How an expatriate avoided mis-selling by his bank

Dear Mr. Tan,

Soon after I moved to Singapore I was offered an investment product from one of the world’s largest banks. It purported to guarantee me a return about four times higher than the then interest rate on deposits. I asked what the risk was and how the product worked; clearly there was risk – the bank was not going to pay me all that return for nothing. The bank representative was totally unable to explain the product or the risk and just ended up saying “well a lot of my customers bought it and they never asked me questions like you do”!! All I can say is more fool them if they bought without understanding. It was a gamble by the way on the movements between two currencies. As for the Bank..well to be mis-selling in this age of increased regulation and supposed consumer protection is indeed staggering.

Golden rules. If you don’t understand the product; don’t buy. If salespeople cannot explain a product in simple, clear language, devoid of jargon, then they don’t understand it; don’t buy. If it sounds too good to be true; don’t buy.

Anthony Hobrow
Direct Asia

Blind adherence to rules

I am worried about several negative aspects of the Singapore mindset. One is the blind adherence to rules. We follow rules blindly and are not prepared to make exceptions, even when the consequence is negligible and helps to remove stress for other people.

Recently, I have to make the final payment for the purchase of my office. I have to apply for a cashier order (i.e. the vendor's lawyer will not accept my company's cheque). I also have to visit my lawyer's office with the company stamp and with the secretary to sign the documents in front of the lawyer. Why are all these requirements necessary? The roads were congested and there were insufficient parking space in the lawyer's office - so this requirement adds to the hassle and the cost.

The lawyer's assistant checked the cashier order thoroughly and found that the amount was short by 2 cents. Sorry, the cashier order cannot be accepted. She called the lawyer for the vendor who said that the amount has to be exact. I was asked to apply for another cashier order and to make another appointment to finalise the formalities. I lost my temper.

Finally, they agreed to take my 10 cents in coin to make up the difference. This will save me the cost of another cashier order (I don't know how much I am being fleeced) and a lot of money and hassle to make another trip.

I have seen so many examples of blind adherence to rules in Singapore. I am worried for the future of our country.

Playing with fire

Banks are supposed to do an honest business by taking money from depositors and lending them to businesses at a higher interest rate and to make profits from the spread in interest rate, less the operating expenses. To make profit, they have to work hard, provide good service to their customers, work efficiently and earn an honest profit.

But, the banks found an easier way to make super profits. During an economic slowdown, when savers are risk averse and accept negligible interest rate, the banks used the money to speculate in all types of asset classes - housing, forex and government debts. It seemed so easy to make money, especially on government debt which was considered to be "safe". They can make a good margin on lending money to the government to earn a high interest rate - better than the money lent to businesses.

But,governments can become insolvent. We now have a situation where the government of several European countries are not able to repay their debts and found it difficult to refinance their short term borrowings. This is the crisis in Greece and possibly Italy. When these governments cannot repay their debts, the European banks that bought their debts get into financial difficulty, causing a potential banking crisis.

http://financialedge.investopedia.com/financial-edge/1111/How-PIIGS-Defaults-Could-Affect-The-Markets.aspx?partner=ntu11#ixzz1dFm08zM8DISCLAIMER:

Banks should be required to go back to their traditional business of handling payments and giving loans to small businesses. They should not be speculators in asset classes, including government debts. These asset classes should be invested by mutual funds.

Bright Sudoku - qualify to be a Sudoka master

Do you qualify to be a Sudoku master? You can practice Sudoku and move up the grades, starting from white belt up to black belt (grade 7) and finally red belt (grade 8). This app available now on the Nokia platform and will soon be available on the Apple platform (iPhone & iPad). Watch this video:
http://www.youtube.com/watch?v=BHCU9YfYkCE

Getting people to enrol for Forex training course

Dear Mr. Tan,
I heard from a friend who went his preview about how X (a forex trainer) slashed and reduced course price to attract people to join his course. My friend felt X was treating the audience like clowns. He mentioned X slashed the price until around $300. While everyone was running to the back to sign up, he then finish writing $300 per month, and not just $300.


I have attended other seminars before and I think it is normal, but not to the extent of not finish writing to somehow cheat people. Most people would just state their actual course fee was (example) $20k, slashed to $10k, $5k, eventually $2.5k to make people think they are having great deals (not just Forex).


