money for the course, and you have proof of the mis-representation, e.g. the trainer has told a lie about the profit made by other traders using his technique or about his past trading experience, you can recover your fees through the small claims court. See this past case.

Test your vocabulary

Test your vocabulary by rearranging the letters to form the correct words that fit the definitions.

Word Power 2-1
Word Power 2-2

I will be launching a new book that has the scrambled words at various levels, suitable for primary and secondary students.

Please give your views on whether this type of exercise can help the student to learn more words and if it is interesting and fun to attract their attention. I have organised the book to have 80 puzzles of 20 words each, in order of difficulty. It allows the student to record the time taken to solve each puzzle and also the number of words that are obtained correctly.

Request for assistance

If you need my assistance, you have to submit a report based on the following:

Mis-selling of financial product
Insurance claim

Warren Buffett and US economy

Warren Buffet said that all the businesses under the Berkshire Hathaway group are booming, except for those connected with the housing market. This means that the US economy is expected to rebound and do well. It is worth watching. Read this report.

Invest in foreign currency

If you find that interest rate is too low in Singapore and you wish to earn a higher interest rate by investing in foreign currency, e.g. Australian dollar, you should be aware of the following:

• You have to bear the risk of currency fluctuation
• You have to incur the cost of converting your Singapore dollars to the foreign currency and to convert back to Singapore dollars on maturity

After you take these factors into account, it is better to avoid investing in foreign currencies. But if you still wish to consider it, you should read this FAQ.

My preference is to invest in blue chip shares, REITS or the STI ETF. You can find shares that give an attractive dividend yield of 3% or higher and enjoy the benefit of capital appreciation. Although these shares may be risky in the short term, the risk is reduced considerably for a long term investor. These concepts are explained in the FISCA workshop on financial planning. Register here. 

•  

Bravo to the New York Attorney General

The New York Attorney General is active in looking after the interest of ordinary people. If they find evidence that a bank has been defrauding its customers, it is ready to take legal action on behalf of the people. It recognizes that the AG office is really the lawyer for the people, and not just for the Government. Read this report.

I hope that our AG office in Singapore and the Minister for Law will recognize that it has a duty to the people of Singapore to uphold justice and to protect the interest of ordinary people when there is suspicion that the business enterprises are set up to defraud the people, e.g. collecting deposits with the likelihood of folding up or designing financial or investment contracts that are unfair to consumers. If they need financial expertise they can cooperate with the Monetary Authority of Singapore.

It is not reasonable to expect that the ordinary people can afford to engage lawyers to pursue civil actions against these business enterprises. Many cases need to be investigated, and ordinary people do not have the resources or the power to carry out the investigation.


  

Financial Planning Workshop

Register early for this workshop.  Do not wait until the last minute, as the workshop will be cancelled if there is insufficient response.

Due to the high cost of booking the venue, we have to cancel a talk if there is insufficient response within one week of the talk. Do not wait until the last minute to register, if you are interested for the talk to be conducted.

Note:
The talk on life insurance scheduled earlier had to be cancelled due to insufficient response. After the talk was cancelled, a few people wrote to me to ask about how to register for the talk. If they had registered earlier, we would have continued the talk.

Profit without tax

It seems that large companies lobby for a tax holiday but does not help to protect jobs. http://www.cnbc.com//id/44769782

A trade war in the horizon?

Will there be a trade war? Here is an event that may lead to this disastrous outcome. Some analysts think that the US government and China will work out a solution to avoid a trade war. But in a conflict, nothing can be taken for granted. Things can go wrong. 

Creating employment in a recession

Read this article. It is a dilemma faced by governments. They have a budget deficit and has to reduce spending by laying off workers. But it is difficult for the workers to find jobs in a recession. The workers will receive unemployment benefits for a short period, but the benefits will run out after a while, and they may still be unemployed.

In a recession, there will not reduced demand for goods and services, as those who are still employed will cut down their own spending. Small businesses will not employ the excess workers. It is difficult for the unemployed workers to start their own business, due to lack of funding, lack of credit and lack of business. It is a vicious cycle.

The solution to a recession is for the government to employ more people, and not to lay them off. These people can be used to provide the public goods and services, that are needed by the population at large, in health, education, security, infrastructure and other useful activities. The government needs the money to pay for these services, and it has to come from taxation of those who are employed and those who are well off.

The people who are employed by the public sector do not need to be paid high wages. They only need to be paid enough to get by. When the economy recovers, they can find better paying jobs in the private sector. In the meantime, they should be kept usefully employed.

