Sunday, January 31, 2010
Personal savings
This writer wants to take care of his own money, rather than let the Government decide on how the money is to be spent.
Cash loan - 16% effective rate
Dear Mr. Tan,
Financial Institution: (bank)
Amount of loan: $1500
Purpose of loan: Personal use
Number of repayments: 12
Amount of monthly repayment: $136.10
REPLY
You are paying a total interest of $133.20. This works out to 8.9% of the amount that you have borrowed. However, as you have to make monthly repayment, the outstanding balance of the loan reduces monthly. Based on the average amount that has been borrowed, the effective interest rate is 16% per annum.
The bank pays 0.5% to its customers on their savings. They charge 16% on loans given to other customers, giving a hefty margin to make a good profit for the bank.
Financial Institution: (bank)
Amount of loan: $1500
Purpose of loan: Personal use
Number of repayments: 12
Amount of monthly repayment: $136.10
REPLY
You are paying a total interest of $133.20. This works out to 8.9% of the amount that you have borrowed. However, as you have to make monthly repayment, the outstanding balance of the loan reduces monthly. Based on the average amount that has been borrowed, the effective interest rate is 16% per annum.
The bank pays 0.5% to its customers on their savings. They charge 16% on loans given to other customers, giving a hefty margin to make a good profit for the bank.
Creating productive employment
Someone said that the selling of financial products, e.g. insurance, properties and investments, is necessary to create employment. Unfortunately, these activities are unproductive. They do not improve the outcome for the economy or lead to a better life for the people. They may create asset bubbles, which make some people rich. But, at a future date, the asset bubble will burst and many people will become poorer.
What are productive work? Here are my views:
- build houses for people to live in
- build roads and public transport
- more teachers to give proper education to the young
- more doctors, nurses and carers to take care of the sick and the weak
- more policeman to ensure security, law and order and reduce crime (including cheating)
- more people to work in restaurants and food courts
- more artists to provide leisure, culture, art, entertainment
- fewer bankers to manage the savings and investments for the economy
- farmers, fishermen, factory workers, retailers
We still need bankers, but we do not need an over-sized financial sector that is based on speculation and trading.
We also need to change the competitive system, and ensure that the available work is distributed more fairly. It is better to have more people working (for lesser hours), rather than fewer people working (for longer hours) while a high percentage is unemployed. We also need more people to have sufficient income, so that they can spend and create useful employment for others.
If people have more time and financial security, they are able to send their time on family, friend, art, culture and religion. They will then be willing to raise children for the future generation - a KPI that Singapore has fared poorly.
Tan Kin Lian
What are productive work? Here are my views:
- build houses for people to live in
- build roads and public transport
- more teachers to give proper education to the young
- more doctors, nurses and carers to take care of the sick and the weak
- more policeman to ensure security, law and order and reduce crime (including cheating)
- more people to work in restaurants and food courts
- more artists to provide leisure, culture, art, entertainment
- fewer bankers to manage the savings and investments for the economy
- farmers, fishermen, factory workers, retailers
We still need bankers, but we do not need an over-sized financial sector that is based on speculation and trading.
We also need to change the competitive system, and ensure that the available work is distributed more fairly. It is better to have more people working (for lesser hours), rather than fewer people working (for longer hours) while a high percentage is unemployed. We also need more people to have sufficient income, so that they can spend and create useful employment for others.
If people have more time and financial security, they are able to send their time on family, friend, art, culture and religion. They will then be willing to raise children for the future generation - a KPI that Singapore has fared poorly.
Tan Kin Lian
GST - who benefits and who loses?
Who benefits from GST:
- accountants, lawyers, civil servants, as more jobs and business are created for this wasteful work
- big businesses and high income earners, as GST is accompanied by lower income tax (personal and corporate)
Who loses from GST?
- consumers, as GST adds to the cost of living through wasteful and unproductive work
- lower income people, who has to pay GST and do not benefit from lower income tax
- the economy, as the increased cost of doing business reduces competitiveness.
Someone told me that many businesses that were engaged in entreport trade decided to move their activities outside of Singapore, after the implementation of GST. I do not understand why, as there is no GST involved in exports. Perhaps, it is due to the fact that compliance with GST adds to the cost of doing business.
I hope that the Finance Ministry can carry out a review on GST in Singapore - is it really necessary or is it wasteful (as I have claimed)?
Tan Kin Lian
- accountants, lawyers, civil servants, as more jobs and business are created for this wasteful work
- big businesses and high income earners, as GST is accompanied by lower income tax (personal and corporate)
Who loses from GST?
- consumers, as GST adds to the cost of living through wasteful and unproductive work
- lower income people, who has to pay GST and do not benefit from lower income tax
- the economy, as the increased cost of doing business reduces competitiveness.
Someone told me that many businesses that were engaged in entreport trade decided to move their activities outside of Singapore, after the implementation of GST. I do not understand why, as there is no GST involved in exports. Perhaps, it is due to the fact that compliance with GST adds to the cost of doing business.
I hope that the Finance Ministry can carry out a review on GST in Singapore - is it really necessary or is it wasteful (as I have claimed)?
Tan Kin Lian
GST is wasteful
Question: What is worse than income tax?
Answer: Income tax and GST.
It is wasteful for a country to have both income tax and GST. It lays a heavy burden on businesses to keep two sets of accounting records to report their earnings (for corporate tax) and for GST. This adds to the cost and complexity of doing business. It is wasteful for a country to collect tax (GST) on every item of transaction every day.
IRAS claims that GST is simple. That is not correct. You can read the GST instructions in IRAS website to know that it has many rules that have to be followed to prepare a GST return - similar to the complex rules needed to prepare income tax returns.
Critics argue that GST is unfair to the lower income group. I agree, especially as they do not earn enough to feed a family. To top it up, GST is also an inefficient tax, adding unnecessary cost to business, that has to be passed to consumers.
I am aware that any Government needs to collect enough tax revenue to fund its operations and take care of the country. Tax is necessary and important. But, we need to have more efficient and fair ways to collect tax. GST is one of the worst methods that has been devised, especially as it is implemented as an additional layer on top of income tax (personal and corporate).
Tan Kin lian
Answer: Income tax and GST.
It is wasteful for a country to have both income tax and GST. It lays a heavy burden on businesses to keep two sets of accounting records to report their earnings (for corporate tax) and for GST. This adds to the cost and complexity of doing business. It is wasteful for a country to collect tax (GST) on every item of transaction every day.
IRAS claims that GST is simple. That is not correct. You can read the GST instructions in IRAS website to know that it has many rules that have to be followed to prepare a GST return - similar to the complex rules needed to prepare income tax returns.
Critics argue that GST is unfair to the lower income group. I agree, especially as they do not earn enough to feed a family. To top it up, GST is also an inefficient tax, adding unnecessary cost to business, that has to be passed to consumers.
I am aware that any Government needs to collect enough tax revenue to fund its operations and take care of the country. Tax is necessary and important. But, we need to have more efficient and fair ways to collect tax. GST is one of the worst methods that has been devised, especially as it is implemented as an additional layer on top of income tax (personal and corporate).
Tan Kin lian
Character building
Singapore Management University has a statement, “Character building, an integral aspect of the SMU education, aims to build the values of ethics and social responsibility.”
Character
Character is the aggregate of features and traits that form the individual nature of a person. It refers to the moral or ethical quality of a person. They include qualities of honesty, courage, integrity.
Ethics
Ethics, also known as moral philosophy, seeks to address questions about morality, that is, about concepts of good and bad, right and wrong, justice and virtue.
Social Responsibility
Social responsibility is a responsibility of government, business or individuals towards society at large. There is the responsibility to avoid breaking the law and also to act proactively to benefit society.
My Personal Values
I wish to share five values that define my personal character. They are:
Honesty
Fairness
Courage
Positive
Public Service.
I shall write more about these values in subsequent postings.
Character
Character is the aggregate of features and traits that form the individual nature of a person. It refers to the moral or ethical quality of a person. They include qualities of honesty, courage, integrity.
Ethics
Ethics, also known as moral philosophy, seeks to address questions about morality, that is, about concepts of good and bad, right and wrong, justice and virtue.
Social Responsibility
Social responsibility is a responsibility of government, business or individuals towards society at large. There is the responsibility to avoid breaking the law and also to act proactively to benefit society.
My Personal Values
I wish to share five values that define my personal character. They are:
Honesty
Fairness
Courage
Positive
Public Service.
I shall write more about these values in subsequent postings.
Improve your negotiating power
Someone said that the car salesman charges a higher price if you pay by cash and a lower price if you take a loan to buy a car. This is the ruse used by salesman.
The consumer should exercise your negotiating power. If the salesman wants to charge a higher price for paying cash, go and look for another car dealer. There are many salesmen who are hungry to get an order. Do not allow the salesman to force you to take a loan and pay interest, when you have the cash to pay outright.
Before you buy any product, always shop around and get a few quotes. You will have a stronger negotiating power.
Tan Kin Lian
The consumer should exercise your negotiating power. If the salesman wants to charge a higher price for paying cash, go and look for another car dealer. There are many salesmen who are hungry to get an order. Do not allow the salesman to force you to take a loan and pay interest, when you have the cash to pay outright.
Before you buy any product, always shop around and get a few quotes. You will have a stronger negotiating power.
Tan Kin Lian
Practical Guide on Financial Planning - book available now
My book, Practical Guide on Financial Planning, will be in the major bookstores by 15 February or earlier. The retail price is $12.
This book is written for the ordinary consumers, so it is easy to understand. It gives tip on saving and investment. More importantly, it advises consumers to avoid financial products that can take away two years of their savings - amounting to several thousand dollars. Invest $12 and 4 hours and have a better financial future. I have just read the printed book, and it looks better than I had earlier expected.
It is available now for purchase from Internet Shop (www.easysearch.sg)
Tan Kin Lian
This book is written for the ordinary consumers, so it is easy to understand. It gives tip on saving and investment. More importantly, it advises consumers to avoid financial products that can take away two years of their savings - amounting to several thousand dollars. Invest $12 and 4 hours and have a better financial future. I have just read the printed book, and it looks better than I had earlier expected.
It is available now for purchase from Internet Shop (www.easysearch.sg)
Tan Kin Lian
Saturday, January 30, 2010
Pressure to develop the financial market
The pressure to develop the financial market caused the fiasco in the credit linked notes, according to this article. This is true, not only in Hong Kong but in Singapore as well.
Low cost housing - a model for economic development
The Singapore experience is a useful lesson for developing countries in their economic development.
During the initial two decades, the Government built low cost housing for the people. It creates employment and gives the people a chance to work hard to own a property. The economic growth generated by the housing sector flowed to other sectors of the economy. The Government enforced a high savings rate to generate funds for this sector. It even implemented land acquisition to facilities the development. These were tough policies, but they produced a good outcome. This was leadership at its best - to set the priority for the country and to mobilize the people towards the priority goal.
The next two decades is a lesson on what to avoid. The Government decided to free up the property market under the "asset enhancement" policy, which created a bubble in housing prices. The ordinary people, who own only one property did not benefit from the appreciation, as they still need a place to live in. Only the few who emigrated or downgraded to a smaller property were able to enjoy the appreciation. Young people have to pay a higher price for a property which take away a larger share of their earnings.
The parties which benefited are the property developers and owners of land and capital. They enjoyed the appreciation in property prices and become billionaires on the debt burden carried by the rest of the population.
Life would have been much better for Singaporeans, if the property prices had been kept stable, rather than be allowed to appreciate in the "free" market. Actually, there is no free market, as the supply of land is held by a few parties, properties are too costly to be transacted freely, and consumers have insufficient information (leading to speculation caused by greed and fear). This is the worst case of a "free" market that is not controlled and exploited by certain parties.
Tan Kin Lian
During the initial two decades, the Government built low cost housing for the people. It creates employment and gives the people a chance to work hard to own a property. The economic growth generated by the housing sector flowed to other sectors of the economy. The Government enforced a high savings rate to generate funds for this sector. It even implemented land acquisition to facilities the development. These were tough policies, but they produced a good outcome. This was leadership at its best - to set the priority for the country and to mobilize the people towards the priority goal.
The next two decades is a lesson on what to avoid. The Government decided to free up the property market under the "asset enhancement" policy, which created a bubble in housing prices. The ordinary people, who own only one property did not benefit from the appreciation, as they still need a place to live in. Only the few who emigrated or downgraded to a smaller property were able to enjoy the appreciation. Young people have to pay a higher price for a property which take away a larger share of their earnings.
The parties which benefited are the property developers and owners of land and capital. They enjoyed the appreciation in property prices and become billionaires on the debt burden carried by the rest of the population.
