> The nature of man is fundamentally good inclined towards goodness.
> The princely man sticks to virtue, and the inferior man clings to material comfort.
> The princely man is just while the inferior man expects rewards and favours.
> The princely man is dignified, noble, magnanimous, and humble while the inferior man is mean, proud, crooked, and arrogant.
> The Ruler should be virtuous, just, honest and dutiful.
Monday, November 30, 2009
Risk Management
There are five ways to manage risk:
a) Avoidance
b) Loss control
c) Retention
d) Non-insurance transfer
e) Insurance
Insurance is just one method of risk management. It is appropriate only for the low frequency and high severity risks, such as premature death or serious disability. We only need to insure against the "premature" occurrence of these events, as everyone will have to die eventually and it cannot be prevented.
Most people use a combination of avoidance, loss control and retention to handle most risks of high frequency or low severity. There is no point in insuring against these risks as the cost of insurance is rather high and it is quite a hassle to make a claim.
Retention means that you set aside savings to pay for the losses that are likely to occur. It is better to have savings to pay for medical expenses and retirement income when one gets old, rather than depend on insurance to pay these benefits. Sometime, when you need insurance to pay your expenses, you may find that your claim is rejected due to some technical reason.
An example of "non-insurance transfer" is when your medical expenses are transferred to your employer through the contract of employment.
To summarize, having adequate savings is as important as having insurance. It is better to pay a small premium to cover the risk of premature death, accident or disability and to save the money separately for future needs.
However, if the insurance policy provides a good return on your savings, compared to other types of investments, it is all right to save through an insurance policy. For this to happen, the expense and other charges for the insurance policy must be much lower than it is now. The "effect of deduction" should not exceed 15% of the accumulated regular premiums (compared to 40% that is taken away now by most insurance policies).
a) Avoidance
b) Loss control
c) Retention
d) Non-insurance transfer
e) Insurance
Insurance is just one method of risk management. It is appropriate only for the low frequency and high severity risks, such as premature death or serious disability. We only need to insure against the "premature" occurrence of these events, as everyone will have to die eventually and it cannot be prevented.
Most people use a combination of avoidance, loss control and retention to handle most risks of high frequency or low severity. There is no point in insuring against these risks as the cost of insurance is rather high and it is quite a hassle to make a claim.
Retention means that you set aside savings to pay for the losses that are likely to occur. It is better to have savings to pay for medical expenses and retirement income when one gets old, rather than depend on insurance to pay these benefits. Sometime, when you need insurance to pay your expenses, you may find that your claim is rejected due to some technical reason.
An example of "non-insurance transfer" is when your medical expenses are transferred to your employer through the contract of employment.
To summarize, having adequate savings is as important as having insurance. It is better to pay a small premium to cover the risk of premature death, accident or disability and to save the money separately for future needs.
However, if the insurance policy provides a good return on your savings, compared to other types of investments, it is all right to save through an insurance policy. For this to happen, the expense and other charges for the insurance policy must be much lower than it is now. The "effect of deduction" should not exceed 15% of the accumulated regular premiums (compared to 40% that is taken away now by most insurance policies).
Holiday in Banda Aceh
I am travelling for a short holiday to Banda Aceh on 1 Decemeber and will return to Singapore on 5 December.
Sunday, November 29, 2009
Emergency jobs program
It's time for an emergency jobs programme. Low interest rate will not create jobs. Here is a view from a renowned economist.
Location map - fast and easy
If you need to produce a location map for your home or office quickly, or to find the location of your distance, you can use the Directory function in the Real Estate Data portal (www.easysearch.sg)
You can enter the postal code, address or name of the building. It will display the location map easily. You can save it into a PDF or print it out.
Try it.
http://projects.easyapps.sg/propinfo/Map.aspx
I am able to use this map to print the location of places that I have visited during my last trip to UK and for my next trip to Banda Aceh. It is so easy to use and useful.
You can enter the postal code, address or name of the building. It will display the location map easily. You can save it into a PDF or print it out.
Try it.
http://projects.easyapps.sg/propinfo/Map.aspx
I am able to use this map to print the location of places that I have visited during my last trip to UK and for my next trip to Banda Aceh. It is so easy to use and useful.
False wealth
During the past two decades, many people thought that they were rich, as their properties and equities appreciate in value. This is false wealth on the back of an asset bubble.
They are the same assets but they were priced at inflated values due to low interest rate, financial engineering and leverage (i.e. high borrowings at low cost).
The global financial crisis of 2008 had brought the asset prices down to earth. Suddenly, many people realized that they were not so rich after all. The affluence brought about by financial innovation was an illusion.
We went through the collapse of the US housing bubble together with the associated asset backed securities, collateralized debt obligations, credit default swaps and other strange products. We will now face a second wave of problems with the default of Dubai World. What next?
Unfortunately, the people who suffer most will again be the ordinary people. They will face higher unemployment and still have to pay the heavy mortgage on their overpriced housing.
Those who think that the free market capitalism can create wealth should re-think again. Is it truth wealth or false wealth?
Tan Kin Lian
They are the same assets but they were priced at inflated values due to low interest rate, financial engineering and leverage (i.e. high borrowings at low cost).
The global financial crisis of 2008 had brought the asset prices down to earth. Suddenly, many people realized that they were not so rich after all. The affluence brought about by financial innovation was an illusion.
We went through the collapse of the US housing bubble together with the associated asset backed securities, collateralized debt obligations, credit default swaps and other strange products. We will now face a second wave of problems with the default of Dubai World. What next?
Unfortunately, the people who suffer most will again be the ordinary people. They will face higher unemployment and still have to pay the heavy mortgage on their overpriced housing.
Those who think that the free market capitalism can create wealth should re-think again. Is it truth wealth or false wealth?
Tan Kin Lian
Keynesian Economics
Source: Wikipedia
Keynesian economics is a macroeconomic theory based on the ideas of 20th-century British economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936; the interpretations of Keynes are contentious, and several schools of thought claim his legacy.
Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector—and served as the economic model during the latter part of the Great Depression, World War II, and the post-war Golden Age of Capitalism, 1945–1973, though it lost some influence following the stagflation of the 1970s. As a middle way between laissez-faire capitalism and socialism, it has been and continues to be attacked from both the right and the left.
The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought. Keynesian economics has provided the theoretical underpinning for the plans of President Barack Obama, Prime Minister Gordon Brown and other global leaders to, allegedly, rescue the world economy.
COMMENT BY TAN KIN LIAN
Keynesian economics leads to deficit spending. It comprise of two strategies - low interest rate and government spending (to create demand). I prefer government spending (e.g. infrastructure and other useful projects) as it create jobs for people. I do not like low interest rate, as it leads to asset bubbles and benefit the asset owners.
Keynesian economics is a macroeconomic theory based on the ideas of 20th-century British economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936; the interpretations of Keynes are contentious, and several schools of thought claim his legacy.
Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector—and served as the economic model during the latter part of the Great Depression, World War II, and the post-war Golden Age of Capitalism, 1945–1973, though it lost some influence following the stagflation of the 1970s. As a middle way between laissez-faire capitalism and socialism, it has been and continues to be attacked from both the right and the left.
The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought. Keynesian economics has provided the theoretical underpinning for the plans of President Barack Obama, Prime Minister Gordon Brown and other global leaders to, allegedly, rescue the world economy.
COMMENT BY TAN KIN LIAN
Keynesian economics leads to deficit spending. It comprise of two strategies - low interest rate and government spending (to create demand). I prefer government spending (e.g. infrastructure and other useful projects) as it create jobs for people. I do not like low interest rate, as it leads to asset bubbles and benefit the asset owners.
Get Ready for Half a Recovery
Small businesses are still finding it difficult to get credit and the jobless rate will continue to be high for at least a year. Read this report.
Saturday, November 28, 2009
EPL matches for 2010
27 people who watch EPL matches responded to my survey. Their responses are:
a) switch to Singtel: 40%
b) watch in pub and friends home: 30%
c) give up watching EPL: 30%
80% said that Singtel should accept Starhub's offer to broadcast the EPL and that MDA should mandate that this sharing be done. The same proportion said that it is wasteful to have 2 set top matches to watch the channels.
a) switch to Singtel: 40%
b) watch in pub and friends home: 30%
c) give up watching EPL: 30%
80% said that Singtel should accept Starhub's offer to broadcast the EPL and that MDA should mandate that this sharing be done. The same proportion said that it is wasteful to have 2 set top matches to watch the channels.
Buy term insurance directly through internet portals
Someone asked if it is possible to buy term insurance and family income benefit directly from an insurance company through an internet portal.
So far, the insurance companies in Singapore have been reluctant to offer this channel, as they are afraid of upsetting their insurance agents. I hope that this will become possible in the near future. There are many websites in USA that offers term insurance at very competitive rates, much lower than in Singapore.
So far, the insurance companies in Singapore have been reluctant to offer this channel, as they are afraid of upsetting their insurance agents. I hope that this will become possible in the near future. There are many websites in USA that offers term insurance at very competitive rates, much lower than in Singapore.
Life insurance can serve a useful purpose
Life insurance is inherently a good product. It provides protection and encourages savings for the long term.
It becomes bad when too much of the savings is taken away from the policyholder, leading to a poor return to the policyholder, compared to other types of investments. It becomes worse when it is sold dishonestly, without disclosing the true cost to the policyholder or by deceiving the policyholder using half truths or outright lies.
It is possible to design life insurance products to give good value for policyholders and still allow an adequate rate of commission to the insurance agent. It allows the agent to make a honest living and to earn more through hard work, without making the customer poorer.
Some insurance companies practiced fair treatment of policyholder in the past, and even give a good rate of bonus based on what they have earned. This allowed the customer to earn a good rate of return, even after allowing for expenses and profit margin. It is possible to achieve this outcome in the future, if the principles of fair treatment of customers are observed.
Tan Kin Lian
It becomes bad when too much of the savings is taken away from the policyholder, leading to a poor return to the policyholder, compared to other types of investments. It becomes worse when it is sold dishonestly, without disclosing the true cost to the policyholder or by deceiving the policyholder using half truths or outright lies.
It is possible to design life insurance products to give good value for policyholders and still allow an adequate rate of commission to the insurance agent. It allows the agent to make a honest living and to earn more through hard work, without making the customer poorer.
Some insurance companies practiced fair treatment of policyholder in the past, and even give a good rate of bonus based on what they have earned. This allowed the customer to earn a good rate of return, even after allowing for expenses and profit margin. It is possible to achieve this outcome in the future, if the principles of fair treatment of customers are observed.
Tan Kin Lian
Termination of Living Policy
Dear Mr Tan,
In 1993, I bought the above policy for myself and family members. I believe at that time, you were in charge of NTUC. I read that you have bought the above too but have since redeemed it. Would you be able to share why and should I continue or redeem the policy like you did. I am now 60 years old.
REPLY
My reasons to give up the living policy are:
a) I am now retired and will not suffer any loss of income in the event of disability
b) I expect medical expenses to be covered under my Medishield plan
c) If I have to pay expenses not covered under Medishield, I can pay out of my accumulated savings
d) I do not like the restructuring of bonus introduced by the new management.
In 1993, I bought the above policy for myself and family members. I believe at that time, you were in charge of NTUC. I read that you have bought the above too but have since redeemed it. Would you be able to share why and should I continue or redeem the policy like you did. I am now 60 years old.
REPLY
My reasons to give up the living policy are:
a) I am now retired and will not suffer any loss of income in the event of disability
b) I expect medical expenses to be covered under my Medishield plan
c) If I have to pay expenses not covered under Medishield, I can pay out of my accumulated savings
d) I do not like the restructuring of bonus introduced by the new management.
Payout under CPF Life
Dear Mr Tan
In the CPF-Life form they ask two questions (which I feel is irrevelant):
- annual assessable income
-annual value of house.
I am doing some part-time job with provides an irregular income and may downgrade to a smaller flat later on. I do not know if the CPF will pay me more, less or the same amount in the future, due to my change of circumstances.
I intend to put $75000.00 into my retirement account to join this scheme. Should I go ahead or put my money here or go elsewhere?
REPLY
The CPF ask you for the annual assessible income and the annual value of your house to determine if you quality for the full amount of the L-Bonus of $4,000, or a partial bonus or none at all. Apart from the L-Bonus, the monthly payout from the CPF Life will not be affected by your income or housing.
In my view, the CPF Life is attractive to the members as it is run operated as a non-profit and on mutual principles (i.e. all the members share the experience of the scheme fairly), has low expense ratio and earns an attractive interest rate of around 4%.
The annuity plan offered by the insurance companies, will not be able to offer this attractive payout.
In the CPF-Life form they ask two questions (which I feel is irrevelant):
- annual assessable income
-annual value of house.
I am doing some part-time job with provides an irregular income and may downgrade to a smaller flat later on. I do not know if the CPF will pay me more, less or the same amount in the future, due to my change of circumstances.
I intend to put $75000.00 into my retirement account to join this scheme. Should I go ahead or put my money here or go elsewhere?
REPLY
The CPF ask you for the annual assessible income and the annual value of your house to determine if you quality for the full amount of the L-Bonus of $4,000, or a partial bonus or none at all. Apart from the L-Bonus, the monthly payout from the CPF Life will not be affected by your income or housing.
In my view, the CPF Life is attractive to the members as it is run operated as a non-profit and on mutual principles (i.e. all the members share the experience of the scheme fairly), has low expense ratio and earns an attractive interest rate of around 4%.
The annuity plan offered by the insurance companies, will not be able to offer this attractive payout.
Family Income Benefit
A family income benefit is a life insurance policy that pays a monthly income to the family following the death of the life assured. The income is payable for the remainder of the term.
I consider this type of insurance to be the most suitable policy for a person to take care of the financial needs of the family. It is more suitable than a term insurance policy.