Regarding the (named removed) website, I saw people complaining about him writing $X amount per month installment which added up to be more than the course fees. I believe it was 0% interest just like most schools are doing now. After searching around online for feedbacks, I felt many people are complaining about him that he is more of a motivational speaker and sales person than a trainer. I watched some videos of his and I felt too.


Hopefully people could be more caution before signing up for courses.

Staged accidents

A staged accident is created by a syndicate involving a criminal workshop. The workshop boss arranged for an accomplice to drive on the expressway and brake suddenly, causing the following vehicle to crash into its rear. Another accomplice will appear quickly with a tow truck to bring the accident vehicles for repair. This will be followed by a big repair bill for the vehicle in front (which belonged to the syndicate).

This type of staged accidents had been happening for many years, but nobody bothered to take any action. One day, the driver of the following vehicle was the son or a prominent politician. He related the matter to his father who brought up the matter to the authority. This caused the authority to take action. For the next few days, there were big stories in the media and the term "staged accidents" was coined. There was a furor, because this was considered to be reckless driving.

This happened in a certain country about 10 years ago. Guess the name of this country, where nobody takes action until it involves an important person's family member?

Re-admission to Universal Studio

The rules of Universal Studio Singapore said that "for same day admission, you must present the Studio admission ticket and hand stamp for re-entry".

I recall visiting the theme parks in America where they recognize the hand stamp (or similar tags). They do not require the admission ticket to be shown as well. I wonder if this reflects the peculiar  requirements in Singapore - where it is usual to add to the hassle for customers?

Benchmark for housing prices

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

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

The price of HDB flat that is being charged is about 3 times of this benchmark - and a 4 room HDB flat is considered to be quite modest, compared to a typical house with a land in America. (See http://en.wikipedia.org/wiki/Public_housing_in_Singapore)

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

HDB flats are getting smaller and more expensive

This is an interesting perspective told by Lucky Tan

http://singaporemind.blogspot.com/2011/11/smaller-flats-doesnt-mean-lower-quality.html

MF Global Singapore clients

Mr Tan,

Your reader might be interested in this news.

http://www.themalaysianinsider.com/business/article/nearly-half-of-mf-global-singapore-client-monies-held-abroad/

 SK

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

Role of government in regulation

I read this interesting story about the problems faced by the regulators on regulating neutrality on the Internet http://tech.fortune.cnn.com/2011/11/11/what-next-for-net-neutrality/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

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

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

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

Danger to the world economy when growth stalls

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


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


http://www.cnbc.com//id/45253864

Interest rate on bank deposits

Which bank offers the best interest rate on fixed deposits in Singapore? The lowest interest rate for 12 month deposit is 0.075% (less than 0.1%) and the highest is 0.625% (less than 1%).
Find out from FISCA website, http://easyapps.sg/assn/Org/Information.aspx?id=5

Should you invest in foreign currency to earn a higher interest rate? Here are the tips. Remember to consider the cost of coversion from Singapore dollar to the foreign currency and converting back. After considering this cost, and considering that the interest rate is so low, it is not worth investing in foreign currency. Read this:
http://tankinlian.com/Admin/File.aspx?id=91&PK=49eface4e1da102d8bb0a4b0889554e4

Managing your retirement savings

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

http://money.cnn.com/2011/11/10/pf/expert/retirement_withdrawal_strategies/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Occupy Wall Street - the issues

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


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


http://management.fortune.cnn.com/2011/11/09/what-occupy-wall-street-got-right/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Itialy is too big to bail

The problem for Italy and the global financial system is serious.

http://money.cnn.com/2011/11/09/news/international/italy_crisis_bail/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

IMF chief - world risk "lost decade"

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


http://www.cnbc.com//id/45217763

Instant Photos

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

Americans move accounts to credit unions

Many Americans are unhappy with recent increase in bank fees that they move their accounts to credit unions.

http://money.cnn.com/2011/11/08/pf/credit_union_switch/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Here are some of the reasons:

http://money.cnn.com/galleries/2011/pf/1111/gallery.move_your_money/index.html?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

High prices in Singapore

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

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

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