Life would have been much better for Singaporeans, if the property prices had been kept stable, rather than be allowed to appreciate in the "free" market. Actually, there is no free market, as the supply of land is held by a few parties, properties are too costly to be transacted freely, and consumers have insufficient information (leading to speculation caused by greed and fear). This is the worst case of a "free" market that is not controlled and exploited by certain parties.
Tan Kin Lian
Universal coverage for health care
Thailand has an interesting and useful experience in implementing universal coverage for health care in a pragmatic way. They adopted a lot of common sense ideas. Read this article.
Morality
If you sell a product that earn you a high commission and you know is bad for customers (e.g. you would not buy the product for your own use), it may still be legal (i.e. you have observed the law strictly to the letter), but you are acting immorally (i.e. to know right from wrong, good from bad).
Many years ago, society observed moral and ethical values. Today, society has accepted immoral values in the pursue of the capitalist profit. They created terms such as "caveat emptor" and "open your eyes" to justify the immoral pursuit of profit. Even the leaders set a bad example by benchmarking their salaries to the top corporate profits, which may be obtained through immoral ways.
Tan Kin Lian
Many years ago, society observed moral and ethical values. Today, society has accepted immoral values in the pursue of the capitalist profit. They created terms such as "caveat emptor" and "open your eyes" to justify the immoral pursuit of profit. Even the leaders set a bad example by benchmarking their salaries to the top corporate profits, which may be obtained through immoral ways.
Tan Kin Lian
Small country can find its niche
Hi Mr. Tan,
In view of global competition and Singapore's small size, is it really possible for Singapore and its citizens to slow down?
Can we really afford to work at a much slower pace like the Europeans? Isn't it better to work hard and hence improve our learning curve on how to work more efficiently and effectively? Can one learn how to be more efficient and effective by working at a slower pace? (I do agree that balance is good, but can we afford to do so?)
Will the MNCs choose Singapore over China or their home countries if we do not offer them a competitive advantage?
While a lot of Singaporeans would like to have a "slower pace" of lifestyle. In the long term, can we really afford to do so? If we do so, will we need to return to Malaysia?
I am really not sure. It is a constant dilemma. Competition vs Coorperation. Environmental Conservation vs Rapid growth and innovation. Drive and Industry vs Balance and Comfort.
But I am sure about a few things:
1. We need to have the best brains to run the country - Especially for a small country like Singapore. Let's face it. Some people can never think as well as others. Even if the desire to serve at the top level is strong. One has to realize his strengths and weaknesses. Otherwise, it might bring about long term and irrecoverable damage to the country. But whether or not, the best brains' values and attitude towards certain things need to be changed, I'm not sure. Maybe that can be improved on.
2. Unnecessary and excessive competition that leads to resource wastage and detoriation of ethics should be frown upon.
Regards,
Mr. L
REPLY
There are many small countries in Europe and they do well without using the competitive policies that are adopted in Singapore. I think that a small country can do well by finding its niche.
In view of global competition and Singapore's small size, is it really possible for Singapore and its citizens to slow down?
Can we really afford to work at a much slower pace like the Europeans? Isn't it better to work hard and hence improve our learning curve on how to work more efficiently and effectively? Can one learn how to be more efficient and effective by working at a slower pace? (I do agree that balance is good, but can we afford to do so?)
Will the MNCs choose Singapore over China or their home countries if we do not offer them a competitive advantage?
While a lot of Singaporeans would like to have a "slower pace" of lifestyle. In the long term, can we really afford to do so? If we do so, will we need to return to Malaysia?
I am really not sure. It is a constant dilemma. Competition vs Coorperation. Environmental Conservation vs Rapid growth and innovation. Drive and Industry vs Balance and Comfort.
But I am sure about a few things:
1. We need to have the best brains to run the country - Especially for a small country like Singapore. Let's face it. Some people can never think as well as others. Even if the desire to serve at the top level is strong. One has to realize his strengths and weaknesses. Otherwise, it might bring about long term and irrecoverable damage to the country. But whether or not, the best brains' values and attitude towards certain things need to be changed, I'm not sure. Maybe that can be improved on.
2. Unnecessary and excessive competition that leads to resource wastage and detoriation of ethics should be frown upon.
Regards,
Mr. L
REPLY
There are many small countries in Europe and they do well without using the competitive policies that are adopted in Singapore. I think that a small country can do well by finding its niche.
Pro-investor Champions
Three participants played all the way to Level 9 and reach the status of Champion. They have shared their experiences under Champion tab. They can reset to Level 1 and play again. All the best. You can try the simulation game here. Learn the skill of stock picking. This is especially important for students studying investments, with the ambition of entering the fund management industry.
Friday, January 29, 2010
Speeches from the White House
I am impressed with the way that the Obama Administration is communicating with the people, not just President Obama but also Vice President Biden. That is true, democratic leadership. Watch the videos here.
Working together
President Obama reaches out to the Republican members of Congress and have a dialogue with them, to try and find ways to work together. This is a good example for all leaders - to find solution, they need to have dialogue with the people and their elected representatives. Watch this video.
Buying consumer goods on installment payment
A furniture store advertised several products, e.g. television, notebooks, computers, furniture, cameras for sale on cash or weekly installments over 48 years.
Here is an example:
Notehook: cash price $1,299
Weekly installments over 4 years (i.e. 208 payments) of $11.87
Here is my calculation of the interest charges:
Total payment over 4 years: $2,469
Cash price: $1,299
Interest charge: $1,170
Annualized interest rate: 36%
Using installment payments, the customer has to pay almost twice of the cash price. The interest charge is almost as much as the cash price. The same formula is applied consistently on all of the products offered on weekly installments
By saving in advance and paying cash, the customer can save a lot of interest charges. It is important to save and pay cash, rather than buy consumer products on installment payments.
Tan Kin Lian
Here is an example:
Notehook: cash price $1,299
Weekly installments over 4 years (i.e. 208 payments) of $11.87
Here is my calculation of the interest charges:
Total payment over 4 years: $2,469
Cash price: $1,299
Interest charge: $1,170
Annualized interest rate: 36%
Using installment payments, the customer has to pay almost twice of the cash price. The interest charge is almost as much as the cash price. The same formula is applied consistently on all of the products offered on weekly installments
By saving in advance and paying cash, the customer can save a lot of interest charges. It is important to save and pay cash, rather than buy consumer products on installment payments.
Tan Kin Lian
Practice your skill in stock picking
Many students attend courses on financial analysis, but they do not have the chance to put the knowledge into practice.
Pro-investor has been developed to give this practice. How do you pick the right stocks based on trends in the country, industry and market segment? Do the earnings per share (EPS) or price earning ratio (PER) give you an indication about the growth and overpriced stocks? What about the price trends in recent years?
Go to Pro-Investor and put your knowledge into practice. Register an account. Read the Guide. And Play the game. Practice many times, until your reach Level 9 and register to be a Champion.
Pro-investor has been developed to give this practice. How do you pick the right stocks based on trends in the country, industry and market segment? Do the earnings per share (EPS) or price earning ratio (PER) give you an indication about the growth and overpriced stocks? What about the price trends in recent years?
Go to Pro-Investor and put your knowledge into practice. Register an account. Read the Guide. And Play the game. Practice many times, until your reach Level 9 and register to be a Champion.
High housing price in Singapore
Dear Mr. Tan,
Singapore's current leaders, instead of owning up to a bad performance, attempts to do their job using the cheapest instrument - words.
They insist repeatedly that housing is affordable on one hand, against everyone's common sense,
and yet they also claim that the rapid climb in Singapore's housing prices is a positive and purposeful result of PAP's good work in growing our economy and that is where your wealth and your kids' future wealth will come from.
And to top it off, Lee Kuan Yew put forth the assumption that should Mah Bow Tan be ousted from Tampines GRC, everyone should sell their flats because it will become worthless?
http://whomovedmysingaporecheese.blogspot.com/2010/01/let-truth-be-told.html
Singapore's current leaders, instead of owning up to a bad performance, attempts to do their job using the cheapest instrument - words.
They insist repeatedly that housing is affordable on one hand, against everyone's common sense,
and yet they also claim that the rapid climb in Singapore's housing prices is a positive and purposeful result of PAP's good work in growing our economy and that is where your wealth and your kids' future wealth will come from.
And to top it off, Lee Kuan Yew put forth the assumption that should Mah Bow Tan be ousted from Tampines GRC, everyone should sell their flats because it will become worthless?
http://whomovedmysingaporecheese.blogspot.com/2010/01/let-truth-be-told.html
Abolish the Financial Advisors Act?
Comment posted in TKL Blog
I have a radical suggestion and that would be to scrap the FAA. The FAA is one hell of a bible that I can bet that not a single financial adviser rep has read and understood it from cover to cover. What it does is raise entry barriers to new FAs. I'm not exactly well-versed with the FAA but I believe one such instance is that FAs must have a capital of a certain minimum sum. This prevents FAs with an "ethical" culture from thriving as they won't have that kind of capital in the first place. It is a known fact the "unethical" reps "earn" more than "ethical" reps for their principal.
Another problem in the FAA is under training and competency. Anyone and everyone should be allowed to hold a license. This way, where's the "information assymetry" now? These "part time" brokers can act as the "direct channel" that has been dreamed of for such a long time. They have full time jobs and just act as "form fillers" who knows the drill and won't stuff any products down your throat since they don't live on that anyway. The FAA restricts such "neutral" brokers as the FA has to spend resources to train them to satisfy CPD hours. Without the FAA breathing down FAs to train their brokers, FAs will be more than happy to have "inactive" brokers who do nothing but help friends and relatives fill forms. They know what's going on behind the scene, the commission, the exclusions etc and won't lose too much dough sharing with his "prospect" for the lack of a better word. Honestly, the training for CPD hours is nonsense. How does holding a party at Expo or Suntec count as 5 hours of skills or knowledge?
The professional consultants who do real financial planning can still carry on with their usual rounds, but as many have pointed out, "the probability of finding an ethical and upright financial sales staff is 0.01%."
People always draw analogies between financial "consultants" and doctors. There is a stark difference here. Financial planning is voluntary, and can be managed by yourself provided you read TKL's good book and do research. In fact, you would make the most objective decisions this way as there is 0 conflict of interest. Medicine however requires years of study and training and medical services demand a high price due to this exclusivity to only the brightest and most determined of the population. If fiancial services were to become such (given even higher entry barriers), people will avoid them altogether due to the high charges and simply read TKL's book instead.
wjsim
I have a radical suggestion and that would be to scrap the FAA. The FAA is one hell of a bible that I can bet that not a single financial adviser rep has read and understood it from cover to cover. What it does is raise entry barriers to new FAs. I'm not exactly well-versed with the FAA but I believe one such instance is that FAs must have a capital of a certain minimum sum. This prevents FAs with an "ethical" culture from thriving as they won't have that kind of capital in the first place. It is a known fact the "unethical" reps "earn" more than "ethical" reps for their principal.
Another problem in the FAA is under training and competency. Anyone and everyone should be allowed to hold a license. This way, where's the "information assymetry" now? These "part time" brokers can act as the "direct channel" that has been dreamed of for such a long time. They have full time jobs and just act as "form fillers" who knows the drill and won't stuff any products down your throat since they don't live on that anyway. The FAA restricts such "neutral" brokers as the FA has to spend resources to train them to satisfy CPD hours. Without the FAA breathing down FAs to train their brokers, FAs will be more than happy to have "inactive" brokers who do nothing but help friends and relatives fill forms. They know what's going on behind the scene, the commission, the exclusions etc and won't lose too much dough sharing with his "prospect" for the lack of a better word. Honestly, the training for CPD hours is nonsense. How does holding a party at Expo or Suntec count as 5 hours of skills or knowledge?
The professional consultants who do real financial planning can still carry on with their usual rounds, but as many have pointed out, "the probability of finding an ethical and upright financial sales staff is 0.01%."
People always draw analogies between financial "consultants" and doctors. There is a stark difference here. Financial planning is voluntary, and can be managed by yourself provided you read TKL's good book and do research. In fact, you would make the most objective decisions this way as there is 0 conflict of interest. Medicine however requires years of study and training and medical services demand a high price due to this exclusivity to only the brightest and most determined of the population. If fiancial services were to become such (given even higher entry barriers), people will avoid them altogether due to the high charges and simply read TKL's book instead.
wjsim
Wages and purchasing power
According to this article, Singapore has the lowest wages and domestic purchasing power among the Asian Tigers.