The advanced countries are now suffering from the current economic system - low taxation, wide income gap, globalisation, high unemployment and budget deficits. The current system is not sustainable. The leaders need the courage to change the system - but the challenges are really big.

Tan Kin Lian

Improve the public transport system

The Minister of Transport, Lui Tuck Yew, has announced that the quota for increase in motor vehicles will be reduced from the current 1.5% per annum, but will state the exact figure at a later date.

I agree with this decision to reduce the growth in vehicle population. In fact, I believe that we already have too many vehicles in Singapore - judging from the congestion on our roads and the difficulty in finding parking spaces at the homes, workplaces, shopping malls and other destinations.  It is appropriate to start reducing the vehicle population, e.g. by not allowing some of the expiring permits to be replaced, but I do not think that the Government will take this step.

More important, we need to improve public transport, especially the local transport that brings commuters from their homes to the MRT stations or bus terminus. This can be done by issuing licences for local bus and taxi services that operate within a town. These services can be exempted from taxies and other fees, so that the cost to commuters will be kept low through competition. It will also provide employment opportunities for older people who have a driving licence.

I have written about these ideas in this paper on local transport and also in another paper on the public transport system. I have sent the papers to Minister Lui, but he had replied to me at that time that he is too busy to study them. I have not heard from him since.

Many people have to buy cars due to difficulty in getting public transport, especially if there do not live close to the MRT station. If there is a good system of affordable and convenient local transport, they may be willing to forego the expense of owning and using a private car,

Tan Kin Lian

How modern economics have failed us

This is an excellent article which explains that modern economics did not follow the teachings of Adam Smith. It has been allowed to stray from from the what the free market should be - i.e. freedom with responsibility. It explained how the financial sector made a lot of profit through excessive speculation and did not add any value in the process. Modern economics have operated on wrong principles and lack of morality.

Eckhart Tolle’s saying and Tommy Wong’s books

Eckhart Tolle said “Do you need more knowledge? Is more information going to save the world, or faster computers, more scientific or intellectual analysis? Is it not wisdom that humanity needs most at this time?”

Looking for wisdom? Read Dr. Tommy Wong’s books “Wisdom on How to Live Life”.

Tommy Wong’s books can be ordered here.

Solving the shortage of nurses

Hi Mr Tan,
There is a problem but isn't there any "localised" solution;

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1156669/1/.html

Who is bold enough to initiate mandatory National Service Nurses programme?  If no policy maker is willing to initiate NS for female, then perhaps tapping on the NS guys to be NS nurses might be better than tapping on FTs.  Cheers.

Eugene

Tell the truth

Politicians should tell the truth and not mislead the public by controlling the flow of information. Who wrote this article? Kishore Mahubani, Dean of LKY School.

Word Power - test your vocabulary

Test for vocabulary by rearranging the letters on the left to form the correct word that fits the definition on the right.

Occupy Wall Street

There is a growing group of people in America who are demonstrating against the greed of Wall Street and politicians .... " yet its two weeks of noisy occupation has lured a sturdily faithful and fervent constituency willing to express discontentment with what they feel is an inequitable financial system until, well, whenever." 

To keep or terminate an existing life insurance policy?

I have been asked quite often on whether a specific life insurance policy taken previously should be terminated for its low yield. The right approach is to calculate the yield on the policy for the next (say) five years and to compare this yield with the yield from alternative investments, e.g. an ETF or a REIT.

This paper explains how to calculate the yield on a life insurance policy. Although a life insurance policy gives a poor yield for its entire duration, most of the expenses are deducted upfront. After the initial loss is written of, the running yield on the policy may be quite acceptable, e.g. close to 4% per annum. In most cases, it is better to continue the existing policy (although the consumers should have avoided it in the first place). 

Mobile apps to desktop

I am some apps developed on the mobile platform (iPhone and Windows Phone 7). I wish to develp the same apps to run on the laptop. Can it be done by adapting the mobile apps or does it have to be completely rewritten? Please send your answer to kinlian@gmail.com.

A wonderful person

Here is a video of a wonderful person, Warren Buffet. He is a multi-billionaire but he thinks for the common people. And he continues to support Barack Obama, in spite of the difficulties that the US President had to overcome. And he is optimistic that the US economy is coming out of a recession. I hope that he is right!

Political cartoons

http://www.facebook.com/pages/Singapore-Says-Political-Cartoon/139514912744152

Casino and money laundering

I heard that casinos are used for money laundering. Here is my guess on how it works.