Take the example of a male aged 30 with a monthly income of $3,000 and young children. He can buy a term insurance policy to cover $300,000 for 25 years and pay an annual premium of $720. For the same premium, he can buy a family income benefit to pay $3,000 a month from death until the end of 25 years.
If death occurs during the first year, the total payout is $3,000 X 12 X 25 = $900,000, but paid monthly over 25 years. This is 3 times the amount payable under level term insurance. If death occurs at end of year 15, the total payout is $3,000 X 12 X 10 years = $360,000, which is still more than the payout under the level term.
The monthly payout is better to meet the family needs, as the spouse does not need to worry about how to invest the lump sum.
Unfortunately, the insurance companies in Singapore are not keen to sell the family income benefit. Most of their sales are made through the agent, who wants to sell other life insurance policies that pays a higher commission to them. The agent will try to convince the customer to buy a policy that gives a return on the premiums, although the return is rather poor and is usually less than 2% per annum.
Some companies offer family income benefit, but they loaded up the premium to a much higher rate, to give a high profit and expense margin. The premium could be two times of what it should be.
To get a competitive rate, the customer should ask a few insurance companies to quote for a family income benefit to pay $X a month for a term of 25 years. If several companies are willing to quote the rate, they are likely to offer a more competitive rate, that reflects the actual cost of claims plus a fair margin for expenses and profit.
I hope that life insurance companies will offer this plan to be sold directly to customer through the internet.
Tan Kin Lian
I consider this type of insurance to be the most suitable policy for a person to take care of the financial needs of the family. It is more suitable than a term insurance policy.
Take the example of a male aged 30 with a monthly income of $3,000 and young children. He can buy a term insurance policy to cover $300,000 for 25 years and pay an annual premium of $720. For the same premium, he can buy a family income benefit to pay $3,000 a month from death until the end of 25 years.
If death occurs during the first year, the total payout is $3,000 X 12 X 25 = $900,000, but paid monthly over 25 years. This is 3 times the amount payable under level term insurance. If death occurs at end of year 15, the total payout is $3,000 X 12 X 10 years = $360,000, which is still more than the payout under the level term.
The monthly payout is better to meet the family needs, as the spouse does not need to worry about how to invest the lump sum.
Unfortunately, the insurance companies in Singapore are not keen to sell the family income benefit. Most of their sales are made through the agent, who wants to sell other life insurance policies that pays a higher commission to them. The agent will try to convince the customer to buy a policy that gives a return on the premiums, although the return is rather poor and is usually less than 2% per annum.
Some companies offer family income benefit, but they loaded up the premium to a much higher rate, to give a high profit and expense margin. The premium could be two times of what it should be.
To get a competitive rate, the customer should ask a few insurance companies to quote for a family income benefit to pay $X a month for a term of 25 years. If several companies are willing to quote the rate, they are likely to offer a more competitive rate, that reflects the actual cost of claims plus a fair margin for expenses and profit.
I hope that life insurance companies will offer this plan to be sold directly to customer through the internet.
Tan Kin Lian
Keep cash, and be safe
Someone asked for my views on how to invest money at this time. It is a difficult question.
I think that it is better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer. I do not like the stock market as it has been inflated due to cheap money from the government stimulus packages around the world.
The underlying problems of the global economy has not been solved, as there is still high unemployment and lower consumer demand. People will be unwilling to spend, if they are not sure about the security of their jobs and incomes. When people spend less, more people will become unemployed. This leads to a depression.
While the global economy remains gloomy, and the underlying problems are not solved, it is better to keep cash. Some people rushed into gold and commodities, but their prices may be too high now.
I would be more confident when the governments around the world start to adopt Keynesian principles, i.e inflate the global economy by creating more jobs funded by the state. This will cause inflation a few years later, but will have the impact of reviving the global economy. At that time, I will start to invest in the stock markets. If the bond markets gives a higher yield (better than inflation), I may invest in bonds also.
Tan Kin Lian
I think that it is better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer. I do not like the stock market as it has been inflated due to cheap money from the government stimulus packages around the world.
The underlying problems of the global economy has not been solved, as there is still high unemployment and lower consumer demand. People will be unwilling to spend, if they are not sure about the security of their jobs and incomes. When people spend less, more people will become unemployed. This leads to a depression.
While the global economy remains gloomy, and the underlying problems are not solved, it is better to keep cash. Some people rushed into gold and commodities, but their prices may be too high now.
I would be more confident when the governments around the world start to adopt Keynesian principles, i.e inflate the global economy by creating more jobs funded by the state. This will cause inflation a few years later, but will have the impact of reviving the global economy. At that time, I will start to invest in the stock markets. If the bond markets gives a higher yield (better than inflation), I may invest in bonds also.
Tan Kin Lian
Friday, November 27, 2009
New immigrant's loyalty to Singapore
An alternative to the free market economy
Many people dream of being a multi-millionaire. They love the free market economy, as it gives them the opportunity to pursue their dream. Let us stop chasing this dream for a while and reflect on what this issue is all about.
At any time, there is a limited number of assets in the world. These assets have to be shared by the people. If some people are multi-millionaires, other people have to be poorer to allow the rich to own more of the limited assets. This leads to income and wealth inequality.
It is possible for the world to produce more assets to be owned by more people. However, the over-production has lead to a depletion of the natural resources, damaging the environment and leaving less resources behind for the future generation. Is this what we really want? Do we really want to work hard to accumulate more assets than is really necessary? What about spending more time for family and friends?
Many people do not have the choice. They have to work hard to keep a job. Other people gets unemployed, so they have to offer their labor at lower rates to compete for the same jobs. This allows the business owners to make more profit and be richer.
This is what has been happening during the past two decades with global competition and the free market. It has lead to wide disparity of income and poorer living conditions for many people, while a few becomes super rich.
My observation is not new. It has happened in history. I am bringing the great philosophers of earlier times, such as Confucius and Karl Marx. Spend time to read about their teachings.
These philosophers tell us that there is an alternative system to the free market and competitive business environment. Do not be misled that the free market environment, that we are used to in recent years, is the only way or the best way to prosperity and a happier life.
Tan Kin Lian
At any time, there is a limited number of assets in the world. These assets have to be shared by the people. If some people are multi-millionaires, other people have to be poorer to allow the rich to own more of the limited assets. This leads to income and wealth inequality.
It is possible for the world to produce more assets to be owned by more people. However, the over-production has lead to a depletion of the natural resources, damaging the environment and leaving less resources behind for the future generation. Is this what we really want? Do we really want to work hard to accumulate more assets than is really necessary? What about spending more time for family and friends?
Many people do not have the choice. They have to work hard to keep a job. Other people gets unemployed, so they have to offer their labor at lower rates to compete for the same jobs. This allows the business owners to make more profit and be richer.
This is what has been happening during the past two decades with global competition and the free market. It has lead to wide disparity of income and poorer living conditions for many people, while a few becomes super rich.
My observation is not new. It has happened in history. I am bringing the great philosophers of earlier times, such as Confucius and Karl Marx. Spend time to read about their teachings.
These philosophers tell us that there is an alternative system to the free market and competitive business environment. Do not be misled that the free market environment, that we are used to in recent years, is the only way or the best way to prosperity and a happier life.
Tan Kin Lian
Confucianism
Source: http://www.religion-cults.com/Eastern/Confucianism/confuci.htm
Confucianism is a "code of conduct" to live this life, and it has had a tremendous impact on how the Chinese live their lives... with a great influence in Chinese government, education, and attitudes toward correct personal behavior and the individual duties to society.
Confucius wanted to be a politician, even a Prime Minister, but he failed... and dedicated to preach good moral conduct... after his death he is the Chinese most influential in the history of China, and had all the honors he never had in life: The Government ordered the "worship of Confucius", and named him the "Co-Assessor with the deities of Heaven and Earth". His precepts and principles were incorporated into the Chinese Law in 210 BC.
His way to please God or the gods is through a "good conduct" with your family, neighbors, and society... if you are a good person, God is going to like you.
Some say that Confucianism is no religion in reality, because Confucius is a philosopher, moralist, statesman and educationist, but no religionist. They say that the thoughts and teachings of Confucius are ethical philosophy, political and educational principle, but not religious philosophy.
The "Jen": The essence of all his teachings may be summed up under this one word ‘Jen’. The nearest equivalent to this difficult word is "social virtue". All those virtues which help to maintain social harmony and peace like benevolence, charity, magnanimity, sincerity, respectfulness, altruism, diligence, loving kindness, goodness are included in Jen.
His "Golden Rule" is: "What you do not want done to yourself, do not do unto others". "The injuries done to you by an enemy should be returned with a combination of love and justice".
The "universal virtues" are: Wisdom, Benevolence, and Fortitude... Asked about what is "Benevolence", he answered: "It is to love all men"; what is "knowledge?: "It is to know all men"... The "perfect virtue": "Gravity, generosity of soul, sincerity, earnestness, and kindness".
Confucius laid great stress on the cultivation of character, purity of heart and conduct. He exhorted the people to develop a good character first, which is a priceless jewel and which is the best of all virtues.
The nature of man, according to Confucius, is fundamentally good inclined towards goodness. Perfection of goodness can be found in sages and saints. Every man should attempt to reach the ideal by leading a virtuous life, by possessing a very noble character, and by doing his duty unselfishly with sincerity and truthfulness. He who is endowed with a good character and divine virtue is a princely type of man. The princely man sticks to virtue, and the inferior man clings to material comfort. The princely man is just while the inferior man expects rewards and favours. The princely man is dignified, noble, magnanimous, and humble while the inferior man is mean, proud, crooked, and arrogant.
His teaching was largely concerned with the problems of good government. He said, "The Ruler himself should be virtuous, just, honest and dutiful. A virtuous ruler is like the Pole-star which, by keeping its place, makes all other stars to evolve round it. As is the Ruler, so will be the subjects."
Confucianism is lived in syncretism with any other religion in China... any Confucianist would be very happy to become a Christian!.
Confucianism is a "code of conduct" to live this life, and it has had a tremendous impact on how the Chinese live their lives... with a great influence in Chinese government, education, and attitudes toward correct personal behavior and the individual duties to society.
Confucius wanted to be a politician, even a Prime Minister, but he failed... and dedicated to preach good moral conduct... after his death he is the Chinese most influential in the history of China, and had all the honors he never had in life: The Government ordered the "worship of Confucius", and named him the "Co-Assessor with the deities of Heaven and Earth". His precepts and principles were incorporated into the Chinese Law in 210 BC.
His way to please God or the gods is through a "good conduct" with your family, neighbors, and society... if you are a good person, God is going to like you.
Some say that Confucianism is no religion in reality, because Confucius is a philosopher, moralist, statesman and educationist, but no religionist. They say that the thoughts and teachings of Confucius are ethical philosophy, political and educational principle, but not religious philosophy.
The "Jen": The essence of all his teachings may be summed up under this one word ‘Jen’. The nearest equivalent to this difficult word is "social virtue". All those virtues which help to maintain social harmony and peace like benevolence, charity, magnanimity, sincerity, respectfulness, altruism, diligence, loving kindness, goodness are included in Jen.
His "Golden Rule" is: "What you do not want done to yourself, do not do unto others". "The injuries done to you by an enemy should be returned with a combination of love and justice".
The "universal virtues" are: Wisdom, Benevolence, and Fortitude... Asked about what is "Benevolence", he answered: "It is to love all men"; what is "knowledge?: "It is to know all men"... The "perfect virtue": "Gravity, generosity of soul, sincerity, earnestness, and kindness".
Confucius laid great stress on the cultivation of character, purity of heart and conduct. He exhorted the people to develop a good character first, which is a priceless jewel and which is the best of all virtues.
The nature of man, according to Confucius, is fundamentally good inclined towards goodness. Perfection of goodness can be found in sages and saints. Every man should attempt to reach the ideal by leading a virtuous life, by possessing a very noble character, and by doing his duty unselfishly with sincerity and truthfulness. He who is endowed with a good character and divine virtue is a princely type of man. The princely man sticks to virtue, and the inferior man clings to material comfort. The princely man is just while the inferior man expects rewards and favours. The princely man is dignified, noble, magnanimous, and humble while the inferior man is mean, proud, crooked, and arrogant.
His teaching was largely concerned with the problems of good government. He said, "The Ruler himself should be virtuous, just, honest and dutiful. A virtuous ruler is like the Pole-star which, by keeping its place, makes all other stars to evolve round it. As is the Ruler, so will be the subjects."
Confucianism is lived in syncretism with any other religion in China... any Confucianist would be very happy to become a Christian!.
Dubai is unable to repay its debts
Someone posted a blog about the speech made by Mr. Lee Kuan Yew concerning Dubai. It is reported here.
Dubai is now facing difficult in repaying its large borrowings that were used to develop its visionary facilities.
I first went to Dubai in 2006 and was also impressed with the bold and visionary steps that were taken to develop Dubai. Few could have foreseen the collapse of the global economy at that time. I did not.
Tan Kin Lian
Dubai is now facing difficult in repaying its large borrowings that were used to develop its visionary facilities.
I first went to Dubai in 2006 and was also impressed with the bold and visionary steps that were taken to develop Dubai. Few could have foreseen the collapse of the global economy at that time. I did not.
Tan Kin Lian
Ideals of communism
I like the theory of communist as taught by Karl Marx. I believe that the people in a society should take care of each other, rather than compete fiercely for selfish ends. I also like the concept of common ownership of property that are made available for use by the people. Many limited resources are actually owned by the state, and they can be put to better use.
I saw a history documentary in TV about China. I was surprised to learn the Confucius taught the people to live in harmony, rather than to compete against each other. This lead to a harmonious society, which did not make much progress, but give a happy life to its people. This concept of community purpose, rather than selfish purpose, actually occurs before Karl Marx.