Thursday, January 28, 2010
Improved version of Pro-Investor
An improved version of Pro-Investor has been uploaded. The summary and stocks are sorted in descending sequence based on the latest year's yield. The investor can identify the categories (i.e. country, industry sector and market segment) that performed best during the past year. It is likely that these categories will continue to perform better than average during the following year. The sorted figures make it easier for the investor to pick the stocks based on this strategy.
Practice makes perfect. Try this simulation game many times and learn how the prices are affected by the trends in the country, industry sector and market segment. This is suitable for students learning fund management to practice their stock picking skills, and get a feel of the practical environment.
Although this simulation game is based on its internal model, it still give the challenge to the player to identify the strategy to pick the right stocks. The strategy will have to be changed in the real world environment, but the skill remains the same. Try this simulation now. Read the Guide. Register an account and Play.
Tan Kin Lian
Practice makes perfect. Try this simulation game many times and learn how the prices are affected by the trends in the country, industry sector and market segment. This is suitable for students learning fund management to practice their stock picking skills, and get a feel of the practical environment.
Although this simulation game is based on its internal model, it still give the challenge to the player to identify the strategy to pick the right stocks. The strategy will have to be changed in the real world environment, but the skill remains the same. Try this simulation now. Read the Guide. Register an account and Play.
Tan Kin Lian
Housing prices and cost of living
If a family lives in a rented home and there is an increase in the rental charge, it results in a higher cost of living.
The purchase price of a home is the discounted value of the future rental. If the purchase price increases, the monthly installment to pay the loan also increases. This is almost the same as paying a higher rental.
If housing prices continue to increase, the owner will benefit as the cost is already fixed at the time of purchase. This was the case in the past, where the cost of property represents a low percentage of the average income, i.e. when housing was inexpensive..
In recent years, the housing prices has increased to a high proportion of the average earnings. It is not possible for housing price to continue to escalate, as the people cannot afford to these prices, when their earnings have stagnated.
The high housing price will be a burden for the future generation. They pay a high price and has to service the loan using a higher proportion of their earnings. The prices will not continue to escalate, after it has passed the "affordability" mark.
It is better to have a system where the housing prices is not left to speculation in the market. The housing prices to be controlled, and kept within a reasonable proportion to the average income. .
Tan Kin Lian
The purchase price of a home is the discounted value of the future rental. If the purchase price increases, the monthly installment to pay the loan also increases. This is almost the same as paying a higher rental.
If housing prices continue to increase, the owner will benefit as the cost is already fixed at the time of purchase. This was the case in the past, where the cost of property represents a low percentage of the average income, i.e. when housing was inexpensive..
In recent years, the housing prices has increased to a high proportion of the average earnings. It is not possible for housing price to continue to escalate, as the people cannot afford to these prices, when their earnings have stagnated.
The high housing price will be a burden for the future generation. They pay a high price and has to service the loan using a higher proportion of their earnings. The prices will not continue to escalate, after it has passed the "affordability" mark.
It is better to have a system where the housing prices is not left to speculation in the market. The housing prices to be controlled, and kept within a reasonable proportion to the average income. .
Tan Kin Lian
Stabilize the price of new HDB flats
I suggest that the Government should set the prices of new HDB flats based on a multiple of the average earnings, rather than on the prices of resale flats. The prices for new flats could serve as a benchmark for the prices of resale flats, rather than the other way round.
If the HDB publishes the prices of new flats and is ready to build more flats to meet demand, it would help to create a stable market for the new and resale flats. This would be better for the economy and for the people who need a place to live in.
A person's home should not be subject to speculation or for asset enhancement. The prices of the home should be kept at an affordable level, relative to the average earnings.
If the HDB publishes the prices of new flats and is ready to build more flats to meet demand, it would help to create a stable market for the new and resale flats. This would be better for the economy and for the people who need a place to live in.
A person's home should not be subject to speculation or for asset enhancement. The prices of the home should be kept at an affordable level, relative to the average earnings.
Wednesday, January 27, 2010
The Political System in America
The American political system has its strengths - the elected leaders represent the will of the people and spend their full time in communicating with their voters and considering legislation and policies that govern the future of their country.
It has several weaknesses, that are outline by President Obama in his State of the Union address to Congress on 27 January 2010. These weaknesses are:
- gridlock, i.e. inability to govern effectively due to the separation of powers and difficulty in getting tough decisions to be taken
- power of the lobbyist in influencing the decisions by the members of Congress
- elected leaders spend too much time worrying about getting re-elected, rather than in governing
I hope that with the right leadership, these issues can be addressed and that the system can be made to operate more efficiently. It is better than an autocratic system that is adopted in many other countries. All the best to America in overcoming these challenges and setting a good example to other countries.
Tan Kin Lian
It has several weaknesses, that are outline by President Obama in his State of the Union address to Congress on 27 January 2010. These weaknesses are:
- gridlock, i.e. inability to govern effectively due to the separation of powers and difficulty in getting tough decisions to be taken
- power of the lobbyist in influencing the decisions by the members of Congress
- elected leaders spend too much time worrying about getting re-elected, rather than in governing
I hope that with the right leadership, these issues can be addressed and that the system can be made to operate more efficiently. It is better than an autocratic system that is adopted in many other countries. All the best to America in overcoming these challenges and setting a good example to other countries.
Tan Kin Lian
Funny financing
I am quite puzzled by the following situation. The US Government lent money to banks at very low interest rate, through the easy monetary policy. This funding was meant to make it easy for the banks to lend to small businesses and get the economy moving. The banks took this money but were not keen to lend to small businesses (or the small businesses were not keen to invest in a weak economy). The banks decided to use the money to buy US Treasuries, i.e. they lend the money back to the Government and pocket the margin.
The US Government is now considering to lend the money directly to small businesses. What then, is the role of the banks?
The US Government is now considering to lend the money directly to small businesses. What then, is the role of the banks?
Investing in properties for rental
You have to be careful before you buy any residential, commercial or industrial property for rental. The developer or the marketing agent will usually release the available units in batches and they will try to push up the price by created a perceived scarcity of supply. They will pressure the buyer to commit to the purchase through a combination of the following techniques:
- pretend to get a special price from the developer
- ask the buyer to submit a cheque to book the unit
- tell the buyer that someone else is waiting to submit a cheque to book the same unit
- tell the buyer about the current market rental and that the property represents an attractive yield.
The market rental indicated by the property agent or consultant is likely to be exaggerated. It could be the highest market rental for a recent transaction, but the average rental from several transactions could be much lower.
The buyer may also overlook to consider other cost of purchasing or renting the property, such as stamp duty, legal fees, GST, agent's commmission (to secure a tenant) and other costs. After deducting these expenses and taking the actual market rental (and not the exaggerated figure), the rental yield is likely to be more modest.
It is better to invest in a REIT (real estate investment trust) to earn the yield on properties, rather than bear the hassle of being a landlord and having to deal with property agents. I found that REITS are able to provide an attractive dividend yield of 6%to 8% at current market prices.
Tan Kin Lian
- pretend to get a special price from the developer
- ask the buyer to submit a cheque to book the unit
- tell the buyer that someone else is waiting to submit a cheque to book the same unit
- tell the buyer about the current market rental and that the property represents an attractive yield.
The market rental indicated by the property agent or consultant is likely to be exaggerated. It could be the highest market rental for a recent transaction, but the average rental from several transactions could be much lower.
The buyer may also overlook to consider other cost of purchasing or renting the property, such as stamp duty, legal fees, GST, agent's commmission (to secure a tenant) and other costs. After deducting these expenses and taking the actual market rental (and not the exaggerated figure), the rental yield is likely to be more modest.
It is better to invest in a REIT (real estate investment trust) to earn the yield on properties, rather than bear the hassle of being a landlord and having to deal with property agents. I found that REITS are able to provide an attractive dividend yield of 6%to 8% at current market prices.
Tan Kin Lian
SCMP:Regulator 'could have avoided minibond fiasco
27 Jan 2010
The Lehman Brothers minibond mess could have been avoided had the Securities and Futures Commission imposed the measures needed to properly vet their sale and suitability to investors, a former senior manager with the regulator said.
Harold Ko Ping-chung, the commission's former head of insurance-related policies and products, told lawmakers that he believed different standards used by the commission's investment products and corporate finance departments, and lax supervision and staff inexperience contributed to the Lehman minibond fiasco.
Minibonds were handled by the corporate finance department, which only required that necessary product information be disclosed, and not the investment products department, which looked at whether the various parties involved in the product were suitably qualified.
Since leaving the commission about five months ago, Ko has been keen for lawmakers to hear his evidence. He testified publicly yesterday for the first time before the Legislative Council subcommittee investigating what went wrong. He also met the subcommittee last week behind closed doors.
The collapse of Lehman Brothers in September 2008 left holders of minibonds linked to it virtually worthless. Minibonds are not corporate bonds, but are high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Ko spent much of his two decades with the commission vetting investment products. His deep understanding of the regulator's work in authorising Lehman minibonds is seen as invaluable as lawmakers prepare to summon banking representatives to testify.
Ko is no stranger to politics. In the 1990s he was a core member of United Ants, a grass-roots human rights group. He also ran unsuccessfully for a seat in Legco in 1995.
Harold Ko Ping-chung, the commission's former head of insurance-related policies and products, told lawmakers that he believed different standards used by the commission's investment products and corporate finance departments, and lax supervision and staff inexperience contributed to the Lehman minibond fiasco.
Minibonds were handled by the corporate finance department, which only required that necessary product information be disclosed, and not the investment products department, which looked at whether the various parties involved in the product were suitably qualified.
Since leaving the commission about five months ago, Ko has been keen for lawmakers to hear his evidence. He testified publicly yesterday for the first time before the Legislative Council subcommittee investigating what went wrong. He also met the subcommittee last week behind closed doors.
The collapse of Lehman Brothers in September 2008 left holders of minibonds linked to it virtually worthless. Minibonds are not corporate bonds, but are high-risk, credit-linked derivatives. They are marketed as a proxy investment in well-known companies.
Ko spent much of his two decades with the commission vetting investment products. His deep understanding of the regulator's work in authorising Lehman minibonds is seen as invaluable as lawmakers prepare to summon banking representatives to testify.
Ko is no stranger to politics. In the 1990s he was a core member of United Ants, a grass-roots human rights group. He also ran unsuccessfully for a seat in Legco in 1995.
Redemption of Pinnacle Notes
Dear Mr. Tan
I picked this up from Den of the Lion Investor. They are redeeming Pinacle Notes at 3% to 5% of the orginal value.
I picked this up from Den of the Lion Investor. They are redeeming Pinacle Notes at 3% to 5% of the orginal value.
Tuesday, January 26, 2010
A Healthier, Happier, Fitter New Year
Hi Tan,
I just posted an article on my blog entitled “100 Painless Resolutions for a Healthier, Happier, Fitter New Year” In n case you thought it interesting enough to drop a quick mention on your site about it as I’m trying to increase readership of my blog.
Thanks,
Jeanne Peterson
I just posted an article on my blog entitled “100 Painless Resolutions for a Healthier, Happier, Fitter New Year” In n case you thought it interesting enough to drop a quick mention on your site about it as I’m trying to increase readership of my blog.
Thanks,
Jeanne Peterson
Pricing of new HDB flats
The HDB now sets the price for new flats based on the market for resale flats. But, the market for resale flat is subject to temporary supply and demand factors and speculation. It is also fueled by greed and fear, and iinformation can be manipulated by property agents at the expense of the consumers.
It would be better for HDB to set the benchmark for the pricing of their flats. The prices can be set at a multipole of the annual earnings of the ordinary workers. If earnings increase, the prices can move up. If it falls, the price can stay stagnant until the earnings recover.
HDB should publish the prices of all the available flats in advance, to set the benchmark not only for new flats but also for resale flats. The prices of individual units can vary according to location, floor level, facing and distance to MRT station and amenities, but the average should price reflect the average wage level. If there is strong demand for a specific unit, the unit can be balloted.
This transparency and pricing policy will remove the fear of escalating prices. The stability of the prices, albeit reflecting the average earnings, will remove the speculation of capital owners and property agents. If there is increased demand, HDB can build more flats. In the meantime, those on the waiting list can rent their accommodation or stay with their parents.
It will be a more transparent and fairer market, and will actually reflect the true market forces.
Tan Kin Lian
It would be better for HDB to set the benchmark for the pricing of their flats. The prices can be set at a multipole of the annual earnings of the ordinary workers. If earnings increase, the prices can move up. If it falls, the price can stay stagnant until the earnings recover.