The customer brings "dirty" money, e.g. obtained through corrupt or illegal means, to the casino and converts them to non-negotiable chips. When the customer uses the chips to bet. When the customer wins a bet, the customer is paid with negotiable chips. The customer can convert the negotiable chips back to cash and is given a receipt by the casino. The customer can report that his wealth comes from winning at the casino. He does not have to report the money that is brought in for the gambling.

Is this how it works?

Read this article on money laundering. There is a mention about betting in a casino.

Occupy Wall Street

There is a protest in New York called the "Occupy Wall Street". 


It is targeted at "bankers and traders who run the financial markets and their enablers in Washington have hijacked the system from ordinary Americans who just want a decent job and a home of their own."


More details here.

High cost of living and low wages

In this article, Leong Sze Hian pointed out that Singapore ranked as the 10th most expensive city in the world and the wage level of the people ranked at 42nd. This is why many Singaporeans had to work hard and for long hours just to earn enough to pay for the cost of living.

Pursuit of justice

Lucky Tan wrote this article about the pursuit of justice in Singapore.

Challenges facing Singapore

Here is an excellent article by Lucky Tan who writes about the problems that will be faced by Singapore in the near future, as we have many of the characteristics of America that has caused huge challenges to their government. I agree with his views as stated in this article.

New rules on evidence

The Ministry of Law is seeking public views on several changes to update the rules on evidence to be submitted in court. I welcome this move to move with the times. It is an encouraging step.

There are many other areas on updating our laws and enforcing our laws. I hope that the Ministry will be more active in these areas, as the administration of justice in Singapore leaves much to be desired.

Mobile website for FISCA

FISCA is now trying a new website that is suitable for access by mobile phones, and also through the browser. You can access it at http://fisca.mviso.com. Try it with your mobile phone.

New scam on motor insurance claim

A consumer approached me on this problem. He had a minor accident 8 months ago. He decided not to make any insurance claim and carried out his own repairs. He has now received a large claim from the other vehicle with a witness report that placed him in the wrong. The claim was inflated and the witness was probably ,making a false statement.

He submitted the third party claim to his insurance company - but the claim officer rejected the claim as he did not make a report at the time of the accident. He is now in a dilemma and does not know how to handle the third party claim.

His only recourse was to engage his own lawyer to fight the claim, but it would be costly. It was likely that the claim was fraudulent but it was quite sad that his insurance company was not assisting him on this matter.

New scam on time sharing

A consumer shared this story with me. He bought a time sharing unit several years ago. The marketing company disappeared after collecting $7,000 from him. He wrote off the loss.

Recently, he was contacted by a service company who claimed to act for the developer. The told him that he had outstanding service payments on his time sharing unit and that the unit had some residual value. He was convinced to pay the fee to this service company to terminate the contract and claim back what was due to him.

After paying the service fee, he did some research and found that the service company was not connected with the developer. He had been scammed again.

Consumers should be careful and not attend presentations or meet people that they do not know. There are too many scams happening around. Some Singaporeans are easy targets due to their naivety.

Labour churning has social and economic cost

Here is an excellent article in Yawning Bread.

Most Singaporeans will not have much idea of the economics of the foreign worker recruiting system, since our daily lives are far removed from this issue. What I can’t figure out is whether civil servants at the Ministry of Manpower know much about it. If they don’t, the question would be: But isn’t it part of your job to know? If they do, then: How have you managed to ignore the injustices, and social and economic consequences of such a dysfunctional system for so long?


Read more.

Fallacies about Singapore Welfare System

At risk of simplification, this static thinking about our social welfare can be roughly summed up in a few statements: Singapore is not a welfare state and should never be, because the Western welfare state is doomed to fail and social welfare is fundamentally un-Asian. As a small country with no natural resources, we have no choice but to define our own style of social welfare, which by and large has worked over the years. So why fix it if it ain’t broke?  
Underlying these statements are four powerful ideas about social welfare and Singapore society. In the spirit of critical reflection, let us now examine the truth in each of them. [Ng Kok Hoe].


Read his article here.

Financial system gets less stable

When you go out to buy your next television set, it is likely that you end up with something better than your existing TV sold for the same price. Like many things around us, man made systems tend to improve over time - if you take Boeing's newest aircraft, The Dreamliner, you will expect that to be build with more safety features than the old Boeing 747.