I asked a Russian couple whether life was better in Russia under Communism or the free market. The woman, who was a school teacher, preferred the previous Communist era, as life was more predictable. The man, who was a small entrepreneur, prefer the present free market era.
In recent history, Communist states failed because the leaders worked only for their own ends, and were oppressive in seeking to retain power. This desire to retain power occurs in democratic societies as well. The leaders changed the election boundaries (i.e. gerrymandering) and the election rules to ensure that they can be re-elected. This practice occurs even in America, a society that aims to champion the cause of democracy.
In some "democratic" countries, the political leaders assassinate their rivals. In other countries, they find other ways to fix their rivals.
We should not associate communism with oppression. According to Karl Marx theory, the decisions on the priorities for society has to be carried out by democratic means. The members of society decide what they want.
Tan Kin Lian
I saw a history documentary in TV about China. I was surprised to learn the Confucius taught the people to live in harmony, rather than to compete against each other. This lead to a harmonious society, which did not make much progress, but give a happy life to its people. This concept of community purpose, rather than selfish purpose, actually occurs before Karl Marx.
I asked a Russian couple whether life was better in Russia under Communism or the free market. The woman, who was a school teacher, preferred the previous Communist era, as life was more predictable. The man, who was a small entrepreneur, prefer the present free market era.
In recent history, Communist states failed because the leaders worked only for their own ends, and were oppressive in seeking to retain power. This desire to retain power occurs in democratic societies as well. The leaders changed the election boundaries (i.e. gerrymandering) and the election rules to ensure that they can be re-elected. This practice occurs even in America, a society that aims to champion the cause of democracy.
In some "democratic" countries, the political leaders assassinate their rivals. In other countries, they find other ways to fix their rivals.
We should not associate communism with oppression. According to Karl Marx theory, the decisions on the priorities for society has to be carried out by democratic means. The members of society decide what they want.
Tan Kin Lian
Thursday, November 26, 2009
Communism - theory and practice
Source: Wikipedia
Karl Marx posited that communism would be the final stage in human society, which would be achieved through a proletarian revolution and only becoming possible only after a socialist stage develops the productive forces, leading to a superabundance of goods and services.
"Pure communism" in the Marxian sense refers to a classless, stateless and oppression-free society where decisions on what to produce and what policies to pursue are made democratically, allowing every member of society to participate in the decision-making process in both the political and economic spheres of life.
In modern usage, communism is often used to refer to Bolshevism or Marxism-Leninism and the policies of the various communist states which had government ownership of all the means of production and centrally planned economies. Communist regimes have historically been authoritarian, repressive, and coercive governments concerned primarily with preserving their own power.
As a political ideology, communism is usually considered to be a branch of socialism; a broad group of economic and political philosophies that draw on the various political and intellectual movements with origins in the work of theorists of the Industrial Revolution and the French Revolution.[6] Communism attempts to offer an alternative to the problems with the capitalist market economy and the legacy of imperialism and nationalism.
Marx states that the only way to solve these problems is for the working class (proletariat), who according to Marx are the main producers of wealth in society and are exploited by the Capitalist-class (bourgeoisie), to replace the bourgeoisie as the ruling class in order to establish a free society, without class or racial divisions. The dominant forms of communism, such as Leninism, Stalinism, Maoism and Trotskyism are based on Marxism, but non-Marxist versions of communism (such as Christian communism and anarcho-communism) also exist.
Karl Marx never provided a detailed description as to how communism would function as an economic system, but it is understood that a communist economy would consist of common ownership of the means of production, culminating in the negation of the concept of private ownership of capital, which referred to the means of production in Marxian terminology.
Misleading arguments by life insurance agents
Life insurance agents are trained to present strong arguments to get the unsavvy public to buy life and investment-linked policies that pay high commission to the agents. Here are some of the arguments put forward by them against term insurance:
a) Term insurance is for a certain period. After the period is over, you will not have any more life insurance cover.
b) Term insurance covers a fixed sum, which does not keep up with inflation.
These arguments are misleading and do not present an honest picture. Here are the reasons:
a) You only need life insurance cover when your children still depend on you financially. After 25 years, they have grown up. During this period, you would have accumulated sufficient savings to surpass the sum insured and will not need life insurance any more.
b) If your term insurance covers a level sum, the accumulated savings will be more than adequate to compensate for the effect of inflation. Actually, a decreasing sum insured may be adequate for most people.
The greatest danger of inflation is not on the death benefit, but on the savings in a life insurance policy. A net yield of 2% provided by a life insurance policy is not sufficient to cover inflation. It is important for a policyholder to invest the savings more wisely to get a higher return (say 4% or more) to cover inflation. A life insurance policy does not provide a fair return, due to the high charges for commission and profit.
Many agents know the facts, but they are dishonest in presenting misleading arguments, in the chase for the lucrative commission.
Tan Kin Lian
a) Term insurance is for a certain period. After the period is over, you will not have any more life insurance cover.
b) Term insurance covers a fixed sum, which does not keep up with inflation.
These arguments are misleading and do not present an honest picture. Here are the reasons:
a) You only need life insurance cover when your children still depend on you financially. After 25 years, they have grown up. During this period, you would have accumulated sufficient savings to surpass the sum insured and will not need life insurance any more.
b) If your term insurance covers a level sum, the accumulated savings will be more than adequate to compensate for the effect of inflation. Actually, a decreasing sum insured may be adequate for most people.
The greatest danger of inflation is not on the death benefit, but on the savings in a life insurance policy. A net yield of 2% provided by a life insurance policy is not sufficient to cover inflation. It is important for a policyholder to invest the savings more wisely to get a higher return (say 4% or more) to cover inflation. A life insurance policy does not provide a fair return, due to the high charges for commission and profit.
Many agents know the facts, but they are dishonest in presenting misleading arguments, in the chase for the lucrative commission.
Tan Kin Lian
Wednesday, November 25, 2009
Watch out for signs of a bad financial adviser
Dear Mr. Tan,
I am a fan of your blog. It is very informative and has tons of information.
Sometime this year,I started to watch a show on CNBC called "The Suze Orman Show".
Although it is targeted at American, I think some sections work for foreigners as well. Recently,she made a list of warning signs of a bad financial advisor and below is the website: http://www.cnbc.com/id/33914402?slide=1
I am a fan of your blog. It is very informative and has tons of information.
Sometime this year,I started to watch a show on CNBC called "The Suze Orman Show".
Although it is targeted at American, I think some sections work for foreigners as well. Recently,she made a list of warning signs of a bad financial advisor and below is the website: http://www.cnbc.com/id/33914402?slide=1
Review of existing life policy
A young person sought my advice on her life insurance policy. Her father bought the policy for her many years ago and now wished to transfer the policy to her. The cash value is lower than the total premiums that were paid. She asked for my advice on whether to continue or terminate the policy. She asked the insurance company to give a projection of the future cash value, but they declined, citing that the future bonus is uncertain.
I advised her as follows:
a) Ask for the projected cash value for each of the next 10 years, based on the guidelines given in this FAQ.
b) Insist on getting a projection of the cash value, even though some part of the projected value is not guaranteed
c) To pass the projection to me, for a review.
It is the duty of the insurance company to give the requested information, so that the customer can review the existing policy and see if it is appropriate to continue the policy. I will ask a volunteer in FISCA to carry out the review for future cases, after the process has been establised.
I advised her as follows:
a) Ask for the projected cash value for each of the next 10 years, based on the guidelines given in this FAQ.
b) Insist on getting a projection of the cash value, even though some part of the projected value is not guaranteed
c) To pass the projection to me, for a review.
It is the duty of the insurance company to give the requested information, so that the customer can review the existing policy and see if it is appropriate to continue the policy. I will ask a volunteer in FISCA to carry out the review for future cases, after the process has been establised.
Tuesday, November 24, 2009
SCMP:Objections to new rules on minibonds look flimsy
23 November 2009
Hong Kong's banks are preparing to fight back against new regulations proposed following the Lehman minibond fiasco.
But although the forces at their disposal are impressive, their tactical position looks weak.
Towards the end of September, the Securities and Futures Commission published its proposals for stricter rules to govern the sale of unlisted structured products to the investing public. Interested parties have until the end of next month to comment.
Most of the proposed rule changes look eminently sensible. For example, the SFC wants to tighten up advertising standards. It wants to ban banks from offering "free gifts" to their customers as inducements to invest. And it plans to force banks to let buyers know if the value of their investment subsequently plunges because of adverse market conditions.
That all sounds reasonable enough, as does the SFC's suggestion that banks should check to see if their customers understand the products they are buying.
But two of the SFC's proposals in particular have raised hackles among Hong Kong's smaller banks: that they should be required to disclose exactly how much commission they stand to earn from the sale of each product, and that they should grant customers a minimum "cooling off" period after buying an investment in which they can change their minds.
Although it is still early days for the consultation period, Hong Kong's banks are already pushing back against the proposed rule changes, complaining that they are unfair, overly complicated and too expensive to implement.
Resistance to commission disclosure is coming from three angles. First, some banks are complaining that full disclosure would enable investors to shop around for the best deal. That, they fear, could lead to unhealthy competition, with banks attempting to undercut each other in order to win business, which they say would erode profits and undermine the stability of the banking system.
The second argument against disclosure is that it would unfairly tilt the investment playing field against banks and in favour of insurance companies, which are under no such obligation to come clean about their own commissions.
The final objection to commission disclosure is that it is simply too difficult. Where banks both structure and sell investment products, the banks claim it is impossible to separate income attributable to the structuring process from value added by the sales force. As a result, they say, they can't disclose their earnings from product sales.
Similarly, the banking sector is raising two major objections to the proposal for a cooling-off period, which is designed to protect impressionable investors against high-pressure sales techniques.
First the banks say the proposal would introduce a perilous element of moral hazard into investment decisions by allowing customers to back out of purchases if the market moves against them or if they decide they can get a better offer elsewhere.
Second, the banks argue that if they buy structured products back from their clients, they will be forced to unwind their hedges in the underlying instruments, which in illiquid markets is likely to be both a lengthy and prohibitively expensive process.
On examination, these objections look unconvincing. On commission disclosure, it is ludicrous to argue that improved transparency could cause unhealthy competition. Heightened competition would only benefit the customer, which is a very healthy thing.
Similarly, complaints that requiring banks to disclose their fees and commissions would unfairly penalise them relative to insurance companies don't stand up. Insurers will face the same requirement under the government's new regulator for the sector.
And contrary to what the banks say, deciding what proportion of income is attributable to origination and what to sales is straightforward. Banks should already do it internally on their departmental profit and loss accounts. If they don't, it is simple enough to determine, based on the commissions paid to third-party distributors.
Objections to the proposed cooling-off period look equally flimsy. If they want to back out, investors will have to pay an administration fee, so there will be little question of moral hazard. And complaints about the difficulty of unwinding hedges are nonsense.
Any cooling-off period is only going to be a matter of days, so it is highly unlikely the banks would actually invest the money raised from a structured product offer until the cooling-off window had closed.
In reality, the banks are opposed to greater transparency because it would reveal internal conflicts of interest.
If a bank salesman were pushing one investment product particularly aggressively compared with another, customers would only have to check which one would pay the more lucrative commission rate to find out whether the salesman was acting in their interest or solely in his own.
And the banks object to the cooling-off period idea simply because they are afraid that on sober reflection without a salesman breathing down their neck, customers may change their minds about buying structured products like minibonds and demand their money back. That would force the banks to surrender their commission income, something they are extremely reluctant to do.
As a result, the banks are preparing to fight back, mobilising their forces to resist the proposed rule changes. Whether they succeed or not will say a great deal about the state of investor protection in Hong Kong.
Hong Kong's banks are preparing to fight back against new regulations proposed following the Lehman minibond fiasco.
But although the forces at their disposal are impressive, their tactical position looks weak.
Towards the end of September, the Securities and Futures Commission published its proposals for stricter rules to govern the sale of unlisted structured products to the investing public. Interested parties have until the end of next month to comment.
Most of the proposed rule changes look eminently sensible. For example, the SFC wants to tighten up advertising standards. It wants to ban banks from offering "free gifts" to their customers as inducements to invest. And it plans to force banks to let buyers know if the value of their investment subsequently plunges because of adverse market conditions.
That all sounds reasonable enough, as does the SFC's suggestion that banks should check to see if their customers understand the products they are buying.
But two of the SFC's proposals in particular have raised hackles among Hong Kong's smaller banks: that they should be required to disclose exactly how much commission they stand to earn from the sale of each product, and that they should grant customers a minimum "cooling off" period after buying an investment in which they can change their minds.
Although it is still early days for the consultation period, Hong Kong's banks are already pushing back against the proposed rule changes, complaining that they are unfair, overly complicated and too expensive to implement.
Resistance to commission disclosure is coming from three angles. First, some banks are complaining that full disclosure would enable investors to shop around for the best deal. That, they fear, could lead to unhealthy competition, with banks attempting to undercut each other in order to win business, which they say would erode profits and undermine the stability of the banking system.
The second argument against disclosure is that it would unfairly tilt the investment playing field against banks and in favour of insurance companies, which are under no such obligation to come clean about their own commissions.
The final objection to commission disclosure is that it is simply too difficult. Where banks both structure and sell investment products, the banks claim it is impossible to separate income attributable to the structuring process from value added by the sales force. As a result, they say, they can't disclose their earnings from product sales.
Similarly, the banking sector is raising two major objections to the proposal for a cooling-off period, which is designed to protect impressionable investors against high-pressure sales techniques.
First the banks say the proposal would introduce a perilous element of moral hazard into investment decisions by allowing customers to back out of purchases if the market moves against them or if they decide they can get a better offer elsewhere.
Second, the banks argue that if they buy structured products back from their clients, they will be forced to unwind their hedges in the underlying instruments, which in illiquid markets is likely to be both a lengthy and prohibitively expensive process.