HDB should publish the prices of all the available flats in advance, to set the benchmark not only for new flats but also for resale flats. The prices of individual units can vary according to location, floor level, facing and distance to MRT station and amenities, but the average should price reflect the average wage level. If there is strong demand for a specific unit, the unit can be balloted.
This transparency and pricing policy will remove the fear of escalating prices. The stability of the prices, albeit reflecting the average earnings, will remove the speculation of capital owners and property agents. If there is increased demand, HDB can build more flats. In the meantime, those on the waiting list can rent their accommodation or stay with their parents.
It will be a more transparent and fairer market, and will actually reflect the true market forces.
Tan Kin Lian
Affordable flats
What is the affordable price of a HDB flat?
In my book, Practical Guide on Financial Planning, I suggested that the flat should represent 4 to 5 years of the combined family income (after deducting the cost of employing a maid). If the combined family income is $5,000 and the cost of the maid is $800, an affordable price for a flat is $4,200 X (48 to 60) = $200,000 to $250,000.
The monthly repayment should be within 25% of the family income and the loan can be repaid within 25 years or before reaching age 55. If the monthly repayment is more than 25% of the income, you are paying too much for your flat (or private housing).
If you have used CPF or personal savings towards the down payment for your flat, your monthly repayment should be reduced proportionately below 25%, as you need the difference to be saved to restore back the savings that have been used for the down payment.
Tan Kin Lian
In my book, Practical Guide on Financial Planning, I suggested that the flat should represent 4 to 5 years of the combined family income (after deducting the cost of employing a maid). If the combined family income is $5,000 and the cost of the maid is $800, an affordable price for a flat is $4,200 X (48 to 60) = $200,000 to $250,000.
The monthly repayment should be within 25% of the family income and the loan can be repaid within 25 years or before reaching age 55. If the monthly repayment is more than 25% of the income, you are paying too much for your flat (or private housing).
If you have used CPF or personal savings towards the down payment for your flat, your monthly repayment should be reduced proportionately below 25%, as you need the difference to be saved to restore back the savings that have been used for the down payment.
Tan Kin Lian
Enhanced SingPass
For the past decades, Singaporeans has enjoyed the convenience of a common NRIC that is used for many personal transactions. This has since been extended to the SingPass, which is used for identifying the person for many transactions with Government departments.
It is time to enhance the SingPass system, to be used more widely in the online world. Some suggestions:
- Make SingPass available to use with private organisations and websites
- Allow the SingPass owner to be linked to a 2FA token, i.e. the token that is used for internet banking
- Allow the registration of an e-mail and mobile phone
- Allow the registration of a unique user name to complement the NRIC.
This enhanced infrastructure will facilitate the adoption of online transactions in the public and private sector and improve national efficiency. Many websites can use this common login, rather than create a separate password to be stored in each website.
Tan Kin Lian
It is time to enhance the SingPass system, to be used more widely in the online world. Some suggestions:
- Make SingPass available to use with private organisations and websites
- Allow the SingPass owner to be linked to a 2FA token, i.e. the token that is used for internet banking
- Allow the registration of an e-mail and mobile phone
- Allow the registration of a unique user name to complement the NRIC.
This enhanced infrastructure will facilitate the adoption of online transactions in the public and private sector and improve national efficiency. Many websites can use this common login, rather than create a separate password to be stored in each website.
Tan Kin Lian
Secret in picking the right stocks
After trying the Pro-Investor simulation game more than 100 times, I managed to find a secret that work well for this game. I click on the tab "Pick:" and sort the stocks in descending order of the column "Yield - 1 year". This sorting is done by clicking on the heading of the column. I pick the top 4 to 7 stocks in this list. I usually pick all of them, but may exclude 1 or 2 stocks. I found this method to yield quite good results based on the simulation formula used in the game.
The prices are generated based on a formula that reflects random changes for the country, sector (industry) and type of company. These prices will be random, but reflect certain underlying trends. If you adopt a certain formula, you may get good results on some occasions, but disappointing results on other occasions. But, I found the above strategy to work quite well. This strategy works on the concept that the best performing stocks in one year is likely to perform better than average during the following year (but may not be at the top), as the underlying trends is likely to persist for more than one year.
Try it here. You have to register an account to play the Pro-Investor game. You can read the Guide for a better understanding of the underlying concepts behind this simulation game.
The prices are generated based on a formula that reflects random changes for the country, sector (industry) and type of company. These prices will be random, but reflect certain underlying trends. If you adopt a certain formula, you may get good results on some occasions, but disappointing results on other occasions. But, I found the above strategy to work quite well. This strategy works on the concept that the best performing stocks in one year is likely to perform better than average during the following year (but may not be at the top), as the underlying trends is likely to persist for more than one year.
Try it here. You have to register an account to play the Pro-Investor game. You can read the Guide for a better understanding of the underlying concepts behind this simulation game.
Improved user interface for Pro-Investor
The user interface has been improved. It is now easier to select the stocks and learn from the results. Read the Guide to get the tip on how to sort the stocks for easy selection. Click here.
In the next upgrade, we will include a Tab to record the Champions who have reached Level 9.
In the next upgrade, we will include a Tab to record the Champions who have reached Level 9.
Monday, January 25, 2010
Stuyvesant Town, Manhatten
The Government Investment Corporation of Singapore (GIC) invested in a Manhatten project called Stuyvesant Town.
Here are some views about this project.
http://news.asiaone.com/News/the%2BStraits%2BTimes/Story/A1Story20100126-194428.html
http://news.asiaone.com/News/the%2BStraits%2BTimes/Story/A1Story20100126-194428.html
Survey: Educating the Young
I have updated the survey results with 63 replies.
My personal views on this topic are expressed here.
My personal views on this topic are expressed here.
Password security
The experts have advised on secure passwords, to prevent hacking, as follows:
- at least 8 characters long
- does not contain all or part of one's name
- mix of upper and lower case characters
- does not have repeated numbers or characters side by side
- password must be changed every 3 months
It is easy to write these exotic rules, but they are not practical. Most people have to keep more than 20 passwords to log into various sites. If every website has their own exotic rules, it would be impossible for the user to remember all these passwords.
We need to exercise common sense. Many of these websites do not contain critical information. I consider that telephone number, address and e-mail to be public information and are not sensitive. So what, if someone knows my e-mail? It is available in my blog anyway. So what, if they know my mobile phone and call me? They do anyway, and I know how to deal with unwanted callers.
We only need secure passwords for bank accounts involving transfer of money or for e-mail accounts that are accessed daily. In most other cases, there is no need to secure passwords. There are millions of accounts, and there is no purpose in spending the time to hack them, unless a specific person is being targeted. If this is the case, the targeted person can take legal action against the hacker for theft or invasion of privacy.
Tan Kin Lian
- at least 8 characters long
- does not contain all or part of one's name
- mix of upper and lower case characters
- does not have repeated numbers or characters side by side
- password must be changed every 3 months
It is easy to write these exotic rules, but they are not practical. Most people have to keep more than 20 passwords to log into various sites. If every website has their own exotic rules, it would be impossible for the user to remember all these passwords.
We need to exercise common sense. Many of these websites do not contain critical information. I consider that telephone number, address and e-mail to be public information and are not sensitive. So what, if someone knows my e-mail? It is available in my blog anyway. So what, if they know my mobile phone and call me? They do anyway, and I know how to deal with unwanted callers.
We only need secure passwords for bank accounts involving transfer of money or for e-mail accounts that are accessed daily. In most other cases, there is no need to secure passwords. There are millions of accounts, and there is no purpose in spending the time to hack them, unless a specific person is being targeted. If this is the case, the targeted person can take legal action against the hacker for theft or invasion of privacy.
Tan Kin Lian
Singapore's declining birth rate
Singapore's birth rate continued to decline in 2009. The Prime Minister blamed it on the economic crisis. But, the birth rate has been falling in good years as well. The various incentives introduced by the Government during the past two decades failed to work.
My "common sense" observations and talking to ordinary people tell me that families are having less children due to the following reasons:
- High cost of living
- Insecurity of jobs
- High cost and burden of educating the child
- No fun for children to take the pressure of childhood
The complicated incentives, to give different benefits to different child according to birth order, year of birth, status of mothers and many other factors did not help.
We should not blame this situation on the modern lifestyle. While the birth rate is falling in other developed countries as well, the situation in Singapore is among the worst in the world. We are seeing the outcome of our social and economic policies.
To improve the birth rate, I would prefer to implement the following measures:
- Have the cost of raising two children in each family to be borne by the state, and not be a financial burden for the family
- Change the education system to avoid the competition to be top, but to educate our young to be literate, numerate, have social skills and character and to play.
Tan Kin Lian
My "common sense" observations and talking to ordinary people tell me that families are having less children due to the following reasons:
- High cost of living
- Insecurity of jobs
- High cost and burden of educating the child
- No fun for children to take the pressure of childhood
The complicated incentives, to give different benefits to different child according to birth order, year of birth, status of mothers and many other factors did not help.
We should not blame this situation on the modern lifestyle. While the birth rate is falling in other developed countries as well, the situation in Singapore is among the worst in the world. We are seeing the outcome of our social and economic policies.
To improve the birth rate, I would prefer to implement the following measures:
- Have the cost of raising two children in each family to be borne by the state, and not be a financial burden for the family
- Change the education system to avoid the competition to be top, but to educate our young to be literate, numerate, have social skills and character and to play.
Tan Kin Lian
Facebook Fan page for Tan Kin Lian & Associates
My staff has created this Facebook Fan page to promote my blog and the services offered by Tan Kin Lian & Associates. You are invited to join his Fan page. Please help to get other people you know to join as well.
The Singapore Recalcitrant
This blog has many well written articles about the social and political situation in Singapore.
Why I joined the Opposition - Gerald Giam
My friends in the PAP tell me that it is more effective to change Singapore from within the PAP than from outside.
I believe that changes to the finer details of policies are possible from within, but fundamental changes to the way the country is governed can only come if the top echelon of leaders in the party either radically change their mind, or are replaced.
Neither is about to happen anytime soon.
Quality of Life Index
Sunday, January 24, 2010
Social studies - a compulsory subject
The Ministry of Education is making social studies into a compulsory subject. This is helpful in getting our young to be more social responsible and less self-centered (or selfish).
I suggest that a more important step is to reduce the competition in the school to go for the top places and win scholarships. This competition is unhealthy and brings negative consequences. My views are elaborated here.
I believe that a better approach is to educate our young to be literate, numerate, have social skills and character. We can find the leaders after they start work and solve real life problems. This view is shared by many people in this survey.
I suggest that a more important step is to reduce the competition in the school to go for the top places and win scholarships. This competition is unhealthy and brings negative consequences. My views are elaborated here.
I believe that a better approach is to educate our young to be literate, numerate, have social skills and character. We can find the leaders after they start work and solve real life problems. This view is shared by many people in this survey.
Ethical financial consultants
There are ethical consultants and bad consultants in the financial services field. The ethical consultants offer advice and products that are in the best interest of their clients. The bad consultants think of their own benefit and offer products that give bad value to their clients.
The tied consultants can only offer the products that are available to them to be sold. If they work for a financial institution that offer ethical products (i.e. transparent and fairly priced), they can earn a honest living. However, if the financial institution designs products that are meant to deceive or mislead the consumers, the consultants face a dilemma. Do they act ethically, in the interest of their clients, and avoid these products? Alternatively, do they sell these products, as they are "bribed" with attractive commissions?
It depends on the ethical and moral values of each individual consultant. Some are upright, but others are not. In our current market environment, it is more likely to find an bad consultant - but there are good ones around.
Some consumers will trust consultants that they know personally. However, there are many cases of such consultants betraying the trust and taking their friends for a ride. If you are not able to differentiate between an ethical or bad consultant, it is best to avoid them altogether.
Tan Kin Lian
The tied consultants can only offer the products that are available to them to be sold. If they work for a financial institution that offer ethical products (i.e. transparent and fairly priced), they can earn a honest living. However, if the financial institution designs products that are meant to deceive or mislead the consumers, the consultants face a dilemma. Do they act ethically, in the interest of their clients, and avoid these products? Alternatively, do they sell these products, as they are "bribed" with attractive commissions?
It depends on the ethical and moral values of each individual consultant. Some are upright, but others are not. In our current market environment, it is more likely to find an bad consultant - but there are good ones around.
Some consumers will trust consultants that they know personally. However, there are many cases of such consultants betraying the trust and taking their friends for a ride. If you are not able to differentiate between an ethical or bad consultant, it is best to avoid them altogether.