There is however one exception, our financial system - it seems to get less stable with each passing year and generates crisis, turmoil and recessions much more often that in the past yet we seem to accept this all encompassing system because most of us are born into or do not really understand what goes on in the banking system. Here is an interesting video that explains quite clear how money is created, how it drives the economy and why we are seeing so many crisis and so much in stability in the current system [Lucky Tan].


Read this article.

Look back at the Pinnacle Notes

Here is an interesting article written nearly two years ago, about the Pinnacle Notes Series 3. Here is another explanation.

Retirees should keep the mortgage

In a low interest rate environment, it is better to keep the mortgage and cash in the bank, or keep invested.
See this article.

How to solve the messy CPF Life scheme

Many people find it difficult to choose among the four options given by CPF Life. Many of them do not like the CPF Life scheme for reasons that are peculiar to their personal situation. Here are my suggestions on how to get out of this messy situation.

Financially sound retirement

Read this article about how to prepare for a financially sound retirement. Several tips refer to the tax situation in America which does not apply to Singapore. Some of the other tips, e.g. do not have debts, how to spend within  your means - are relevant. 

Class action on Pinnacle Notes

An important decision on the class action for the Pinnacle Notes in the USA will be decided soon - the hearing will start on 28 September.


By GRACE LEONG (Business Times)
A lawsuit involving allegations that Morgan Stanley & Co Inc sold rigged Pinnacle Notes as 'safe, conservative' products to a group of Singaporean investors including Singapore's oldest credit cooperative, costing them US$154.7 million in investment losses, is making its way through federal court in Manhattan.


A hearing is scheduled for Sept 28 in which the US District Court for the Southern District of New York will decide whether the case can proceed in the US or whether it should be dismissed and heard in Singapore, The Business Times has learned.


If approved, the Singapore investors will seek class-action status.


NOTE:
Under a class action (in the USA), any compensation received will be shared by all investors in the class, including the investors who were not involved in lodging the original complaint. There is no provision for a class action suit in Singapore.

Volatile gold and silver prices

Gold an silver prices can be quite volatile. Gold dropped 8% in 3 days and is expected to rally. However, there is the risk that it may drop much further. The drop in silver is more severe. This is an example of a speculative and volatile market. Be careful.

http://www.businessweek.com/news/2011-09-27/gold-rallies-after-biggest-three-day-drop-since-lehman-collapse.html

Here is a bearish view:
http://www.cnbc.com/id/44667027

How to use private bankers

In some countries, financial advisers or private bankers can advise their wealthy clients on tax and estate planning, so that they can minimize the tax payable on their income or on the estate that is transferred to the dependants.

It is difficult for these advisers to help their clients in market timing or stock selection - as this is speculation and a zero-sum game. In fact, after allowing for the cost of transactions and fees, it is a negative sum game for the clients.

The best way to get a good yield on the investments is to invest in an index fund and to invest for the long term - to average out the good and bad years. There is little that the advisers can help the client to achieve a better yield.

I have seen many cases where the investor who had relied on the financial adviser to pick the manage the investments on their behalf - only to be disappointed with the bad results. The financial adviser probably did their best, but when the market is volatile, some investors will be at the wrong end, and the results can be disastrous. For each winner, there will be a loser - and after deducting fees and expenses, most investors (actually speculators) will be worse off.

To avoid speculation, you should learn how to invest for the long term. Read my book on financial planning (www.tankinlian.com/ishop) or attend the financial planning talk organized by FISCA (www.easysearch.sg/fisca).

Advisers acted honestly but gave bad advice

Many people had bought a bad financial product from an agent or adviser whom they know and trusted. They learned later that this was a bad decision.

The adviser might have acted honestly but gave the wrong advice, due to being naive. The advisers desperately needed a job, e.g. they have just graduated. They were taught about the positive aspects of the financial product (e.g. life insurance policy or structured product) but did not know about the negative aspects (i.e. the high charges and high risk). They honestly sold the financial product to their friends and family members thinking that they are giving good advice.

When they learned later about the negative aspects, they felt quite bad about letting down the people who trusted them and left the business quietly.

Their agency managers knew the full picture, but exploited the ignorance of the newcomers. Some advisers or agents, who later learned the tricks, decided to continue the game and make a lot of money for themselves.

I do not wish to imply that all agency managers or experienced advisers are dishonest. I know of a few who are honest and acted in the best interest of their customers. But there are dishonest or naive advisers as well, so consumers should be wary.

Life insurance book

The life insurance book is now available at a reduced price from i-shop
http://tankinlian.com/admin/file.aspx?id=375

Order here: www.tankinlian.com/ishop