On examination, these objections look unconvincing. On commission disclosure, it is ludicrous to argue that improved transparency could cause unhealthy competition. Heightened competition would only benefit the customer, which is a very healthy thing.
Similarly, complaints that requiring banks to disclose their fees and commissions would unfairly penalise them relative to insurance companies don't stand up. Insurers will face the same requirement under the government's new regulator for the sector.
And contrary to what the banks say, deciding what proportion of income is attributable to origination and what to sales is straightforward. Banks should already do it internally on their departmental profit and loss accounts. If they don't, it is simple enough to determine, based on the commissions paid to third-party distributors.
Objections to the proposed cooling-off period look equally flimsy. If they want to back out, investors will have to pay an administration fee, so there will be little question of moral hazard. And complaints about the difficulty of unwinding hedges are nonsense.
Any cooling-off period is only going to be a matter of days, so it is highly unlikely the banks would actually invest the money raised from a structured product offer until the cooling-off window had closed.
In reality, the banks are opposed to greater transparency because it would reveal internal conflicts of interest.
If a bank salesman were pushing one investment product particularly aggressively compared with another, customers would only have to check which one would pay the more lucrative commission rate to find out whether the salesman was acting in their interest or solely in his own.
And the banks object to the cooling-off period idea simply because they are afraid that on sober reflection without a salesman breathing down their neck, customers may change their minds about buying structured products like minibonds and demand their money back. That would force the banks to surrender their commission income, something they are extremely reluctant to do.
As a result, the banks are preparing to fight back, mobilising their forces to resist the proposed rule changes. Whether they succeed or not will say a great deal about the state of investor protection in Hong Kong.
Tax burden around the world
Read this article.
Denmark 48.3%
Sweden 47.1%
Belgium 44.3%
Italy 43.2%
France 43.1%
UK 35.7%
Japan 28.3%
USA 26.9%
Singapore - not listed, but way below 20% (not counting ARF, COE, ERP and costly HDB flats).
Denmark 48.3%
Sweden 47.1%
Belgium 44.3%
Italy 43.2%
France 43.1%
UK 35.7%
Japan 28.3%
USA 26.9%
Singapore - not listed, but way below 20% (not counting ARF, COE, ERP and costly HDB flats).
Level the playing field
Life is difficult for young people. Jobs are hard to find and wages are low. The cost of living is high, especially the cost of housing. If they have studied in university, they have to repay a hefty study loan.
If they come from a poor family, they start life with $0. If they have to borrow, they pay a high interest rate, that goes towards the large profit of the banks. Those who come from wealthy families do not have to face this burden, as they can get the starting funds from their parents.
I have been toying with the idea of giving every young person a good start in life. Each person should be allowed to get access to credit, up to a certain limit, from the state at a low rate of interest, say 2.5% per annum. The credit should be for specific purposes, such as to meet living expenses during unemployment, unexpected medical bills, marriage or childbirth expenses. This limit can be set at one or two years of the average annual earnings.
The access to this credit will avoid the need for people to borrow money from loan sharks and pay exorbitant interest. Borrowing from the banks at 2% per month is not cheap either. Someone said that it is loan sharking by another name.
There are risks of abuse, but they can be managed and prevented. The benefits can outweigh the risks. Such a credit facility should only be given to citizens. This will give a level playing field to the people from poor families.
Tan Kin Lian
If they come from a poor family, they start life with $0. If they have to borrow, they pay a high interest rate, that goes towards the large profit of the banks. Those who come from wealthy families do not have to face this burden, as they can get the starting funds from their parents.
I have been toying with the idea of giving every young person a good start in life. Each person should be allowed to get access to credit, up to a certain limit, from the state at a low rate of interest, say 2.5% per annum. The credit should be for specific purposes, such as to meet living expenses during unemployment, unexpected medical bills, marriage or childbirth expenses. This limit can be set at one or two years of the average annual earnings.
The access to this credit will avoid the need for people to borrow money from loan sharks and pay exorbitant interest. Borrowing from the banks at 2% per month is not cheap either. Someone said that it is loan sharking by another name.
There are risks of abuse, but they can be managed and prevented. The benefits can outweigh the risks. Such a credit facility should only be given to citizens. This will give a level playing field to the people from poor families.
Tan Kin Lian
Survey: EPL matches on Pay TV
What are your plans to watch EPL matches on Pay TV next year? Participate in this survey.
Here are the survey results.
Quality of service
Someone sent to me a letter written by a 86 year woman complaining about the impersonal treatment provided by her bank. The sender asked for my comments.
I visited London, Paris and Canterbury recently and observed that the quality of service is generally better than Singapore. The situation is rather bad in Singapore due to the following:
a) Strong emphasis on keeping cost low, leading to overworked and highly stressed staff
b) Employment of foreign workers who are not familiar with the local setting
c) Low wages leading to high turnover and lack of accumulated experience
d) Complaints by customers are generally ignored
This observation applies to the business sectors and to the public service. There are some examples of excellent service in Singapore, but they tend to be occasional rather than systemic.
I dislike the automated system adopted in most large organisations in Singapore. They waste a lot of time for customers and makes it difficult for the customer to speak to a person. It does not reduce the cost for the organisation, as most customers need to speak to a person anyway, rather than get the reply from the pre-programmed automated responses. The people who designed these automated systems do not think about the needs of the customers. They only want to introduce expensive technology to "look good".
The quality of service can only improve if there is general respect for the customer or the public. Sadly, this lack of respect is quite systemic in Singapore, due to the elitist culture promoted by our leaders.
Tan Kin Lian
I visited London, Paris and Canterbury recently and observed that the quality of service is generally better than Singapore. The situation is rather bad in Singapore due to the following:
a) Strong emphasis on keeping cost low, leading to overworked and highly stressed staff
b) Employment of foreign workers who are not familiar with the local setting
c) Low wages leading to high turnover and lack of accumulated experience
d) Complaints by customers are generally ignored
This observation applies to the business sectors and to the public service. There are some examples of excellent service in Singapore, but they tend to be occasional rather than systemic.
I dislike the automated system adopted in most large organisations in Singapore. They waste a lot of time for customers and makes it difficult for the customer to speak to a person. It does not reduce the cost for the organisation, as most customers need to speak to a person anyway, rather than get the reply from the pre-programmed automated responses. The people who designed these automated systems do not think about the needs of the customers. They only want to introduce expensive technology to "look good".
The quality of service can only improve if there is general respect for the customer or the public. Sadly, this lack of respect is quite systemic in Singapore, due to the elitist culture promoted by our leaders.
Tan Kin Lian
Monday, November 23, 2009
Loss of human touch
Hi Mr Tan,
The email below may be amusing, but this is also happening in Singapore in the name of efficiency and productivity. I found this to be cold and the banks and government departments have lost their human touch for the customers and people.
I would like to read your comments or suggestions on this matter in your blog as matter of public interest.
Banking
Shown below, is an actual letter that was sent to a bank by an 86 year old woman. The bank manager thought it amusing enough to have it published in the New York Times.
Dear Sir:
I am writing to thank you for bouncing my check with which I endeavored to pay my plumber last month. By my calculations, three nanoseconds must have elapsed between his presenting the check and the arrival in my account of the funds needed to honor it.
I refer, of course, to the automatic monthly deposit of my entire pension, an arrangement which, I admit, has been in place for only eight years. You are to be commended for seizing that brief window of opportunity, and also for debiting my account $30 by way of penalty for the inconvenience caused to your bank. My thankfulness springs from the manner in which this incident has caused me to rethink my errant financial ways.
I noticed that whereas I personally answer your telephone calls and letters, when I try to contact you, I am confronted by the impersonal, overcharging, pre-recorded, faceless entity which your bank has become.
From now on, I, like you, choose only to deal with a flesh-and-blood person. My mortgage and loan repayments will therefore and hereafter no longer be automatic, but will arrive at your bank, by check, addressed personally and confidentially to an employee at your bank whom you must nominate.
Be aware that it is an offense under the Postal Act for any other person to open such an envelope. Please find attached an Application Contact which I require your chosen employee to complete. I am sorry it runs to eight pages, but in order that I know as much about him or her as your bank knows about me, there is no alternative. Please note that all copies of his or her medical history must be countersigned by a Notary Public, and the mandatory details of his/her financial situation (income, debts, assets and liabilities) must be accompanied by documented proof. In due course, at MY convenience, I will issue your employee with a PIN number which he/she must quote in dealings with me.
I regret that it cannot be shorter than 28 digits but, again, I have modeled it on the number of button presses required of me to access my account balance on your phone bank service. As they say, imitation is the sincerest form of flattery.
Let me level the playing field even further.
When you call me, press buttons as follows:
IMMEDIATELY AFTER DIALLING, PRESS THE STAR (*) BUTTON FOR ENGLISH
#1. To make an appointment to see me.
#2. To query a missing payment.
#3. To transfer the call to my living room in case I am there.
#4. To transfer the call to my bedroom in case I am sleeping.
#5. To transfer the call to my toilet in case I am attending to nature.
#6. To transfer the call to my mobile phone if I am not at home.
#7. To leave a message on my computer, a password to access my computer is required. Password will be communicated to you at a later date to that Authorized Contact mentioned earlier.
#8. To return to the main menu and to listen to options 1 through 7.
#9. To make a general complaint or inquiry. The contact will then be put on hold, pending the attention of my automated answering service.
#10. This is a second reminder to press * for English. While this may, on occasion, involve a lengthy wait, uplifting music will play for the duration of the call.
Regrettably, but again following your example, I must also levy an establishment fee to cover the setting up of this new arrangement. May I wish you a happy, if ever so slightly less prosperous New Year?
Your Humble Client
(Remember: This was written by an 86 year old woman)
The email below may be amusing, but this is also happening in Singapore in the name of efficiency and productivity. I found this to be cold and the banks and government departments have lost their human touch for the customers and people.
I would like to read your comments or suggestions on this matter in your blog as matter of public interest.
Banking
Shown below, is an actual letter that was sent to a bank by an 86 year old woman. The bank manager thought it amusing enough to have it published in the New York Times.
Dear Sir:
I am writing to thank you for bouncing my check with which I endeavored to pay my plumber last month. By my calculations, three nanoseconds must have elapsed between his presenting the check and the arrival in my account of the funds needed to honor it.
I refer, of course, to the automatic monthly deposit of my entire pension, an arrangement which, I admit, has been in place for only eight years. You are to be commended for seizing that brief window of opportunity, and also for debiting my account $30 by way of penalty for the inconvenience caused to your bank. My thankfulness springs from the manner in which this incident has caused me to rethink my errant financial ways.
I noticed that whereas I personally answer your telephone calls and letters, when I try to contact you, I am confronted by the impersonal, overcharging, pre-recorded, faceless entity which your bank has become.
From now on, I, like you, choose only to deal with a flesh-and-blood person. My mortgage and loan repayments will therefore and hereafter no longer be automatic, but will arrive at your bank, by check, addressed personally and confidentially to an employee at your bank whom you must nominate.
Be aware that it is an offense under the Postal Act for any other person to open such an envelope. Please find attached an Application Contact which I require your chosen employee to complete. I am sorry it runs to eight pages, but in order that I know as much about him or her as your bank knows about me, there is no alternative. Please note that all copies of his or her medical history must be countersigned by a Notary Public, and the mandatory details of his/her financial situation (income, debts, assets and liabilities) must be accompanied by documented proof. In due course, at MY convenience, I will issue your employee with a PIN number which he/she must quote in dealings with me.
I regret that it cannot be shorter than 28 digits but, again, I have modeled it on the number of button presses required of me to access my account balance on your phone bank service. As they say, imitation is the sincerest form of flattery.
Let me level the playing field even further.
When you call me, press buttons as follows:
IMMEDIATELY AFTER DIALLING, PRESS THE STAR (*) BUTTON FOR ENGLISH
#1. To make an appointment to see me.
#2. To query a missing payment.
#3. To transfer the call to my living room in case I am there.
#4. To transfer the call to my bedroom in case I am sleeping.
#5. To transfer the call to my toilet in case I am attending to nature.
#6. To transfer the call to my mobile phone if I am not at home.
#7. To leave a message on my computer, a password to access my computer is required. Password will be communicated to you at a later date to that Authorized Contact mentioned earlier.
#8. To return to the main menu and to listen to options 1 through 7.
#9. To make a general complaint or inquiry. The contact will then be put on hold, pending the attention of my automated answering service.
#10. This is a second reminder to press * for English. While this may, on occasion, involve a lengthy wait, uplifting music will play for the duration of the call.
Regrettably, but again following your example, I must also levy an establishment fee to cover the setting up of this new arrangement. May I wish you a happy, if ever so slightly less prosperous New Year?
Your Humble Client
(Remember: This was written by an 86 year old woman)
Lending to small businesses
During the financial crisis, banks withdrew credit to small businesses, as they do not wish to see bad debts. The governments had to step in to provide cheap funds to the banks, so that they can continue to lend to small businesses, as these businesses create jobs.
The banks took the cheap funds, but did not lend to small businesses. Instead, they use the cheap funds to invest in the stock market and earned a big profit, on the inflated asset prices.
Is there a better way for the government to provide credit to small businesses, instead of relying on the banks, which are profit driven - and are not concerned about helping small businesses to create jobs.
I can think of two ways:
a) The cheap funds from government has to be tied to actual lending by the banks. If the banks do not lend to small businesses, they cannot get the cheap funds. This lending can be backed by partial guarantees by the government. (If I am not mistaken, this is the approach adopted in Singapore).
b) The government create another agency to provide the lending to small businesses, which is tied to the number of people employed, The entrepreneur is personally liable for the loan, but can have access to low cost credit. This should provide control over moral hazard, and serve the purpose of giving credit to small businesses, which in turn creates jobs.
Tan Kin Lian
The banks took the cheap funds, but did not lend to small businesses. Instead, they use the cheap funds to invest in the stock market and earned a big profit, on the inflated asset prices.