Tan Kin Lian
Saturday, January 23, 2010
Talk at NLB: Financial Planning in Time of Crisis
The talk at Yishun Library was successful. More than 60 people turned up. Due to the limited capacity, I had to carry out two sessions at 3 pm and 4.30 pm. The second session was for those that turned up late and could not be accommodated. Apologies for the inconvenience.
The talk was stimulating and enjoyable. The participants asked a lot of questions, relating to the topics and outside the topics.
FISCA (Financial Services Consumer Association) will be organising more talks in collaboration with National Library Board, to be held in the Head Office in Bras Basah Road and in other community libraries.
Many participants expressed interest in attending a 12 hour course on financial planning (covering 8 topics in more detail). More details will be released later.
The talk was stimulating and enjoyable. The participants asked a lot of questions, relating to the topics and outside the topics.
FISCA (Financial Services Consumer Association) will be organising more talks in collaboration with National Library Board, to be held in the Head Office in Bras Basah Road and in other community libraries.
Many participants expressed interest in attending a 12 hour course on financial planning (covering 8 topics in more detail). More details will be released later.
Successful start to Pro-Investor
Nearly 40 participants have registered to play Pro-Investor during the past 2 days. One participant log in 7 times and played around 30 games. Another participant achieved Level 9 - which is the top level.
I have created a new entry under Guide to share my personal experience about playing this simulation game on stock selection. I have given some tips on how you can find a technique that can reduce your learning curve. You can experiment with variations of this technique to get better results.
Picking the right stocks in the real world environment is a matter of experience and learning. There is no single magic formula that you can use, as the environment keeps changing. What you can learn is the secret of watching the right trends and making the right choices - and hope to be right 60% of the time or better. Pro-Investor aims to give you this chance to learn through experience, and to acquire a lifetime of experience within a few days. I hope that you enjoy this learning experience.
Tan Kin Lian
I have created a new entry under Guide to share my personal experience about playing this simulation game on stock selection. I have given some tips on how you can find a technique that can reduce your learning curve. You can experiment with variations of this technique to get better results.
Picking the right stocks in the real world environment is a matter of experience and learning. There is no single magic formula that you can use, as the environment keeps changing. What you can learn is the secret of watching the right trends and making the right choices - and hope to be right 60% of the time or better. Pro-Investor aims to give you this chance to learn through experience, and to acquire a lifetime of experience within a few days. I hope that you enjoy this learning experience.
Tan Kin Lian
Friday, January 22, 2010
Restore trust in participating policies
Participating policies, i.e. endowment or whole life policies, are designed to provide a guaranteed yield at a modest level (say 1% p.a.) and to provide variable reversionary and terminal bonuses that can increase the yield to a higher level. The bonuses are declared each year based on the financial results of the insurance company.
In the past, most life insurance companies were able to give an attractive yield to the policyholders. The insurance company invest the money well with a long term perspective and were able to achieve an attractive return. After taking away a fair proportion to cover their expenses and profits, they distribute most of the surplus to the policyholders with a high rate of bonus.
The insurance company maintains a manageable number of policy series, and distributes the same rate of reversionary or terminal bonuses to all policies in the same series. The policyholders in each series can see that they have been treated equally with other policyholders in the same series.
This practice has changed in recent years. Insurance companies have introduced too many policy series and distributes different rates of bonuses to policyholders in the same series. It is difficult for any policyholder to be sure that they are getting the fair rate of bonus, based on the actual experience of the fund.
To make matters worse, some insurance companies retain too much surplus in the fund, under the purported aim of "smoothing the bonus", or use the surplus to pay for high expenses, resulting in a poor yield to policyholders.
It is the lack of clarity that gives a bad name to participating policies in recent years. Many policyholders find that the projected bonuses made at the inception of the policy had been severely reduced due to "difficult investment climate", but it is not clear if the reduction is due solely to this cause or to other unethical and unfair practices.
To overcome this problem, the insurance company can adopt the "asset share" method to distribute bonus. This method ensures that each policyholder gets its fair asset share on the surrender or maturity of the policy based on the actual experience for that policy. It is quite to adopt this method using modern computer technology.
Some countries make it mandatory for the "asset share" method to be used, to ensure that the policyholders are fairly treated. The regulator in Malaysia took this step many years ago, in their effort to protect the interest of the consumers and to ensure fair practices.
In Singapore, many insurance companies have severely reduced their reversionary and terminal bonuses in recent years, often more than expected. Many consumers have lost trust in the participating policies and the insurance companies that sold these policies.
I hope that the regulator in Singapore will implement the "asset share" method early, to ensure that all policyholders are given a fair return in this volatile situation and that the trust in participating policies can be restored.
Tan Kin Lian
In the past, most life insurance companies were able to give an attractive yield to the policyholders. The insurance company invest the money well with a long term perspective and were able to achieve an attractive return. After taking away a fair proportion to cover their expenses and profits, they distribute most of the surplus to the policyholders with a high rate of bonus.
The insurance company maintains a manageable number of policy series, and distributes the same rate of reversionary or terminal bonuses to all policies in the same series. The policyholders in each series can see that they have been treated equally with other policyholders in the same series.
This practice has changed in recent years. Insurance companies have introduced too many policy series and distributes different rates of bonuses to policyholders in the same series. It is difficult for any policyholder to be sure that they are getting the fair rate of bonus, based on the actual experience of the fund.
To make matters worse, some insurance companies retain too much surplus in the fund, under the purported aim of "smoothing the bonus", or use the surplus to pay for high expenses, resulting in a poor yield to policyholders.
It is the lack of clarity that gives a bad name to participating policies in recent years. Many policyholders find that the projected bonuses made at the inception of the policy had been severely reduced due to "difficult investment climate", but it is not clear if the reduction is due solely to this cause or to other unethical and unfair practices.
To overcome this problem, the insurance company can adopt the "asset share" method to distribute bonus. This method ensures that each policyholder gets its fair asset share on the surrender or maturity of the policy based on the actual experience for that policy. It is quite to adopt this method using modern computer technology.
Some countries make it mandatory for the "asset share" method to be used, to ensure that the policyholders are fairly treated. The regulator in Malaysia took this step many years ago, in their effort to protect the interest of the consumers and to ensure fair practices.
In Singapore, many insurance companies have severely reduced their reversionary and terminal bonuses in recent years, often more than expected. Many consumers have lost trust in the participating policies and the insurance companies that sold these policies.
I hope that the regulator in Singapore will implement the "asset share" method early, to ensure that all policyholders are given a fair return in this volatile situation and that the trust in participating policies can be restored.
Tan Kin Lian
Training software: Pro-Investor
Develop your skill in picking the right stocks for long term investments. This skill comes from many years of experience. This simulation software allows you to acquire a lifetime of experience in a few hours. Click here to play the game.
Read the Guide. Register an account. You start witl Level 1 and will progress until Level 9. Good luck.
Read the Guide. Register an account. You start witl Level 1 and will progress until Level 9. Good luck.
Thursday, January 21, 2010
GST penalty for small business
I wrote to Today Paper that a small business has to suffer a penalty under the current Goods and Service tax (GST). It has to pay GST on its purchases and is not able to recover the GST from its business customers and on its exports. This has forced many small businesses to "volunteer" to register for GST, even though the amount of GST payable is small. It causes administrative work for IRAS and compliance cost for small businesses to keep records to prepare and submit the quarterly GST returns.
To avoid this problem, I suggested that the the GST law be changed to allow business customers to treat al ltheir purchases as qualifying from GST, including the purchases from the small entities that are exempt from GST.
IRAS has replied that it is not able to offer GST credit for exempt entities who do not pay GST. This reasoning overlooks the fact that the exempt entity has to pay GST on many of its own purchases already. By taking a rigid position, IRAS is creating unproductive and wasteful work for small businesses and itself. Even the business customers have to keep separate records to segregate purchases from exempt and non-exempt suppliers.
IRAS did not contact me to discuss the issue before giving its reply. There is no attempt by IRAS to understand the issue from the point of view of the taxpayer. I hope that our authority can be more open for discussion and dialogue on important issues that affect the cost of doing business in Singapore.
Tan Kin Lian
To avoid this problem, I suggested that the the GST law be changed to allow business customers to treat al ltheir purchases as qualifying from GST, including the purchases from the small entities that are exempt from GST.
IRAS has replied that it is not able to offer GST credit for exempt entities who do not pay GST. This reasoning overlooks the fact that the exempt entity has to pay GST on many of its own purchases already. By taking a rigid position, IRAS is creating unproductive and wasteful work for small businesses and itself. Even the business customers have to keep separate records to segregate purchases from exempt and non-exempt suppliers.
IRAS did not contact me to discuss the issue before giving its reply. There is no attempt by IRAS to understand the issue from the point of view of the taxpayer. I hope that our authority can be more open for discussion and dialogue on important issues that affect the cost of doing business in Singapore.
Tan Kin Lian
Wednesday, January 20, 2010
Benefits of Life Insurance
Life insurance performs two useful functions:
a) Provide financial security in event of premature death or disability through the pooling of risks
b) Provide a useful service for ordinary people to pool and invest their savings to get an attractive long term return.
If it is practiced fairly, transparently and honestly, it can bring tremendous benefits to ordinary people. This was how life insurance was practiced for a long time in the past. It was useful to society.
In recent years, life insurance has been changed to be a way for financial institutions to make large share of the gains, and to offer a poor return to the unsuspecting, trusting public. The charges taken away from the consumers to pay the high marketing expenses, salaries and profits are excessive - perhaps unconscionable.
I hope that the leaders of life insurance realize that they have a responsibility to offer a fair return to the consumers who trusted them to take care of their future. It is necessary to pay for the expenses and make a fair profit, but the charges should be reasonable and the interest of the consumers must also be protected.
I hope that the regulator will make it possible for the public to enjoy a fair outcome. This will make life insurance a good way for consumers to save and invest for the future.
Tan Kin Lian
a) Provide financial security in event of premature death or disability through the pooling of risks
b) Provide a useful service for ordinary people to pool and invest their savings to get an attractive long term return.
If it is practiced fairly, transparently and honestly, it can bring tremendous benefits to ordinary people. This was how life insurance was practiced for a long time in the past. It was useful to society.
In recent years, life insurance has been changed to be a way for financial institutions to make large share of the gains, and to offer a poor return to the unsuspecting, trusting public. The charges taken away from the consumers to pay the high marketing expenses, salaries and profits are excessive - perhaps unconscionable.
I hope that the leaders of life insurance realize that they have a responsibility to offer a fair return to the consumers who trusted them to take care of their future. It is necessary to pay for the expenses and make a fair profit, but the charges should be reasonable and the interest of the consumers must also be protected.
I hope that the regulator will make it possible for the public to enjoy a fair outcome. This will make life insurance a good way for consumers to save and invest for the future.
Tan Kin Lian
Purpose of insurance regulations
Some regulators consider that their primary duty is to ensure the solvency of the insurance companies, as financial failure will cause hardship to the consumers. Solvency is important, but is not the only risks faced by the consumer.
The regulator has also to pay attention to all four duties, as follows:
- Maintain insurer solvency
- Compensate for inadequate consumer knowledge
- Ensure reasonable rates
- Make insurance available
The regulator has also to pay attention to all four duties, as follows:
- Maintain insurer solvency
- Compensate for inadequate consumer knowledge
- Ensure reasonable rates
- Make insurance available
Consumers are not well versed in insurance and may be badly treated through legal contracts that are not transparent and not fair. A common example is the use of irresponsible projection to entice consumers to invest in insurance contracts, and to give a final payout that is much lower than projected. Badly worded or unclear language in policy documents also place consumers at a disadvantage as the consumers are not able to afford the legal fees to have the contracted interpreted in the court.
The regulator has also to ensure that the insurance rates are reasonable and that consumers are not overcharged due to their ignorance of the market or their inability to judge the value of the insurance protection that is provided.
At the other extreme, the regulator also wants to prevent irresponsible price cutting that may lead to insolvency of the insurers. If an insurer cuts price to an inadequate level, other insurers may be forced to follow, to protect their market share.
The regulator also aims to ensure that insurance is available, especially for people or risks that are considered to be unprofitable. As motor insurance is compulsory, it is necessary to ensure that it is available to people who are considered to be high risk, as they would otherwise by denied the right to drive a car.
Tan Kin Lian
Mark to market and asset bubbles
There is an accounting principle called "mark to market". It is generally recognized that the most recent transaction represents the best indication of the current value of a specific asset and that it is better for the financial accounts to share the "fair values" of these assets.
This accounting principle works well when there is a true market with many transactions or where the prices are not driven by manipulation, speculation, gambling, greed and fear. Unfortunately, the imperfect situation occurs more commonly than the true market situation.