Is there a better way for the government to provide credit to small businesses, instead of relying on the banks, which are profit driven - and are not concerned about helping small businesses to create jobs.
I can think of two ways:
a) The cheap funds from government has to be tied to actual lending by the banks. If the banks do not lend to small businesses, they cannot get the cheap funds. This lending can be backed by partial guarantees by the government. (If I am not mistaken, this is the approach adopted in Singapore).
b) The government create another agency to provide the lending to small businesses, which is tied to the number of people employed, The entrepreneur is personally liable for the loan, but can have access to low cost credit. This should provide control over moral hazard, and serve the purpose of giving credit to small businesses, which in turn creates jobs.
Tan Kin Lian
Zero interest rate
The global stock markets are strong because interest rate is near zero. When interest rate starts to move up, the stock markets will correct by a lot. The current levels of the stock markets are unsustainable and quite risky. I have decided to reduce my holdings of stocks.
Common Sense Investing - John Bogle
Foreword:
Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner's game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), and after the substantial costs of investing are deducted, it becomes a loser's game.
Common sense tells us, and history confirms, that the simplest and most efficient investment strategy is to buy and hold all of the nation's publicly held businesses at very low cost. The classic index fund that owns this market portfolio is the only investment that guarantees you with your fair share of stock market returns.
Quotes:
"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees." Warren Buffett
"A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth." Warren Buffett
Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner's game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), and after the substantial costs of investing are deducted, it becomes a loser's game.
Common sense tells us, and history confirms, that the simplest and most efficient investment strategy is to buy and hold all of the nation's publicly held businesses at very low cost. The classic index fund that owns this market portfolio is the only investment that guarantees you with your fair share of stock market returns.
Quotes:
"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees." Warren Buffett
"A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth." Warren Buffett
Credit card bills
Be aware about the charges that can appear on your credit card bill. Read this blog.
Recession and opportunity to change
The recession gives an excellent opportunity to recreate a new environment for business. Read this report. Our Government should also be thinking about change.
Sunday, November 22, 2009
Excellent train service in UK
I like the train service in the UK. There is something that Singapore can learn. Read here.
Oligopoly
Source: Wikipedia
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek oligoi 'few' and poleein 'to sell'. Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be a high risk for collusion.
Firms often collude in an attempt to stabilize unstable markets, so as to reduce the risks inherent in these markets for investment and product development. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be actual communication between companies) - for example, in some industries, there may be an acknowledged market leader which informally sets prices to which other producers respond, known as price leadership.
In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater than when there are more firms in an industry if, for example, the firms were only regionally based and did not compete directly with each other.
Question: Is banking in Singapore similar to an oligopoly?
New York Times to Goldman Sachs
The New York Times editorial slams Goldman Sachs for its role in creating the global financial crisis. What a brave newspaper who is willing to speak the facts honestly.
Low interest rate
Interest rate has been low for the past few years. It will continue to be low for a long time, partly due to supply and demand. There is low demand for loans due to the global economic downturn. There is too much money due to stimulus spending of governments.
But there is another factor. The banks are keeping large spread for themselves. They charge a high interest rate on their loans, especially to small businesses, but offers a low interest rate to their savings. They make a large profit.
In a competitive market, the banks should be competing among themselves to pay higher interest rate to get savings to give out as loans. Their access to cheap government money reduces the need for paying competitive interest rate. There are just a few banks and there could be some "tacit understanding" among the banks that they do not need to compete for savings in this environment. This is an oligopolistic situation.
For interest rate to raise, we need a new arrangement for businesses to get loans at cheaper rates, and for savers to get a higher interest rate. This is a challenge for the governments and economists to rebuild a more competitive environment for the financial sector. The old "free market" did not work well.
Tan Kin Lian
But there is another factor. The banks are keeping large spread for themselves. They charge a high interest rate on their loans, especially to small businesses, but offers a low interest rate to their savings. They make a large profit.
In a competitive market, the banks should be competing among themselves to pay higher interest rate to get savings to give out as loans. Their access to cheap government money reduces the need for paying competitive interest rate. There are just a few banks and there could be some "tacit understanding" among the banks that they do not need to compete for savings in this environment. This is an oligopolistic situation.
For interest rate to raise, we need a new arrangement for businesses to get loans at cheaper rates, and for savers to get a higher interest rate. This is a challenge for the governments and economists to rebuild a more competitive environment for the financial sector. The old "free market" did not work well.
Tan Kin Lian
Bailout of AIG
Read this report. The counter parties should have been forced to take a haircut, rather than get paid in full.
Full employment and welfare state
Winston Churchill was the Prime Minister of Great Britain during the Second World War. His outstanding leadership was the key factor in winning the war for Great Britain, against a stronger Germany. He was called "the savior of our nation".
Towards the end of the war, an election was called in Great Britain. Churchill was the leader of the Conservative Party. The Labour Party campaigned on a platform of full employment and a welfare state, and won the general election. Churchill lost, in spite of the gratitude of the people for his leadership. The people were looking towards the future and wanted a government that could deliver full employment and welfare.
Towards the end of the war, an election was called in Great Britain. Churchill was the leader of the Conservative Party. The Labour Party campaigned on a platform of full employment and a welfare state, and won the general election. Churchill lost, in spite of the gratitude of the people for his leadership. The people were looking towards the future and wanted a government that could deliver full employment and welfare.
Charity and the retrenched
Mr Tan,
What exactly is the legal definition of "Charity"? I am somewhat confused by the "We Are One" campaign which is enjoying an unprecendented TV coverage, to solicit public donations.
Why are retrenched people who can't find jobs, being lumped with the traditional Charity recipients, as in, chronic sick, aged, infirm, homeless, destitute. Is this legal? Surely a lot of retrenched people get at lease some retrenchment benefits whilst those really in dire need e.g. kidney patients, poor sickly aged people, are actually more deserving of :charity: money?
Why are "those affected by the economic downturn" now being sanctioned by the government as charity recipients?
Who isn't affected by the economic downturn, it is a question of the "degree". How do you qualify to get this charity money? Who is the judge? this is very important. Everyone would like to say he is affected terribly by the economic downturn!
I went to "weareone" website to find outmore. The FAQ just tells you how to donate, not telling how the money is administered, who qualifies to get it, how, when, who, zilch!
The website, as in the tV clips, said that the donation is for those "affected by the economic downturn". this is a very vague statement for me to part with my donation money, which could also be given to a kidney patient in financial trouble.
I am quite traditional, i still think that if retrenched people cannot find work and is in financial trouble, it is the Government's duty to generate jobs, or have a system to cushion the impact.
Is it a shift in the policy to pass the burden of supporting jobless people to the rest of the people with jobs, and the government will wash half its hands off the burden of generating jobs, by putting the jobless on charity? I wonder if the small boy on tv who felt proud of contributing the lego bricks, does he know wht he is doing?
In summary, I don't feel comfortable at all constantly being bombarded by the media in the last few weeks, and not getting any wiser going to their website.
What does everyone here think? Tell me, am I being selfish, oversensitive and unreasonable?
REX
What exactly is the legal definition of "Charity"? I am somewhat confused by the "We Are One" campaign which is enjoying an unprecendented TV coverage, to solicit public donations.
Why are retrenched people who can't find jobs, being lumped with the traditional Charity recipients, as in, chronic sick, aged, infirm, homeless, destitute. Is this legal? Surely a lot of retrenched people get at lease some retrenchment benefits whilst those really in dire need e.g. kidney patients, poor sickly aged people, are actually more deserving of :charity: money?
Why are "those affected by the economic downturn" now being sanctioned by the government as charity recipients?
Who isn't affected by the economic downturn, it is a question of the "degree". How do you qualify to get this charity money? Who is the judge? this is very important. Everyone would like to say he is affected terribly by the economic downturn!
I went to "weareone" website to find outmore. The FAQ just tells you how to donate, not telling how the money is administered, who qualifies to get it, how, when, who, zilch!
The website, as in the tV clips, said that the donation is for those "affected by the economic downturn". this is a very vague statement for me to part with my donation money, which could also be given to a kidney patient in financial trouble.
I am quite traditional, i still think that if retrenched people cannot find work and is in financial trouble, it is the Government's duty to generate jobs, or have a system to cushion the impact.
Is it a shift in the policy to pass the burden of supporting jobless people to the rest of the people with jobs, and the government will wash half its hands off the burden of generating jobs, by putting the jobless on charity? I wonder if the small boy on tv who felt proud of contributing the lego bricks, does he know wht he is doing?
In summary, I don't feel comfortable at all constantly being bombarded by the media in the last few weeks, and not getting any wiser going to their website.
What does everyone here think? Tell me, am I being selfish, oversensitive and unreasonable?
REX
Saturday, November 21, 2009
Marketing of Portals
I wish to look for marketing associates who are interested to work from home to market the portals. Details are shown here. If you are interested, send an e-mail to kinlian@gmail.com.
Law Society - Speech by Michael Hwang
Read this speech by President Michael Hwang of the Law Society. He made reference to the Minibond saga.
Yield on a Life Insurance Policy
Microsoft Excel has a function to calculate the yield on a life assurance policy. You can get this function using Insert > Function > Financial > Rate.
Policy taken for 18 years
Monthly premium of $50
Surrender value at end of 18 years is $12,800
What is the yield?
You have to enter the following values in the RATE function:
NPER - number of periods: 18
PMT - payment: $50 X 12 = $600
PV - present value: 0
FV - future value: -12,700 (show as negative as the money is being received)
TYPE: payment type: 0.5 (for monthly payment)
This returns a value of 1.68%
Policy taken for 18 years
Monthly premium of $50
Surrender value at end of 18 years is $12,800
What is the yield?
You have to enter the following values in the RATE function:
NPER - number of periods: 18
PMT - payment: $50 X 12 = $600
PV - present value: 0
FV - future value: -12,700 (show as negative as the money is being received)
TYPE: payment type: 0.5 (for monthly payment)
This returns a value of 1.68%
The Big Squander
Paul Krugman wrote this article about the bailout of the banks during the financial crisis of 2008. The government should have insisted that the banks take a haircut on the credit default swaps that were bought from AIG. They did not. The banks obtained 100% payout on the CDS, which were funded by the tax payers. Now the banks can pay multi million dollar bonuses again. What a corrupt world.
Wonderful scenes of Paris
I just visited Paris. Here are some wonderful scenes of this beautiful city.
SCMP:Ex-DBS broker suspended over Lehman debacle
21 Nov 2009
A former employee of DBS Bank (Hong Kong) has been suspended from providing securities-related services for three months by the Monetary Authority after being found to have failed to disclose to a client the risk involved when selling a Lehman Brothers-related financial product.
It was the first disciplinary action taken by the authority since it received complaints about problematic sale practices of products linked to the bankrupt US investment bank.
The authority said yesterday that an investigation had found that Leung Wai-yu, who was registered with the authority to run securities-related businesses, had "failed to diligently disclose and explain to the client the product's risk".
She had also "failed to complete the risk-disclosure statement for the client in accordance with the bank's internal control procedures" when she was selling a client Lehman Brothers constellation notes, a derivative similar to minibonds also issued by Lehman, in March 2006, a spokesman said. He said the authority had suspended Leung's details from its register for three months from November 20 to February 19, during which time she could not take part in dealing in or advising on securities.
"This is the first time the HKMA has taken disciplinary action against a relevant individual in connection with a Lehman Brothers-related investment product," the authority's executive director responsible for securities enforcement, Raymond Li Ling-cheung, said. "There are other disciplinary cases which have reached an advanced stage and they will be announced in due course."
Leung left DBS in 2006 and works for the Bank of Communications. The authority said it had taken into account all the circumstances of the case, including the extent of the client's losses and the fact that Leung had no disciplinary history.
The action followed Leung's withdrawal of an appeal with the Securities and Futures Appeals Tribunal seeking to review the authority's decision. As of yesterday, the authority had begun disciplinary consideration of 765 Lehman Brothers-related investments other than minibonds. It is investigating 3,097 cases of Lehman Brothers-related non-minibond complaints and seeking further information on 1,292 cases. A DBS spokesman said it had reviewed every complaint by investors in the derivatives and had compensated those in which the sale might have been inappropriate.
Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September last year. Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives, marketed as a proxy investment in well-known companies.
A former employee of DBS Bank (Hong Kong) has been suspended from providing securities-related services for three months by the Monetary Authority after being found to have failed to disclose to a client the risk involved when selling a Lehman Brothers-related financial product.
It was the first disciplinary action taken by the authority since it received complaints about problematic sale practices of products linked to the bankrupt US investment bank.
The authority said yesterday that an investigation had found that Leung Wai-yu, who was registered with the authority to run securities-related businesses, had "failed to diligently disclose and explain to the client the product's risk".
She had also "failed to complete the risk-disclosure statement for the client in accordance with the bank's internal control procedures" when she was selling a client Lehman Brothers constellation notes, a derivative similar to minibonds also issued by Lehman, in March 2006, a spokesman said. He said the authority had suspended Leung's details from its register for three months from November 20 to February 19, during which time she could not take part in dealing in or advising on securities.
"This is the first time the HKMA has taken disciplinary action against a relevant individual in connection with a Lehman Brothers-related investment product," the authority's executive director responsible for securities enforcement, Raymond Li Ling-cheung, said. "There are other disciplinary cases which have reached an advanced stage and they will be announced in due course."
Leung left DBS in 2006 and works for the Bank of Communications. The authority said it had taken into account all the circumstances of the case, including the extent of the client's losses and the fact that Leung had no disciplinary history.
The action followed Leung's withdrawal of an appeal with the Securities and Futures Appeals Tribunal seeking to review the authority's decision. As of yesterday, the authority had begun disciplinary consideration of 765 Lehman Brothers-related investments other than minibonds. It is investigating 3,097 cases of Lehman Brothers-related non-minibond complaints and seeking further information on 1,292 cases. A DBS spokesman said it had reviewed every complaint by investors in the derivatives and had compensated those in which the sale might have been inappropriate.