Many property transactions do not reflect the true market as they are big ticket items, and are driven by manipulation and fear. These transacted prices are then used to create an impression of the market values. This is how bubbles are created.
Bubbles will create wealth for the speculators, but will eventually have to burst, giving a lot of economic pain for ordinary people who are caught with the over-priced assets that have to be paid over a lifetime. This does not create a sound economic or social foundation.
I hope that the "mark to market" rule can be modified to recognize its undesired role in creating bubbles in properties. I also hope that effective measures be taken to prevent future bubbles, such as the recent measures taken in Singapore and now being applied in China. It recognizes that property prices cannot be left to the market and have to be better controlled.
Tan Kin Lian
This accounting principle works well when there is a true market with many transactions or where the prices are not driven by manipulation, speculation, gambling, greed and fear. Unfortunately, the imperfect situation occurs more commonly than the true market situation.
Many property transactions do not reflect the true market as they are big ticket items, and are driven by manipulation and fear. These transacted prices are then used to create an impression of the market values. This is how bubbles are created.
Bubbles will create wealth for the speculators, but will eventually have to burst, giving a lot of economic pain for ordinary people who are caught with the over-priced assets that have to be paid over a lifetime. This does not create a sound economic or social foundation.
I hope that the "mark to market" rule can be modified to recognize its undesired role in creating bubbles in properties. I also hope that effective measures be taken to prevent future bubbles, such as the recent measures taken in Singapore and now being applied in China. It recognizes that property prices cannot be left to the market and have to be better controlled.
Tan Kin Lian
Broadcast of World Cup matches
How much should the operator pay for the right to broadcast the World Cup matches in Singapore? FIFA wants $100 million. The operator (Singtel, Starhub or both) offers to pay a lower fee, as they are not likely to get sufficient revenue to make a profit.
This is free market at work (or rather, fail to work). There is free negotiation, but there is no real market, as there is only one supplier, i.e. FIFA. Is FIFA abusing its monopolistic pricing power, or is it just trying to get a fair amount from affluent Singaporeans?
Rather than pay a flat fee, it would be better for the operator to work with FIFA on a revenue sharing formula. FIFA can decide on a fee per viewer (for the entire series of matches) and the operator can add on its charges to offer the final product to consumers. The price charged will determine the number of subscribers who are willing to pay this fee.
Let me make a guess about a fair fee to pay to FIFA. I estimate that 300,000 homes would be willing to pay $150 to watch the matches on TV. The operator has to keep $50 to cover its marketing and operating cost. This would leave $100 per subscriber for FIFA, or an estimated $30 million for 300,000 subscribers. If the viewer is willing to pay $200, the fee to FIFA could be increased to $45 million.
I hope that the operator can agree with FIFA on a revenue sharing model or FIFA should reduce its fee to $30 to 45 million. This would be in the interest of soccer and sports.
Tan Kin Lian
This is free market at work (or rather, fail to work). There is free negotiation, but there is no real market, as there is only one supplier, i.e. FIFA. Is FIFA abusing its monopolistic pricing power, or is it just trying to get a fair amount from affluent Singaporeans?
Rather than pay a flat fee, it would be better for the operator to work with FIFA on a revenue sharing formula. FIFA can decide on a fee per viewer (for the entire series of matches) and the operator can add on its charges to offer the final product to consumers. The price charged will determine the number of subscribers who are willing to pay this fee.
Let me make a guess about a fair fee to pay to FIFA. I estimate that 300,000 homes would be willing to pay $150 to watch the matches on TV. The operator has to keep $50 to cover its marketing and operating cost. This would leave $100 per subscriber for FIFA, or an estimated $30 million for 300,000 subscribers. If the viewer is willing to pay $200, the fee to FIFA could be increased to $45 million.
I hope that the operator can agree with FIFA on a revenue sharing model or FIFA should reduce its fee to $30 to 45 million. This would be in the interest of soccer and sports.
Tan Kin Lian
Tuesday, January 19, 2010
Policy wordings
In many states in America, the policy wordings used by insurance companies have to be approved by the regulator. I find this to be a good practice. The regulator can check that the wordings are clear and are fair to consumers. It will minimize disputes that have to be resolved in court. It is also a good practice for insurance companies to use standard wordings for the common types of coverage, rather than be allowed to write their own wordings.
I hope that this practice can be adopted in Singapore and that the regulator can play an active role in achieving this outcome - to ensure fair treatment of consumers.
Tan Kin Lian
I hope that this practice can be adopted in Singapore and that the regulator can play an active role in achieving this outcome - to ensure fair treatment of consumers.
Tan Kin Lian
Fair settlement of claims
Many claims officers think that their responsibility is to reduce the claim payments and save money for the insurance company. They may not be aware that they also have a duty to ensure fair settlement of claims. Some states in America have laws that forbid unfair claim practices, such as:
–Refusing to pay claims without conducting a reasonable investigation
–Not attempting to provide prompt, fair, and equitable settlements
–Offering lower settlements to compel insureds to institute lawsuits to recover amounts due
This is taken from the text book that I use to teach Risk Management & Insurance at a local university.
Tan Kin Lian
–Refusing to pay claims without conducting a reasonable investigation
–Not attempting to provide prompt, fair, and equitable settlements
–Offering lower settlements to compel insureds to institute lawsuits to recover amounts due
This is taken from the text book that I use to teach Risk Management & Insurance at a local university.
Tan Kin Lian
Talk at Yishun Public Library
I am giving a talk at Yishun Public Library on Saturday 23 January 3 to 4 pm on the subject "Coping Financially in Difficult Times". More details are available here. I invite my readers to attend this talk.
LED lighting
According to this report, LED lighting has the potential to reduce energy consumption significantly.
Misleading illustrations
Some life insurance products were designed to provide an annual cash bonus. The underlying return on the policy is poor, usually less than 2% p.a., due to the high expenses and profit margin. To enjoy the cash bonus, the consumer has to pay an additional premium that is usually more than 10% of the cash bonus. For example, to get a cash bonus of $2,000, the additional premium could be $2,200 a year. The consumer is not aware about this type of structure.
To hide the poor return, the insurance agent tells the customer that the cash bonus can be re-invested in an investment linked fund to earn 5% or 9% per annum. This is stated to be not guaranteed, but the consumer does not know that the projections are over-optimistic.
By illustrating with this high projected return, the benefit illustration will show a higher return on the policy, perhaps 4% or more. If it was possible to earn 9% per annum, the consumer should invest the entire premium into the investment linked fund, rather than just the cash bonus.
I hope that the authority will ban this type of projection, as it is misleading to the consumer.
Tan Kin Lian
To hide the poor return, the insurance agent tells the customer that the cash bonus can be re-invested in an investment linked fund to earn 5% or 9% per annum. This is stated to be not guaranteed, but the consumer does not know that the projections are over-optimistic.
By illustrating with this high projected return, the benefit illustration will show a higher return on the policy, perhaps 4% or more. If it was possible to earn 9% per annum, the consumer should invest the entire premium into the investment linked fund, rather than just the cash bonus.
I hope that the authority will ban this type of projection, as it is misleading to the consumer.
Tan Kin Lian
Monday, January 18, 2010
Big cut in maturity payment
A policyholder bought a 21 year anticipated endowment policy. At that time, the policy showed a projected return of 5.5% per annum. The company used 7% to project the accumulation of the triennial payments and also included reversionary and maturity bonus that were not explained in a transparent manner. However, the company did explain that the projected amounts were not guaranteed.
On maturity, the policyholder was given a payout that is about 35% lower than the initial projection. The final yield was reduced to 1.6% per annum. The insurance company explained that the low payout was due to the difficult investment climate. In my view, this is only partly true. Another major contributor was the highly optimistic assumptions used in the initial projection, to entice the consumer to buy the insurance policy.
I hope that the authority will ask the insurance company to be accountable for its initial projection. While it is acceptable for the final payout to be lower to reflect the actual investment climate, the difference should not be as much as 35%. I believe that this type of unfair treatment applies to large numbers of policyholders.
I have advised consumers not to trust the optimistic projections that are used to sell life insurance policies, unless there is a higher standard of business integrity and protection of consumer rights.
Tan Kin Lian
On maturity, the policyholder was given a payout that is about 35% lower than the initial projection. The final yield was reduced to 1.6% per annum. The insurance company explained that the low payout was due to the difficult investment climate. In my view, this is only partly true. Another major contributor was the highly optimistic assumptions used in the initial projection, to entice the consumer to buy the insurance policy.
I hope that the authority will ask the insurance company to be accountable for its initial projection. While it is acceptable for the final payout to be lower to reflect the actual investment climate, the difference should not be as much as 35%. I believe that this type of unfair treatment applies to large numbers of policyholders.
I have advised consumers not to trust the optimistic projections that are used to sell life insurance policies, unless there is a higher standard of business integrity and protection of consumer rights.
Tan Kin Lian
Benefit Illustration - Single Premium Whole Life Policy
I analysed the benefit illustration for a reader of my blog. The figures have been changed or removed to protect the identity of the policyholder.
1. You are investing a single premium of $30,000 in a life insurance policy. The distribution cost represents 7.9% of the invested sum. This is high, but it is typical of life insurance policies (where a high commission is paid to the agent).
2. If you decide to terminate the policy within 5 years, you will get a cash value that is less than the single premium. This policy, like all life insurance policies, provides poor liquidity. You cannot withdraw your investment without suffering a high penalty. As may need to withdraw your investment to meet some unexpected cash need in the future, it better to have the flexibility, especially in an uncertain world with insecure employment.
3. Here is the projected yield on your investment. If you keep the investment for 30 years, you are guaranteed a minimum cash value which represents a yield of 2.33% p.a. If the insurance company is able to earn an average yield of 3.75% on its investments in the future, they projected a non-guaranteed payout which a yield of 3.1% p.a. If they earn 5.25%, the non-guaranteed payout represents yield of 3.96% p.a. These yields are reasonable, but not attractive.
4. If you decide to invest on your own in an exchange traded fund, such as the STI ETF, and you receive an average yield, net of charges, of 5.25% over 30 years, your investment would accumulate to an amount that is 45% more than the non-guaranteed cash value provided by the life insurance policy at the end of 30 years.
5. I usually recommend to young people to learn about managing the risk of long term investments. After they understand the risk, they would usually prefer to invest in an exchange traded fund (which offers diversification of risk) and a potential better return. They will face short term fluctuation, but they understand that the fluctuation does not really affect the long term value of their investment.
6. You are offered an option for you to buy a rider that will accelerate the payment of the sum assured when you contract one of the critical illness. This “acceleration” means that the sum assured is payable earlier, rather than being paid on death. However, there is an additional cost for this “accelerated payment”. I think that the chance of making a claim is quite low, and this cost is rather high. But, I do not have the statistics to know if it is worth paying this additional premium for the accelerated benefit.
Tan Kin Lian
1. You are investing a single premium of $30,000 in a life insurance policy. The distribution cost represents 7.9% of the invested sum. This is high, but it is typical of life insurance policies (where a high commission is paid to the agent).
2. If you decide to terminate the policy within 5 years, you will get a cash value that is less than the single premium. This policy, like all life insurance policies, provides poor liquidity. You cannot withdraw your investment without suffering a high penalty. As may need to withdraw your investment to meet some unexpected cash need in the future, it better to have the flexibility, especially in an uncertain world with insecure employment.
3. Here is the projected yield on your investment. If you keep the investment for 30 years, you are guaranteed a minimum cash value which represents a yield of 2.33% p.a. If the insurance company is able to earn an average yield of 3.75% on its investments in the future, they projected a non-guaranteed payout which a yield of 3.1% p.a. If they earn 5.25%, the non-guaranteed payout represents yield of 3.96% p.a. These yields are reasonable, but not attractive.
4. If you decide to invest on your own in an exchange traded fund, such as the STI ETF, and you receive an average yield, net of charges, of 5.25% over 30 years, your investment would accumulate to an amount that is 45% more than the non-guaranteed cash value provided by the life insurance policy at the end of 30 years.
5. I usually recommend to young people to learn about managing the risk of long term investments. After they understand the risk, they would usually prefer to invest in an exchange traded fund (which offers diversification of risk) and a potential better return. They will face short term fluctuation, but they understand that the fluctuation does not really affect the long term value of their investment.
6. You are offered an option for you to buy a rider that will accelerate the payment of the sum assured when you contract one of the critical illness. This “acceleration” means that the sum assured is payable earlier, rather than being paid on death. However, there is an additional cost for this “accelerated payment”. I think that the chance of making a claim is quite low, and this cost is rather high. But, I do not have the statistics to know if it is worth paying this additional premium for the accelerated benefit.
Tan Kin Lian
Safe deposit box
Hi there,
I am looking to open a safe box(X-small) and would appreciate if you could kindly assist.
By the way I have no idea of the size, price, terms and conditions. I have very tight budget constraint.
REPLY
You can try CISCO. See here:
http://www.certissecurity.com/safedeposit/
I am looking to open a safe box(X-small) and would appreciate if you could kindly assist.
By the way I have no idea of the size, price, terms and conditions. I have very tight budget constraint.
REPLY
You can try CISCO. See here:
http://www.certissecurity.com/safedeposit/
Switching a policy will incur high front end charge
Dear Mr Tan,
I would really like to seek your comments regarding a single premium whole life policy introduced to me after realizing that my endowment and whole life policies were not worth keeping. A financial adviser recommended me a 25 year whole life plan to replace my existing policies and I asked for a 'single premium' quote on the same plan. Attached is a copy of the BI. May I seek your advice if this policy is acceptable because I’m very confused
REPLY
It is usually a bad idea to switch from one policy to another, as you have to incur the upfront cost again, and this will give good commission to the insurance agent. Generally, I would advice people not to make such a switch, unless there are clear advantages of doing so.
If you are not able to trust the agent who is making the recommendation to you, you should not buy the new policy from the agent.
I am not able to study your case in detail. If you wish to get advice, you can contact FISCA. They will get a volunteer to asssit you to understand the benefit illustration but you have to pay an admin fee of $50. You can contact FISCA at www.fisca.sg
I would really like to seek your comments regarding a single premium whole life policy introduced to me after realizing that my endowment and whole life policies were not worth keeping. A financial adviser recommended me a 25 year whole life plan to replace my existing policies and I asked for a 'single premium' quote on the same plan. Attached is a copy of the BI. May I seek your advice if this policy is acceptable because I’m very confused
REPLY
It is usually a bad idea to switch from one policy to another, as you have to incur the upfront cost again, and this will give good commission to the insurance agent. Generally, I would advice people not to make such a switch, unless there are clear advantages of doing so.
If you are not able to trust the agent who is making the recommendation to you, you should not buy the new policy from the agent.
I am not able to study your case in detail. If you wish to get advice, you can contact FISCA. They will get a volunteer to asssit you to understand the benefit illustration but you have to pay an admin fee of $50. You can contact FISCA at www.fisca.sg
Transparency Initiative - How the FDA works
The Food & Drug Administration has launched a website to explain how it carries out its work. Read this report.
RSS feed on my blog
A regular visitor to my blog said the he had problem with the RSS feed for the past two days? Can other visitors on RSS feed share your experience?
Sunday, January 17, 2010
Get the Benefit Illustration
A few people have asked me quite difficult questions on the life insurance policies that have been marketed to them. They ask, "is it all right to invest in the policy?"
Quite often, the policies are specific to the company that has offered it. I am not aware about the features of the policies, or the charges that are being taken away from the premiums that have to be paid. I know that, in most cases, the charges are excessive and the insurance policy represents a bad investment for the consumer, but I am not able to give a conclusive view, without the underlying facts.
My reply to the consumer is, "get the Benefit Illustration and send it to me". With the Benefit Illustration, I can point out the key points in the policy and how consumers are being overcharged, or "ripped off".
A few consumers who sent their Benefit Illustrations to me in the past were shocked that a large part of the potential investment gain was taken away from them, and this was not explained by the financial adviser who sold the policy to them. When they learn about it, it was already too late.
If you want my views, send the Benefit Illustration to me.
Tan Kin Lian
Managing investment risks
Many people are risk averse. They are afraid of taking investment risks and making a loss. The investments that gives the best long term return are equities, but they are also the most volatile, i.e. the price can go up and down by a large percentage in a few days or weeks.
A long term investor should not worry about the short term changes in the price of the shares. As long as they keep the shares, they do not have to take a loss. The value of the shares will eventually recover and give an attractive return. This has been the trend over the past years.
There is the risk of selecting the wrong shares, which may perform worse than the market or may even go bankrupt. This risk can be minimized through diversification, i.e. investing in a fund comprising of 10 or more shares. Some shares in the fund may perform badly, but they will be offset by the other shares that perform better than the market.
There is still the market risk. In a bad stock market, most shares will perform badly. The bad market may last for a few months or even a few years. A long term investor is able to ride out the bad years and will be compensated by the good years, to get an above average return. I describe this strategy as "averaging out the good and bad years".
By investing in a fund, the long term investor does not have to worry about picking the right stocks, or managing the individual investments, such as collecting the dividends and subscribing to the rights issues and other corporate actions. These fund manager will take care of these activities.
It is important for the long term investor to choose a fund that have low initial and annual charges. They can choose an exchange traded fund (ETF) that meets these two criteria. The STI ETF has a transaction charge of 0.3% and an annual management fee of 0.3%. Some other ETFs have higher annual charges, but they are usually less than 0.7%.
The investor can choose a unit trust that has an upfront charge of about 2% and an annual fee of about 1%. The unit trust is actively managed and is aimed at producing a better return than an ETF through the active selection of the fund manager. Research has shown, however, that over the longer term, the actively managed unit trusts perform worse than ETF, after deducting fees.
If you select the right unit trust, you may get a better return than average, but the challenge is selecting the right fund. It has been found that past performance is not an indication of future performance. Choose the funds that performed well in recent years may not be a good strategy.
For a long term investor, the tip is, invest in an exchange traded fund that have low annual charges, of less than 0.5%. Invest for the long term and do not worry about the fluctuations in the market. This type of investment is better than investing in life insurance policies, due to the extremely high charges taken by life insurance companies (usually 3% per annum).
Tan Kin Lian
A long term investor should not worry about the short term changes in the price of the shares. As long as they keep the shares, they do not have to take a loss. The value of the shares will eventually recover and give an attractive return. This has been the trend over the past years.
There is the risk of selecting the wrong shares, which may perform worse than the market or may even go bankrupt. This risk can be minimized through diversification, i.e. investing in a fund comprising of 10 or more shares. Some shares in the fund may perform badly, but they will be offset by the other shares that perform better than the market.
There is still the market risk. In a bad stock market, most shares will perform badly. The bad market may last for a few months or even a few years. A long term investor is able to ride out the bad years and will be compensated by the good years, to get an above average return. I describe this strategy as "averaging out the good and bad years".
By investing in a fund, the long term investor does not have to worry about picking the right stocks, or managing the individual investments, such as collecting the dividends and subscribing to the rights issues and other corporate actions. These fund manager will take care of these activities.
It is important for the long term investor to choose a fund that have low initial and annual charges. They can choose an exchange traded fund (ETF) that meets these two criteria. The STI ETF has a transaction charge of 0.3% and an annual management fee of 0.3%. Some other ETFs have higher annual charges, but they are usually less than 0.7%.
The investor can choose a unit trust that has an upfront charge of about 2% and an annual fee of about 1%. The unit trust is actively managed and is aimed at producing a better return than an ETF through the active selection of the fund manager. Research has shown, however, that over the longer term, the actively managed unit trusts perform worse than ETF, after deducting fees.
If you select the right unit trust, you may get a better return than average, but the challenge is selecting the right fund. It has been found that past performance is not an indication of future performance. Choose the funds that performed well in recent years may not be a good strategy.
For a long term investor, the tip is, invest in an exchange traded fund that have low annual charges, of less than 0.5%. Invest for the long term and do not worry about the fluctuations in the market. This type of investment is better than investing in life insurance policies, due to the extremely high charges taken by life insurance companies (usually 3% per annum).
Tan Kin Lian
Survey: Educating the young
Here are the results of the survey based on 47 replies.
About 90% refer an education system that has the following features:
However, about 20% (i.e. more than 10%) are satisfied with the current system which emphasis academic excellence, and picks future leaders from the scholars.
The survey is still open for participation. Click here.
About 90% refer an education system that has the following features:
> educate the young to be literate, numerate, have social skills, and moral values, instead of achieving academic excellence.
> a less competitive system, so that parents do not have to put pressure on students to study hard through homework and private tuition
> gives higher priority to non-academic subjects, such as moral values, character, social skills and interaction?
> encourage some people to pursue other forms of personal development, instead of university degrees
However, about 20% (i.e. more than 10%) are satisfied with the current system which emphasis academic excellence, and picks future leaders from the scholars.
The survey is still open for participation. Click here.
Migrant and foreign workers
The following terms have been used to describe the foreigners who are now working in Singapore:
foreign talent
foreign workers
foreigners
migrant workers
immigrants
Previously, the word "foreign talent" was commonly used by our political leaders, mainstream media and even by the common people. I have spoken a few times against the use of this term, as it is inappropriate and demeaning to Singaporeans.
I found that the mainstream media has started to use the term "foreigners". While this is more appropriate, I still find that it is an unnecessary distinction. If we have to use a term, perhaps "immigrant" would be more appropriate. It implies a willingness of these workers and their families to make a future in Singapore.
Tan Kin Lian
foreign talent
foreign workers
foreigners
migrant workers
immigrants
Previously, the word "foreign talent" was commonly used by our political leaders, mainstream media and even by the common people. I have spoken a few times against the use of this term, as it is inappropriate and demeaning to Singaporeans.
I found that the mainstream media has started to use the term "foreigners". While this is more appropriate, I still find that it is an unnecessary distinction. If we have to use a term, perhaps "immigrant" would be more appropriate. It implies a willingness of these workers and their families to make a future in Singapore.
Tan Kin Lian
Saturday, January 16, 2010
FOREIGN TALENTS “FT” vs FOREIGN TALENTS POLICY “FTP”
Mr TAN Kin Lian
I like to suggest that you create a LABEL on “Foreign Talents” and “Foreign Talents Policy” in your website. I discover that there are a lot of mis-communications on “Foreign Talents” and “Foreign Talents Policy”.
FOREIGN TALENTS “FT” vs FOREIGN TALENTS POLICY “FTP”
With the discussion and reaction of some Singaporeans, it may seem that Singaporeans are not welcoming foreigners. I think this is a wrong description of Singaporeans.
Many of us, including myself, used to work overseas one time or another. We were foreign talents, once upon a time. We also have a lot of foreigners’ friends. I think Singaporeans are warm people. As a Singaporean, I am looking forward to Singapore Government to make a clear statement of what is their FTP. For example, what category of talents we are attracting and why. For example, what are the level of influx Singapore can absorb. The possibility lack of clear deliberation of FTP could result in Singaporeans calling for explanation. This is understandable because they are many foreigners living among our midst and doing the same job we used to do.
Some may have over-reacted, but many could be just striving understand what is FT and FTP. Unfortunately, calling for explanation and rationale could be seen as unwelcoming FT. This is sadly not the case for Singaporeans.
Maybe, MR TAN could help to elaborate what is Government’s FTP; alternatively, you can help Singaporeans to raise intelligent questions for the Government to answer them. I really hope that local breed and bred Singaporeans to live in harmony with FT in our midst. Even if Singaporeans do not agree with Government’s FTP, we cannot conclude that Singaporeans do not live alongside FT. Singaporeans want to welcome foreigners, but at the same time they need a FTP that fit the need of social and economics objectives of Singapore.
Demographics is an important fabrics of the society, and I think FTP should be deliberated clearly and convincingly to Singaporeans at large. This is the best way to cultivate sense of belonging to this little land we are living in, and the best way to welcome and integrate FT among our midst. I like to conclude that it is good to have FT coming to our country. Singaporeans at large just want to know who are these FT and in what level of influx Singapore can absorb – socially and economically.
Once again, I think you could be the person who has sufficient depth of knowledge and grace for this subject matter. Thank you.
CASHEW NUT
I like to suggest that you create a LABEL on “Foreign Talents” and “Foreign Talents Policy” in your website. I discover that there are a lot of mis-communications on “Foreign Talents” and “Foreign Talents Policy”.
FOREIGN TALENTS “FT” vs FOREIGN TALENTS POLICY “FTP”
With the discussion and reaction of some Singaporeans, it may seem that Singaporeans are not welcoming foreigners. I think this is a wrong description of Singaporeans.
Many of us, including myself, used to work overseas one time or another. We were foreign talents, once upon a time. We also have a lot of foreigners’ friends. I think Singaporeans are warm people. As a Singaporean, I am looking forward to Singapore Government to make a clear statement of what is their FTP. For example, what category of talents we are attracting and why. For example, what are the level of influx Singapore can absorb. The possibility lack of clear deliberation of FTP could result in Singaporeans calling for explanation. This is understandable because they are many foreigners living among our midst and doing the same job we used to do.