Hong Kong investors lost billions of dollars on minibonds guaranteed by Lehman Brothers when the US investment bank went bankrupt in September last year. Minibonds are not corporate bonds, but consist of high-risk, credit-linked derivatives, marketed as a proxy investment in well-known companies.
Socialist Market Economy - China's Key to Success
Here is an interview with Wen Jiabao, Prime Minister of China. He expressed an insightful understanding of Adam Smith's theory of economics. He pointed out that Adam Smith actually wrote two books - on the invisible hand (i.e .market) and the visible hand (i.e. role of government). When economist applied only one side of Adam Smith's theory, the results are not satisfactory. It is now time for Singapore to learn from China about economics and governance. View this interview.
Thursday, November 19, 2009
Health care reform in the USA
Action to cool down speculation
Asia is faced an asset bubble, due to speculation in real estates caused by low interest rate, due to stimulus spending by governments in many countries. Read this report.
Reforming the financial sector
The senator should not give way to the business lobbies. Read this report.
Wednesday, November 18, 2009
How to spot an investment scam
Mr Tan
This article may be useful to some of your readers from the UK FSA . It also points out the issues with prosecuting overseas fraud and why recovering funds is very difficult. I think a key question for an investment scheme should be who is independently auditing on an annual basis and what are they auditing. http://www.fool.co.uk/news/investing/2009/04/30/transcript-how-to-spot-an-investment-scam.aspx
I was disappointed that he didnt mention land banking but did feel that this quote represents the issues with many investments (stock scams, ponzis, land banking, oil etc) where big returns are offered annually (Minimum 12% return etc). Most people lose of the actual money and just see numbers on a statement or page.
David:
It strikes me that the guys who actually get in early are the ones who are going to make the most amount out of it.
Jonathan:
No, because what actually happens is, normally the con man is good enough to convince the first guys to leave their money in, and that normally happens, they might take out a bit of interest, but essentially they leave their money in as well, and what everybody sees is a paper profit; we see the conmen, they'll give a fancy spreadsheet, they'll open up a laptop, show a graph, and say, "That's what your money was at the beginning" (pointing to the low point of the graph) "and that’s what your money is now" (pointing to the high point of the graph), it looks fantastic.
Steve
This article may be useful to some of your readers from the UK FSA . It also points out the issues with prosecuting overseas fraud and why recovering funds is very difficult. I think a key question for an investment scheme should be who is independently auditing on an annual basis and what are they auditing. http://www.fool.co.uk/news/investing/2009/04/30/transcript-how-to-spot-an-investment-scam.aspx
I was disappointed that he didnt mention land banking but did feel that this quote represents the issues with many investments (stock scams, ponzis, land banking, oil etc) where big returns are offered annually (Minimum 12% return etc). Most people lose of the actual money and just see numbers on a statement or page.
David:
It strikes me that the guys who actually get in early are the ones who are going to make the most amount out of it.
Jonathan:
No, because what actually happens is, normally the con man is good enough to convince the first guys to leave their money in, and that normally happens, they might take out a bit of interest, but essentially they leave their money in as well, and what everybody sees is a paper profit; we see the conmen, they'll give a fancy spreadsheet, they'll open up a laptop, show a graph, and say, "That's what your money was at the beginning" (pointing to the low point of the graph) "and that’s what your money is now" (pointing to the high point of the graph), it looks fantastic.
Steve
Globalization - some bad consequences
The prevailing thinking is that globalization improves the economic wellbeing of the people in the world. Not enough attention is paid to its negative consequences.
One such consequence is the export of the harmful effects of low interest rate to other countries. During the past two decades, Japan had very low interest rates. Speculators borrowed large sums in Japanese currency to speculate in assets in other economies, leading to asset inflation. This has been named as the "carry trade".
Now, the US Dollar has become the currency to borrow for the "carry trade". It has led to the stock and property market bubbles in Asia. Some countries have decided to impose control over the flow of currency to prevent their assets from excessive escalation.
If we want to get back to more stable economic growth, we have to open our eyes and see what is really happening, rather than rely on thinking that globalization, free market and global competition are good. They may be good in some respects but they have negative consequences, which may outweigh the benefits.
Tan Kin Lian
One such consequence is the export of the harmful effects of low interest rate to other countries. During the past two decades, Japan had very low interest rates. Speculators borrowed large sums in Japanese currency to speculate in assets in other economies, leading to asset inflation. This has been named as the "carry trade".
Now, the US Dollar has become the currency to borrow for the "carry trade". It has led to the stock and property market bubbles in Asia. Some countries have decided to impose control over the flow of currency to prevent their assets from excessive escalation.
If we want to get back to more stable economic growth, we have to open our eyes and see what is really happening, rather than rely on thinking that globalization, free market and global competition are good. They may be good in some respects but they have negative consequences, which may outweigh the benefits.
Tan Kin Lian
Public transport in London and Paris
Read my observations about the public transport system in London and Paris here.
Wealth manager
A wealth manager is a person working for a bank who helps the high net worth people to manage their wealth. Usually the client needs to have assets of more than a certain sum, e.g. $250,000.
The wealth manager tells the client that they will help the client to earn a good return on the wealth and will tell some stories about how this can happen. But there is no guarantee.
In some cases, the wealth manager can help the client to make some money but in other cases, the wealth manager loses money for the client. On average, the loses outweigh the gains.
The wealth manager is usually involved in advising on short term speculations on the currency or stock markets. These speculations are at best a zero sum game. The gains made by some come from the losses made by the other speculators.
However, the wealth managers and the banks earn a large fee and commission from handling these transactions. So, in the long run, the clients tend to lose out. For each client that makes money, there is likely to be another client that loses a larger sum, due to the fees.
The experience of many clients who entrusted their wealth to be managed by the wealth managers had been disappointing during the current downturn of the market. However, during good times, they have not been great either.
The lesson: invest for the long term. Avoid short term speculations. The wealth managers cannot help you to spot winning trends. If they can, they would be wealthy on their own.
Tan Kin Lian
The wealth manager tells the client that they will help the client to earn a good return on the wealth and will tell some stories about how this can happen. But there is no guarantee.
In some cases, the wealth manager can help the client to make some money but in other cases, the wealth manager loses money for the client. On average, the loses outweigh the gains.
The wealth manager is usually involved in advising on short term speculations on the currency or stock markets. These speculations are at best a zero sum game. The gains made by some come from the losses made by the other speculators.
However, the wealth managers and the banks earn a large fee and commission from handling these transactions. So, in the long run, the clients tend to lose out. For each client that makes money, there is likely to be another client that loses a larger sum, due to the fees.
The experience of many clients who entrusted their wealth to be managed by the wealth managers had been disappointing during the current downturn of the market. However, during good times, they have not been great either.
The lesson: invest for the long term. Avoid short term speculations. The wealth managers cannot help you to spot winning trends. If they can, they would be wealthy on their own.
Tan Kin Lian
Tuesday, November 17, 2009
Disclosing the commission earned
Someone asked why it is necessary for an insurance agent to disclose the commission earned on selling an insurance policy, while sellers of other products are not required to disclose their commission.
The answer is, the insurance agent is supposed to give advice that is in the best interest of the client. The payment of commission create a conflict of interest.
The commission is paid indirectly by the client, from the premiums. A high commission means a high cost to the client.
The regulators in the UK, where this concept of disclosure was developed, thought that the disclosure was the best way to manage the conflict of interest. If the client is aware about the cost, the client would be able to evaluate the advice of the agent.
This belief has turned out to be naive. The consumers were not savvy. The advisers were able to hide essential facts from the clients or to give misleading information.
I understand, from comments posted in this blog, that the UK authorities have now decided that this "disclosure" does not work and intends to ban the payment of commission entirely. I have not been following this specific development, so I am not sure about the details.
I agree with the thinking that it is better for insurance advisers to be paid a fee for their advice. Some practising advisers also hold the same view, as they prefer to be transparent in their dealings with their clients.
Tan Kin Lian
The answer is, the insurance agent is supposed to give advice that is in the best interest of the client. The payment of commission create a conflict of interest.
The commission is paid indirectly by the client, from the premiums. A high commission means a high cost to the client.
The regulators in the UK, where this concept of disclosure was developed, thought that the disclosure was the best way to manage the conflict of interest. If the client is aware about the cost, the client would be able to evaluate the advice of the agent.
This belief has turned out to be naive. The consumers were not savvy. The advisers were able to hide essential facts from the clients or to give misleading information.
I understand, from comments posted in this blog, that the UK authorities have now decided that this "disclosure" does not work and intends to ban the payment of commission entirely. I have not been following this specific development, so I am not sure about the details.
I agree with the thinking that it is better for insurance advisers to be paid a fee for their advice. Some practising advisers also hold the same view, as they prefer to be transparent in their dealings with their clients.
Tan Kin Lian
Personal entertainment system on air flights
Singapore Airlines can learn from Emirates or other airlines on how to improve the ergonomics of its personal entertainment system. Read here.
Monday, November 16, 2009
Changi Airport can adopt the best practice
Changi Airport may be among the best in the world. It can still learn from the best practice at other airports. Read here.
Paying the right price for insurance
A good insurance product has the following features:
a) reimburse the insured for a loss caused to an unforeseen event
b) provides transparency in coverage
c) charges a fair price.
Medical bills, repair bills and loss of income are unforeseen events. Insurance serves a useful purpose in compensating the insured for the loss.
The coverage should be written in clear terms. It should be understood by both parties. There should not be uncertainty leading to disputes. If the coverage is written in language that is not obvious to the lay person and requires a court to interpret the meaning, it is not transparent.
A fair price is one that covers the cost of claims and provides a reasonable margin for expenses and profit. The claims should represent 70% of the premium, with the remaining 30% set aside for marketing expenses, administration expenses and profit margin. This applies to the risk portion of the premium.
For the savings portion, the margin should not take more than 10% of the premium.
Many insurance product in the market failed to meet the tests of useful purpose, transparency and fair premium. They may be written in a confusing manner (which allows the insurer to interpret differently and deny the claim) or has an excessive margin for expenses and profit (which is hidden from the customer). The product is designed to make it difficult to compare the price.
The insurance agent can over-exaggerate the claims and get the unwitting customer to pay an excessive premium. For example, If the rate of claim is 5% and the average amount of claim is $5,000, the pure premium should be $250. If the margin is 30%, the gross premium should be $357. If the insurance company is charging $500 or more, the premium is too high and the insurance should be avoided. If the agent said that the claim could be $50,000 and get the customer to pay a premium of $1,000,the cost is excessive.
I have often been asked by the public - is this insurance plan a good plan for consumers? My answer is, "it depends on the premium that is charged". If the premium rate is fair and the coverage is transparent, it is a good plan.
However, most insurance plans are designed to give excessive profit to the insurer and pays a high commission rate to make it attractive for the agent to sell the product. After allowing for the high cost, which has to be paid by the customer, most insurance product are not good for consumers.
One possible exception is term insurance as it is tranparent and the consumer can get a quote of similar products for several insurers. The competitive market is likely to drive the premuim rate down to a fair level.
Tan Kin Lian
a) reimburse the insured for a loss caused to an unforeseen event
b) provides transparency in coverage
c) charges a fair price.
Medical bills, repair bills and loss of income are unforeseen events. Insurance serves a useful purpose in compensating the insured for the loss.
The coverage should be written in clear terms. It should be understood by both parties. There should not be uncertainty leading to disputes. If the coverage is written in language that is not obvious to the lay person and requires a court to interpret the meaning, it is not transparent.
A fair price is one that covers the cost of claims and provides a reasonable margin for expenses and profit. The claims should represent 70% of the premium, with the remaining 30% set aside for marketing expenses, administration expenses and profit margin. This applies to the risk portion of the premium.
For the savings portion, the margin should not take more than 10% of the premium.
Many insurance product in the market failed to meet the tests of useful purpose, transparency and fair premium. They may be written in a confusing manner (which allows the insurer to interpret differently and deny the claim) or has an excessive margin for expenses and profit (which is hidden from the customer). The product is designed to make it difficult to compare the price.
The insurance agent can over-exaggerate the claims and get the unwitting customer to pay an excessive premium. For example, If the rate of claim is 5% and the average amount of claim is $5,000, the pure premium should be $250. If the margin is 30%, the gross premium should be $357. If the insurance company is charging $500 or more, the premium is too high and the insurance should be avoided. If the agent said that the claim could be $50,000 and get the customer to pay a premium of $1,000,the cost is excessive.
I have often been asked by the public - is this insurance plan a good plan for consumers? My answer is, "it depends on the premium that is charged". If the premium rate is fair and the coverage is transparent, it is a good plan.
However, most insurance plans are designed to give excessive profit to the insurer and pays a high commission rate to make it attractive for the agent to sell the product. After allowing for the high cost, which has to be paid by the customer, most insurance product are not good for consumers.
One possible exception is term insurance as it is tranparent and the consumer can get a quote of similar products for several insurers. The competitive market is likely to drive the premuim rate down to a fair level.
Tan Kin Lian
APEC Leader's declaration at Singapore 2009
Here is the declaration of the Apec leaders at the Singapore 2009 meeting.
Here are some key paragraphs:
Looking beyond supporting the recovery, we recognise the necessity to develop a new growth paradigm for the changed post-crisis landscape, and an expanded trade and investment agenda that will strengthen regional economic integration (REI) in the Asia-Pacific region. We cannot go back to “growth as usual”. We will put in place next year a comprehensive long-term growth strategy that supports more balanced growth within and across economies, achieves greater inclusiveness in our societies, sustains our environment, and which seeks to raise our growth potential through innovation and a knowledge-based economy.
Supporting Balanced Growth
We support the goals of the G-20 Framework for Strong, Sustainable and Balanced Growth. We join in their commitment to:
* Work together to ensure that our macroeconomic, regulatory and structural policies are collectively consistent with more sustainable and balanced trajectories of growth;
* Promote current account sustainability and open trade and investment to advance global prosperity and growth sustainability;
* Undertake macro prudential and regulatory policies to help prevent credit and asset price cycles from becoming forces of destabilisation; and
* Promote development and poverty reduction as part of the rebalancing of global growth.
Resisting Protectionism
We firmly reject all forms of protectionism and reaffirm our commitment to keep markets open and refrain from raising new barriers to investment or to trade in goods and services, and instruct our Ministers to continue to regularly review our adherence to these commitments. These efforts reinforce the WTO’s own monitoring mechanism, and act as another bulwark against protectionist pressures by ensuring transparency in the measures taken in response to the crisis.
Consequence of widening income gap
Published in New York Times
So the corporate C.E.O.’s and their friends now reap what they have sown. For the last two decades, they have systematically (with tax subsidies at times) stripped middle- and working-class America of the jobs, financial security and health care that they depended on to buy those same companies’ cars, “labor saving” devices, electronic devices and all other manner of stuff.
The cost savings conveniently floated up the pyramid and were split among the executives and their board members, lawyers, accountants, investment bankers and other friends.
Now Middle America is broke and can no longer support those at the top of the pyramid. Or their big bonuses. Or their friends and hangers-on.
It’s going to stay that way until they start to undo what they have done and bring jobs back — real jobs with health care.
Elizabeth A. Letzler
Baldwin, N.Y., Nov. 8, 2009
The writer is a retired former banker and certified financial planner.
CyCab - Driverless Electric Vehicle (2)
I am visiting Paris to see the Cycab, - driverless electric vehicle. After that, I will visit the University of Kent to give a talk to the actuarial students. I will return on Saturday.
Sunday, November 15, 2009
Insuring critical illness
I have often been asked if it is advisable to buy insurance to cover critical illness. It is difficult for me to answer this question. It is likely that the customer has been advised by an insurance agent to buy critical illness policy to cover medical bills, which can amount to $100,000 or more, and for the loss of income during the period of treatment.
The large cost of medical treatment is usually exaggerated and the chance of incurring a large bill is small, especially as there is the option to be treated in a subsidised ward.
In most cases, the medical bills can be covered by Medishield or private Shield, which pays for the major portion of large hospital bills. The patient has to pay only the deductible and coinsurance.
Some insurance agent advised on the need to insure the loss of income during treatment of the critical illness. However, you must consider the the risk of loss of income does not arise only from critical illness. It is more likely to arise from unemployment and retrenchment, which is higher than the risk of critical illness.
The best way to protect against loss of income is to have adequate savings. If you save 15% of your monthly earnings, it will take you 10 years to accumulate savings amounting to two years of earnings. This is likely to be more than the sum that you can insure under a critical illness policy.
The accumulated saving can be used not only for critical illness, but also for unemployment and other emergencies. Furthermore, you also do not have to worry about the exclusions in a critical illness policy.
If you wish to cover for critical illness, make sure that you do not pay more than 0.4% of the insured sum. If you insure for $100,000, the premium should not exceed $400 a year. If you take a critical illness term coverage for 10 years, the cost should be lower.
However, if you cannot buy a critical illness cover at a fair price. it is better for you to be uninsured. The chance of getting a critical illness during the first 10 years for a young person is quite low. The priority is to accumulate sufficient savings as early as possible. This is explained in my book on Financial Planning. Get a free copy here.
Tan Kin Lian
The large cost of medical treatment is usually exaggerated and the chance of incurring a large bill is small, especially as there is the option to be treated in a subsidised ward.
In most cases, the medical bills can be covered by Medishield or private Shield, which pays for the major portion of large hospital bills. The patient has to pay only the deductible and coinsurance.
Some insurance agent advised on the need to insure the loss of income during treatment of the critical illness. However, you must consider the the risk of loss of income does not arise only from critical illness. It is more likely to arise from unemployment and retrenchment, which is higher than the risk of critical illness.
The best way to protect against loss of income is to have adequate savings. If you save 15% of your monthly earnings, it will take you 10 years to accumulate savings amounting to two years of earnings. This is likely to be more than the sum that you can insure under a critical illness policy.
The accumulated saving can be used not only for critical illness, but also for unemployment and other emergencies. Furthermore, you also do not have to worry about the exclusions in a critical illness policy.
If you wish to cover for critical illness, make sure that you do not pay more than 0.4% of the insured sum. If you insure for $100,000, the premium should not exceed $400 a year. If you take a critical illness term coverage for 10 years, the cost should be lower.
However, if you cannot buy a critical illness cover at a fair price. it is better for you to be uninsured. The chance of getting a critical illness during the first 10 years for a young person is quite low. The priority is to accumulate sufficient savings as early as possible. This is explained in my book on Financial Planning. Get a free copy here.
Tan Kin Lian
Low birth rate and immigration
I saw a news report that Japan, which is suffering from low birth rates and an aging population, is thinking about making changes to be more attractive to immigrants. This is similar to the situation and solution adopted in Singapore.
In my view, a better approach is to deal with the underlying causes for the low birth rates. Due to insecurity caused by globalization, many people are now spending more years to get a higher education, and are starting work later. They have to work long hours to establish a career. They dare not think about the commitment to raise a family.
The people from the less developed countries do not have this same type of worry. The cost of living is low. They are willing to raise more children and supply them as immigrants to the more developed countries.
Is this type of arrangement good for the world? I think that it is better for a country to grow its own local population rather than rely on immigrants.
In my view, a better approach is to deal with the underlying causes for the low birth rates. Due to insecurity caused by globalization, many people are now spending more years to get a higher education, and are starting work later. They have to work long hours to establish a career. They dare not think about the commitment to raise a family.
The people from the less developed countries do not have this same type of worry. The cost of living is low. They are willing to raise more children and supply them as immigrants to the more developed countries.
Is this type of arrangement good for the world? I think that it is better for a country to grow its own local population rather than rely on immigrants.
Choice of modes of travel
I planned a visit from London to Canterbury and was surprised to see the choice of travel by coach (cheaper) and by train (more connection times). This is an example of the positive aspect of competition between the different modes of travel. I hope that the transport system in Singapore can provide a similar choice and encourage real competition. Read here.
Distributor of torchlights
Someone expressed an interest to distribute my rechargeable torchlight with locator, but did not give any contact information. He can contact me at kinlian@gmail.com. This offer is also available for those who are interested to distribute my books.
Saturday, November 14, 2009
Practice your skills in financial trading with Pro-Trader
You can practice your skills in trading in the futures market with Pro-Trader. It is fun. Learn about how news affecting prices of future products and the unpredictability of the markets (which is a reality in life). Learn how to respond to events and market trends. Read this document.
You can ask a few friends to challenge each other by logging into the same game, created by the first player. It can be quite fun. It is also educational, as you get the chance to interpret how events affect the prices of the various products - and see which player make the best moves. Good luck.
Fee on bank overdraft
A friend told me that the bank in America have an unfair practice to levy the overdraft fee on many transactions during a month.
For example, if the customer has a few transactions that may result in an overdraft, the bank will debit the largest transaction first to cause the account to be overdrawn. All subsequent transactions will be overdraft and each will attract an overdrawn fee. It may result in the fee being applied to many transactions in a month.
The US Congress is passing a law to disallow a bank from this kind of practice and to require the bank to debit the transactions in the chronological order that they have been received.
I find this type of practice to be dishonest. However, the bank seems to be able to get away with it, and a new law has to be passed to stop them from continuing with it. It seems that the standard of honesty has dropped to a low level and that bankers need a law to tell them what is honesty.
For example, if the customer has a few transactions that may result in an overdraft, the bank will debit the largest transaction first to cause the account to be overdrawn. All subsequent transactions will be overdraft and each will attract an overdrawn fee. It may result in the fee being applied to many transactions in a month.
The US Congress is passing a law to disallow a bank from this kind of practice and to require the bank to debit the transactions in the chronological order that they have been received.
I find this type of practice to be dishonest. However, the bank seems to be able to get away with it, and a new law has to be passed to stop them from continuing with it. It seems that the standard of honesty has dropped to a low level and that bankers need a law to tell them what is honesty.
Cap on interest rate and bank charges
Should the government set a cap on loan interest rate and other bank charges?
At one time, it was argued that these matters should be left to the free market. Consumers can make their choice and avoid the banks that have high charges. In reality, consumers are not aware about these charges. The ignorance allows the banks to make billions of dollars in high charges and fees.
The US Congress is now considering passing laws to make it mandatory for consumers to be informed about the charges and to opt in. Some people think that this does not go far enough, and that it is better for the Government to set limits on the interest rates and charges.
Many decades ago, there was a law to limit the interest rate that can be charged by money lenders. This law was necessary to prevent consumers from being exploited by money lenders. The same reasoning can be applied to the lending by banks, especially if they behave just as bad as the money lenders.
The general argument is that the level of interest rate should depend on the market and cannot be set by law. I do not agree with this argument, especially if we look at what has happened in many countries. It is better for the government to set these caps on fees and loan interest rate, and to revise them when necessary due to changes in the market conditions.
Tan Kin Lian
At one time, it was argued that these matters should be left to the free market. Consumers can make their choice and avoid the banks that have high charges. In reality, consumers are not aware about these charges. The ignorance allows the banks to make billions of dollars in high charges and fees.
The US Congress is now considering passing laws to make it mandatory for consumers to be informed about the charges and to opt in. Some people think that this does not go far enough, and that it is better for the Government to set limits on the interest rates and charges.
Many decades ago, there was a law to limit the interest rate that can be charged by money lenders. This law was necessary to prevent consumers from being exploited by money lenders. The same reasoning can be applied to the lending by banks, especially if they behave just as bad as the money lenders.
The general argument is that the level of interest rate should depend on the market and cannot be set by law. I do not agree with this argument, especially if we look at what has happened in many countries. It is better for the government to set these caps on fees and loan interest rate, and to revise them when necessary due to changes in the market conditions.
Tan Kin Lian
Overdraft protection
What is overdraft protection? It is a nice name for fleecing the bank customer.
Low interest rate - the underlying cause
Why is interest rate so low? The simple answer is there is a big supply of money and insufficient demand for money. What cause this imbalance?
The low demand for money is caused by low consumption. The low consumption is caused by low wages and high unemployment, which has affected a large part of the population, and brought out a large disparity in income distribution in recent decades. The lower and middle class people have to work harder to earn enough to survive. They have fewer children, which also contributed to the drop in demand over the years.
The supply of money has also been increased by governments through their monetary policy and recently, through stimulus spending. With so much money in the economy and little demand, interest rate is likely to remain low for a long time.
This is bad news to retirees who have to depend on their investment income to live on. With low income from their savings, they have to spend their capital sum, which will deplete over the years.
What can retirees do? They have to invest in equities to earn a higher return. Although equities have a higher level of risk, it can be mitigated by investing in a low cost fund, such as an exchange traded fund. The return on equities is likely to be around 5% to 7%, which is much better than 2% on government bonds.
In the past two decades, there was demand for money but they were used to create asset bubbles, especially in housing. This helped to boost the world economy for some time. The recent collapse of the asset bubbles brought about the economic downturn. However, the asset bubble is being revived, but this is not a long term solution.
In my view, the solution is to generate demand by giving people a chance to work and enjoy fair wages, so that they can feel secure about their future, raise a family and spend time on leisure. With a sound economy, there will be a demand for money which will give a fair return on their savings.
Tan Kin Lian
The low demand for money is caused by low consumption. The low consumption is caused by low wages and high unemployment, which has affected a large part of the population, and brought out a large disparity in income distribution in recent decades. The lower and middle class people have to work harder to earn enough to survive. They have fewer children, which also contributed to the drop in demand over the years.
The supply of money has also been increased by governments through their monetary policy and recently, through stimulus spending. With so much money in the economy and little demand, interest rate is likely to remain low for a long time.
This is bad news to retirees who have to depend on their investment income to live on. With low income from their savings, they have to spend their capital sum, which will deplete over the years.
What can retirees do? They have to invest in equities to earn a higher return. Although equities have a higher level of risk, it can be mitigated by investing in a low cost fund, such as an exchange traded fund. The return on equities is likely to be around 5% to 7%, which is much better than 2% on government bonds.
In the past two decades, there was demand for money but they were used to create asset bubbles, especially in housing. This helped to boost the world economy for some time. The recent collapse of the asset bubbles brought about the economic downturn. However, the asset bubble is being revived, but this is not a long term solution.
In my view, the solution is to generate demand by giving people a chance to work and enjoy fair wages, so that they can feel secure about their future, raise a family and spend time on leisure. With a sound economy, there will be a demand for money which will give a fair return on their savings.
Tan Kin Lian
A recovery for some
This article explains that the economy recovery in America benefits only the elites who has stock portfolios. It did not benefit the many people who are still unemployed. The same comments would probably apply to many other countries, including Singapore.
Experience with locator torchlight
I have been using the torchlight (with locator turned on) each night for the past two weeks. I found it to be useful. It is easy to locate the torchlight. I have now made it a habit to use the torchlight instead of the main light at night.
This torchlight is available at $6.50, compared to $27.20 for a branded torchlight with similar functions.
This torchlight is available at $6.50, compared to $27.20 for a branded torchlight with similar functions.
Friday, November 13, 2009
Battle of Pay TV Operators (2)
There is a big battle between SingTel and Starhub over PayTV. SingTel has won the rights to boradcast the English Premier League (EPL) matches in 2010. Consumers have to switch set top boxes to SingTel to watch these matches. If they wish to watch programmes from both operators, they need two set top boxes and two sets of wiring in their home.
This is time for the regulator (i.e Media Development Authority) to come in and require the PayTV operators to separate the two operations, namely to operate a platform and to provide the contents. There will be a separate charge for using the platform and subscribing to the content. Each platform operator is required to carry the content of any approved provider.
This will give the best choice to consumers. There is competition between the platform operators in pricing and service. There is also a free choice of contents.
The content should not be bundled up with the platform.
There is also a need for the Competition Commission to come in and give a ruling. The Commission is required to ensure that there is free competition in Singapore to give choice to consumers. The bundling of platform and content is monopolistic and bad for consumers. I hope that the Commission will also have a say on this matter.
Tan Kin Lian
This is time for the regulator (i.e Media Development Authority) to come in and require the PayTV operators to separate the two operations, namely to operate a platform and to provide the contents. There will be a separate charge for using the platform and subscribing to the content. Each platform operator is required to carry the content of any approved provider.
This will give the best choice to consumers. There is competition between the platform operators in pricing and service. There is also a free choice of contents.
The content should not be bundled up with the platform.
There is also a need for the Competition Commission to come in and give a ruling. The Commission is required to ensure that there is free competition in Singapore to give choice to consumers. The bundling of platform and content is monopolistic and bad for consumers. I hope that the Commission will also have a say on this matter.
Tan Kin Lian
Specific unfair practices - financial products
Here are some practices adopted in the financial services industry that could be found in breach of the second schedule in the Fair Trading Act:
11. Taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable.
12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a transaction involving goods or services.
14. Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or a promotion.
18. Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period.
20. Using small print to conceal a material fact from the consumer or to mislead a consumer as to a material fact, in connection with the supply of goods or services.
11. Taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable.
12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a transaction involving goods or services.
14. Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or a promotion.
18. Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period.
20. Using small print to conceal a material fact from the consumer or to mislead a consumer as to a material fact, in connection with the supply of goods or services.
Thursday, November 12, 2009
Delivery of torchlight with locator
A customer placed on order for 2 torchlights and asked for them to be delivered urgently to his office. He pays a delivery charge of $7. This is the first order with delivery.
It is better for a customer to order more pieces and enjoy a discount of $1 (for order above 5 pieces). The delivery cost will also be spread among a larger number of orders.
It is better for a customer to order more pieces and enjoy a discount of $1 (for order above 5 pieces). The delivery cost will also be spread among a larger number of orders.
Most customers prefer to collect from my office and save on the delivery charges.
Unfair contract terms
There is a law against unfair contract terms in Singapore. Some of the standard terms used in contracts for financial products are likely to be considered as unfair, if they are challenged in court.
If you are caught in an unfair contract, you can engage a lawyer to take a look at the contract to see if it falls foul of this law. If I am not mistaken, the requirement for fair contract goes beyond the concept of "caveat emptor". The other party is required to give fair terms for the contract.
Here are some legal points about contract law in Singapore.
I like to ask volunteers (especially those with legal training) to do some research and send your views to kinlian@gmail.com.
Combating escalating motor claims
Someone asked for my views on why the "motor claim framework", which was introduced two years ago to combat the escalating claims, did not work. This question should more properly be addressed to the parties that introduced this framework, rather than to me.
This framework was introduced by the General Insurance Association with the support of the Monetary Authority of Singapore. They should explain what has happened, what had failed and what they are doing about this matter.
Why did I say that the framework did not work? I recall that the framework was intended to bring down the claims and keep motor premiums from escalating. From anecdotal evidence, it seems that the motor premiums continued to escalate sharply during the past two years. Clearly the framework had failed to achieve its primary purpose.
When the framework was first launched, there were media reports that motorists can wait at the roadside and ask for a surveyor to arrive on the spot to settle the claim or arrange the repair. At that time, it was quite clear to me that this proposal was impractical, but the people who promoted this framework was confident that it would be the silver bullet to solve the underlying problem. It did not work.
It seems that nobody really wants to put to find a solution. They are only interested to make a show of dealing with the problem. Most of the parties involved actually benefited from the escalating claims - the repair shops, the lawyers, and the insurance companies. The only parties that suffer are the consumers, who has to pay higher premiums.
The consumers do not have the power to hold anybody accountable for the escalating premiums. Their complaints will be ignored and will be brushed off as the price for living in an advanced country. If consumers have to pay higher petrol prices and ERP, what is a few dollars more in insurance premiums?
The trouble is that this attitude will lead to wastefulness, which is now acceptable as being part of life in Singapore. It is now a Singapore culture to pay a lot of money on infrastructure and systems (instead of going for cheaper solutions) and passes the higher cost to consumers.
What is the underlying cause of the escalating motor claims, which was not solved during the past three decades? It is caused by fraudulent claims, not only for repair claims but for injury claims as well.
These fraudulent claims cannot be handled by the insurance executives, who do not have the power to deal with crime. They have to be handled by the people with the power, namely the Government. If the Government does not wish to deal with fraudulent claims, then the problem can never be solved.
Tan Kin Lian
This framework was introduced by the General Insurance Association with the support of the Monetary Authority of Singapore. They should explain what has happened, what had failed and what they are doing about this matter.
Why did I say that the framework did not work? I recall that the framework was intended to bring down the claims and keep motor premiums from escalating. From anecdotal evidence, it seems that the motor premiums continued to escalate sharply during the past two years. Clearly the framework had failed to achieve its primary purpose.
When the framework was first launched, there were media reports that motorists can wait at the roadside and ask for a surveyor to arrive on the spot to settle the claim or arrange the repair. At that time, it was quite clear to me that this proposal was impractical, but the people who promoted this framework was confident that it would be the silver bullet to solve the underlying problem. It did not work.
It seems that nobody really wants to put to find a solution. They are only interested to make a show of dealing with the problem. Most of the parties involved actually benefited from the escalating claims - the repair shops, the lawyers, and the insurance companies. The only parties that suffer are the consumers, who has to pay higher premiums.
The consumers do not have the power to hold anybody accountable for the escalating premiums. Their complaints will be ignored and will be brushed off as the price for living in an advanced country. If consumers have to pay higher petrol prices and ERP, what is a few dollars more in insurance premiums?
The trouble is that this attitude will lead to wastefulness, which is now acceptable as being part of life in Singapore. It is now a Singapore culture to pay a lot of money on infrastructure and systems (instead of going for cheaper solutions) and passes the higher cost to consumers.
What is the underlying cause of the escalating motor claims, which was not solved during the past three decades? It is caused by fraudulent claims, not only for repair claims but for injury claims as well.
These fraudulent claims cannot be handled by the insurance executives, who do not have the power to deal with crime. They have to be handled by the people with the power, namely the Government. If the Government does not wish to deal with fraudulent claims, then the problem can never be solved.
Tan Kin Lian
Power of demonstration
I gave the rechargeable torchlight to a friend and showed him the use of the locator lamp. He showed it to many of his friends, who expressed interest in the torchlight. He came back to me with an order for a dozen pieces.
Specific unfair practices
ECOND SCHEDULE
Section 4(d)
SPECIFIC UNFAIR PRACTICES
1. Representing that goods or services have sponsorship, approval, performance characteristics, accessories, ingredients, components, qualities, uses or benefits that they do not have.
2. Representing that goods or services are of a particular standard, quality, grade, style, model, origin or method of manufacture if they are not.
3. Representing that goods are new or unused if they are not or if they have deteriorated or been altered, reconditioned or reclaimed.
4. Representing that goods have been used to an extent different from the fact or that they have a particular history or use if the supplier knows it is not so.
5. Representing that goods or services are available or are available for a particular reason, for a particular price, in particular quantities or at a particular time if the supplier knows or can reasonably be expected to know it is not so, unless the representation clearly states any limitation.
6. Representing that a service, part, repair or replacement is needed or desirable if that is not so, or that a service has been provided, a part has been installed, a repair has been made or a replacement has been provided, if that is not so.
7. Representing that a price benefit or advantage exists respecting goods or services where the price benefit or advantage does not exist.
8. Charging a price for goods or services that is substantially higher than an estimate provided to the consumer, except where the consumer has expressly agreed to the higher price in advance.
9. Representing that a transaction involving goods or services involves or does not involve rights, remedies or obligations where that representation is deceptive or misleading.
10. Representing that a person has or does not have the authority to negotiate the final terms of an agreement involving goods or services if the representation is different from the fact.
11. Taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable.
12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a transaction involving goods or services.
13. Representing in relation to a voucher that another supplier will provide goods or services at a discounted or reduced price if the supplier making the representation knows or ought to know that the other supplier will not do so.
14. Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or a promotion.
15. Representing that a particular person has offered or agreed to acquire goods or services whether or not at a stated price if he has not.
16. Representing the availability of facilities for repair of goods or of spare parts for goods if that is not the case.
17. Offering gifts, prizes or other free items in connection with the supply of goods or services if the supplier knows or ought to know that the items will not be provided or provided as offered.
18. Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period.
19. Representing that goods or services are available at a discounted price for a particular reason that is different from the fact.
20. Using small print to conceal a material fact from the consumer or to mislead a consumer as to a material fact, in connection with the supply of goods or services.
Section 4(d)
SPECIFIC UNFAIR PRACTICES
1. Representing that goods or services have sponsorship, approval, performance characteristics, accessories, ingredients, components, qualities, uses or benefits that they do not have.
2. Representing that goods or services are of a particular standard, quality, grade, style, model, origin or method of manufacture if they are not.
3. Representing that goods are new or unused if they are not or if they have deteriorated or been altered, reconditioned or reclaimed.
4. Representing that goods have been used to an extent different from the fact or that they have a particular history or use if the supplier knows it is not so.
5. Representing that goods or services are available or are available for a particular reason, for a particular price, in particular quantities or at a particular time if the supplier knows or can reasonably be expected to know it is not so, unless the representation clearly states any limitation.
6. Representing that a service, part, repair or replacement is needed or desirable if that is not so, or that a service has been provided, a part has been installed, a repair has been made or a replacement has been provided, if that is not so.
7. Representing that a price benefit or advantage exists respecting goods or services where the price benefit or advantage does not exist.
8. Charging a price for goods or services that is substantially higher than an estimate provided to the consumer, except where the consumer has expressly agreed to the higher price in advance.
9. Representing that a transaction involving goods or services involves or does not involve rights, remedies or obligations where that representation is deceptive or misleading.
10. Representing that a person has or does not have the authority to negotiate the final terms of an agreement involving goods or services if the representation is different from the fact.
11. Taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable.
12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a transaction involving goods or services.
13. Representing in relation to a voucher that another supplier will provide goods or services at a discounted or reduced price if the supplier making the representation knows or ought to know that the other supplier will not do so.
14. Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or a promotion.
15. Representing that a particular person has offered or agreed to acquire goods or services whether or not at a stated price if he has not.
16. Representing the availability of facilities for repair of goods or of spare parts for goods if that is not the case.
17. Offering gifts, prizes or other free items in connection with the supply of goods or services if the supplier knows or ought to know that the items will not be provided or provided as offered.
18. Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period.
19. Representing that goods or services are available at a discounted price for a particular reason that is different from the fact.
20. Using small print to conceal a material fact from the consumer or to mislead a consumer as to a material fact, in connection with the supply of goods or services.
Unfair practices as defined in Singapore
Here are some extracts from the Unfair Practices Act:
Meaning of unfair practice
4. It is an unfair practice for a supplier, in relation to a consumer transaction —
(a) to do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled;
(b) to make a false claim;
(c) to take advantage of a consumer if the supplier knows or ought reasonably to know that the consumer —
(i) is not in a position to protect his own interests; or
(ii) is not reasonably able to understand the character, nature, language or effect of the transaction or any matter related to the transaction; or
(d) without limiting the generality of paragraphs (a) to (c), to do anything specified in the Second Schedule.
Circumstances surrounding unfair practice
5. —(1) An unfair practice may occur before, during or after a consumer transaction.
(2) An unfair practice may consist of a single act or omission.
(3) In determining whether or not a person has engaged in an unfair practice —
(a) the reasonableness of the actions of that person in those circumstances is to be considered; and
(b) an act or omission by an employee or agent of a person is deemed also to be an act or omission of the person if the act or omission occurred in the course of —
(i) the employee’s employment with the person; or
(ii) the agent exercising the powers or performing the duties on behalf of the person within the scope of the agent’s actual or apparent authority.
Consumer’s right to sue for unfair practice
If a consumer has been the subject of an unfair practice, the consumer can sue the supplier under this Act, but the amount of claim is subject to a limit of $20,000.
Meaning of unfair practice
4. It is an unfair practice for a supplier, in relation to a consumer transaction —
(a) to do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled;
(b) to make a false claim;
(c) to take advantage of a consumer if the supplier knows or ought reasonably to know that the consumer —
(i) is not in a position to protect his own interests; or
(ii) is not reasonably able to understand the character, nature, language or effect of the transaction or any matter related to the transaction; or
(d) without limiting the generality of paragraphs (a) to (c), to do anything specified in the Second Schedule.
Circumstances surrounding unfair practice
5. —(1) An unfair practice may occur before, during or after a consumer transaction.
(2) An unfair practice may consist of a single act or omission.
(3) In determining whether or not a person has engaged in an unfair practice —
(a) the reasonableness of the actions of that person in those circumstances is to be considered; and
(b) an act or omission by an employee or agent of a person is deemed also to be an act or omission of the person if the act or omission occurred in the course of —
(i) the employee’s employment with the person; or
(ii) the agent exercising the powers or performing the duties on behalf of the person within the scope of the agent’s actual or apparent authority.
Consumer’s right to sue for unfair practice
If a consumer has been the subject of an unfair practice, the consumer can sue the supplier under this Act, but the amount of claim is subject to a limit of $20,000.
Wednesday, November 11, 2009
Gerrymandering and election
Gerrymandering is the redrawing of electoral districts to benefit the incumbent in an election. It is practiced in New York and is considered to be corrupt.
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