Some may have over-reacted, but many could be just striving understand what is FT and FTP. Unfortunately, calling for explanation and rationale could be seen as unwelcoming FT. This is sadly not the case for Singaporeans.
Maybe, MR TAN could help to elaborate what is Government’s FTP; alternatively, you can help Singaporeans to raise intelligent questions for the Government to answer them. I really hope that local breed and bred Singaporeans to live in harmony with FT in our midst. Even if Singaporeans do not agree with Government’s FTP, we cannot conclude that Singaporeans do not live alongside FT. Singaporeans want to welcome foreigners, but at the same time they need a FTP that fit the need of social and economics objectives of Singapore.
Demographics is an important fabrics of the society, and I think FTP should be deliberated clearly and convincingly to Singaporeans at large. This is the best way to cultivate sense of belonging to this little land we are living in, and the best way to welcome and integrate FT among our midst. I like to conclude that it is good to have FT coming to our country. Singaporeans at large just want to know who are these FT and in what level of influx Singapore can absorb – socially and economically.
Once again, I think you could be the person who has sufficient depth of knowledge and grace for this subject matter. Thank you.
CASHEW NUT
Friday, January 15, 2010
Buy insurance up to age 60
Many agent advice consumers that they need to buy life insurance for the whole of life. This is bad advice.
The consumer only need to buy life insurance up to the time that their youngest child reaches age 25. By that time, all the children would have been financially independent. This is likely to be age 60 or 65 (for those who have their children at an older age).
There is no need for life insurance after age 65. If the consumer had been prudent in having regular saving during their working life, they are likely to have sufficient savings to take care of their retirement needs. This could amount $250,000 for an ordinary wage earner or more for a high income earner. With this savings, there is no need for life insurance cover.
The agent likes to advice consumers to buy the most expensive insurance policy, as their commission is directly linked to the amount of premium. They can earn between 12 to 24 months of the savings. If you save $300 a month, you may lose $7,200 of your savings to pay commission to the agent or the expenses and profit of the insurance company. This is a lot of money to give away, especially as the saving plan does not give you an attractive return (compared to saving in an low cost unit trust) and imposes a heavy penalty if the policy is terminated prematurely.
You should have your savings separately and buy Term Insurance or Family Income Benefit for 25 years or up to age 60 years (if this is shorter). This is adequate for most people. But you can consider your own financial situation to make a suitable decision. Do not be misled by an insurance agent or financial planner who is only interested in earning a higher commission.
Tan Kin lian
The consumer only need to buy life insurance up to the time that their youngest child reaches age 25. By that time, all the children would have been financially independent. This is likely to be age 60 or 65 (for those who have their children at an older age).
There is no need for life insurance after age 65. If the consumer had been prudent in having regular saving during their working life, they are likely to have sufficient savings to take care of their retirement needs. This could amount $250,000 for an ordinary wage earner or more for a high income earner. With this savings, there is no need for life insurance cover.
The agent likes to advice consumers to buy the most expensive insurance policy, as their commission is directly linked to the amount of premium. They can earn between 12 to 24 months of the savings. If you save $300 a month, you may lose $7,200 of your savings to pay commission to the agent or the expenses and profit of the insurance company. This is a lot of money to give away, especially as the saving plan does not give you an attractive return (compared to saving in an low cost unit trust) and imposes a heavy penalty if the policy is terminated prematurely.
You should have your savings separately and buy Term Insurance or Family Income Benefit for 25 years or up to age 60 years (if this is shorter). This is adequate for most people. But you can consider your own financial situation to make a suitable decision. Do not be misled by an insurance agent or financial planner who is only interested in earning a higher commission.
Tan Kin lian
Thursday, January 14, 2010
Life insurance for family protection
You only need to worry about life insurance when you have dependents, e.g. after you are married and have children. In the event of premature death, the life insurance policy will take care of the financial needs of your dependents.
You should buy a low cost life insurance, such as a Term Insurance or Family Income Benefit. If you take the insurance at a young age, you only need to insure for 25 years, as your children would have been financially independent on the expiry of the insurance. Furthermore, after 25 years, you would have accumulated sufficient savings, and life insurance is not needed at that time.
If you buy Term Insurance or Family Income Benefit at an older age, you can buy for a shorter period, e.g. until your youngest child reach age 25. If you take up the insurance when your youngest child is 10 years old, you only need insurance for 15 years.
The best insurance is actually a Family Income Benefit. You can insure for 60% of your current earnings. If your monthly income is $5,000, you can buy this insurance to pay $3,000 a month in the event of premature death (i.e. during the term), for a benefit that is payable for the remainder of the term. If you buy a 25 year insurance and death occurs after 10 years, the Family Income Benefit is payable for 15 years.
Alternatively, you can buy a Term Insurance to provide a lump sum of 5 years to 10 of your annual income, for a term of 25 years. If the term is less than 25 years, you can reduce the insurance sum proportionately. If you need insurance for the next 15 years, you can insure for 3 to 6 years of your income.
A Family Income Benefit is better than Term Insurance, as your family will not have to worry about investing the lump sum payable on premature death. Instead, they will receive a monthly income.
You can upgrade your Term Insurance or Family Income Benefit every 3 to 5 years, to increase the insurance in line with your higher earnings. However, even if you do not, the basic benefit should already cover most of your financial needs of your family.
You can visit this website to get an indication of the premium rate that you should be paying for Term Insurance. Although the website is for America, you can get an idea about the premium that you should be paying for similar insurance in Singapore. I have not been able to find a website to give the premium rate for Family Income Benefit.
Tan Kin Lian
You should buy a low cost life insurance, such as a Term Insurance or Family Income Benefit. If you take the insurance at a young age, you only need to insure for 25 years, as your children would have been financially independent on the expiry of the insurance. Furthermore, after 25 years, you would have accumulated sufficient savings, and life insurance is not needed at that time.
If you buy Term Insurance or Family Income Benefit at an older age, you can buy for a shorter period, e.g. until your youngest child reach age 25. If you take up the insurance when your youngest child is 10 years old, you only need insurance for 15 years.
The best insurance is actually a Family Income Benefit. You can insure for 60% of your current earnings. If your monthly income is $5,000, you can buy this insurance to pay $3,000 a month in the event of premature death (i.e. during the term), for a benefit that is payable for the remainder of the term. If you buy a 25 year insurance and death occurs after 10 years, the Family Income Benefit is payable for 15 years.
Alternatively, you can buy a Term Insurance to provide a lump sum of 5 years to 10 of your annual income, for a term of 25 years. If the term is less than 25 years, you can reduce the insurance sum proportionately. If you need insurance for the next 15 years, you can insure for 3 to 6 years of your income.
A Family Income Benefit is better than Term Insurance, as your family will not have to worry about investing the lump sum payable on premature death. Instead, they will receive a monthly income.
You can upgrade your Term Insurance or Family Income Benefit every 3 to 5 years, to increase the insurance in line with your higher earnings. However, even if you do not, the basic benefit should already cover most of your financial needs of your family.
You can visit this website to get an indication of the premium rate that you should be paying for Term Insurance. Although the website is for America, you can get an idea about the premium that you should be paying for similar insurance in Singapore. I have not been able to find a website to give the premium rate for Family Income Benefit.
Tan Kin Lian
Big pay packets in Wall Street
The big pay packets are now receiving attention from various quarters. Read this article.
Wednesday, January 13, 2010
Buying Term Insurance from America
Someone asked me about the risk of buying Term Insurance from America. They premium rate is much lower than the rates available in Singapore and it is easy to buy through the internet. Here is an example of a website.
I am not aware about any risk. I believe that it should be quite easy to make a claim, if the need arises. You should choose a financially strong and reputable company. I have asked two lawyers to give me their views. I will past the replies when I received them.
Of course, it is better to buy Term Insurance from an insurance company in Singapore, provided that the premium rate is competitive and they make it easy to buy directly through the internet. It is all right for you to pay up a higher premium for the convenience and assurance, but the difference should not exceed 20% compared to the best rates available in America. I hope that competition in Singapore should force the premium rate down to the same level as in America (as the life expectancy and health status in Singapore is better than in America.
Tan Kin Lian
I am not aware about any risk. I believe that it should be quite easy to make a claim, if the need arises. You should choose a financially strong and reputable company. I have asked two lawyers to give me their views. I will past the replies when I received them.
Of course, it is better to buy Term Insurance from an insurance company in Singapore, provided that the premium rate is competitive and they make it easy to buy directly through the internet. It is all right for you to pay up a higher premium for the convenience and assurance, but the difference should not exceed 20% compared to the best rates available in America. I hope that competition in Singapore should force the premium rate down to the same level as in America (as the life expectancy and health status in Singapore is better than in America.
Tan Kin Lian
Educating our young - views posted in survey
Views posted in the survey
1. Please don't force the children to buy useless textbooks which are not comprehensive enough. At the moment there is a huge sideline industry for other "outside" study guides which are a thousand times better than the school textbooks! It penalises the children from poor families who already spend all their money on the Official textbooks.
2. Children learn the selfishness from parents. Parents are selfish because of the education system here. So, the root cause is the education system here. Under the current system, only those who can perform better academically will be "rewarded" with a place in "good" school. Consequently, lucrative career awaiting them in government service. As there are limited vacancies in these "good" schools, do you think parents would share useful info among their friends so that children of their friends would land a place in these good schools? That's how the selfishness begins and unwittingly pass it to the next generation...sad!
3. University degrees ought not to be valued over other factors in recruitment, unless the technical knowledge or skills required are those that cannot be acquired otherwise (medical, engineering, or specific professional degrees). For example, an general office worker does not require a degree to be competent; rather, what should be required are good language skills and other skills that are relevant to the job. A university degree may be a sufficient condition, but it ought not be a necessary condition.
4. Good results/certification does not equal to good future.
Participate in the survey by clicking on this link.
1. Please don't force the children to buy useless textbooks which are not comprehensive enough. At the moment there is a huge sideline industry for other "outside" study guides which are a thousand times better than the school textbooks! It penalises the children from poor families who already spend all their money on the Official textbooks.
2. Children learn the selfishness from parents. Parents are selfish because of the education system here. So, the root cause is the education system here. Under the current system, only those who can perform better academically will be "rewarded" with a place in "good" school. Consequently, lucrative career awaiting them in government service. As there are limited vacancies in these "good" schools, do you think parents would share useful info among their friends so that children of their friends would land a place in these good schools? That's how the selfishness begins and unwittingly pass it to the next generation...sad!
3. University degrees ought not to be valued over other factors in recruitment, unless the technical knowledge or skills required are those that cannot be acquired otherwise (medical, engineering, or specific professional degrees). For example, an general office worker does not require a degree to be competent; rather, what should be required are good language skills and other skills that are relevant to the job. A university degree may be a sufficient condition, but it ought not be a necessary condition.
4. Good results/certification does not equal to good future.
Participate in the survey by clicking on this link.
Financial Inquiry Commission
The US Congress set up a Financial Inquiry Commission to investigate the causes of the financial crisis. Some knowledgeable people and the media have identified questions to be posed to the large banks that were involved in the crisis. The questions are shown here:
Ten Questions A Financial Inquiry Commission MUST Ask
by Eliot Spitzer, William Black, and Frank Partnoy
http://en.wikipedia.org/wiki/
http://www.businessinsider.
My questions for 4 bank CEOs
Mr Keith Hennessey, an ex-senior White House economic advisor to former president
George W Bush, is one of the members of the 10-member panel..
http://en.wikipedia.org/wiki/
http://keithhennessey.com/
Questions for the Big Bankers
The New York Times's Op-Ed editors asked eight financial experts
to pose questions they would like to hear the bankers answer.
http://www.nytimes.com/2010/
Ten Questions A Financial Inquiry Commission MUST Ask
by Eliot Spitzer, William Black, and Frank Partnoy
http://en.wikipedia.org/wiki/
http://www.businessinsider.
My questions for 4 bank CEOs
Mr Keith Hennessey, an ex-senior White House economic advisor to former president
George W Bush, is one of the members of the 10-member panel..
http://en.wikipedia.org/wiki/
http://keithhennessey.com/
Questions for the Big Bankers
The New York Times's Op-Ed editors asked eight financial experts
to pose questions they would like to hear the bankers answer.
http://www.nytimes.com/2010/
Unemployment in Singapore
I need your help to do some research on unemployment in Singapore
a) How many citizens and permanent residents lose their job each year, due to retrenchment or business failure of their employers, i.e. not due to change of job? It varies from one year to another, but I like to have an average over a number of years.
b) What is the proportion of people who lose their job, i.e. taking this average number as a percentage of those in the workforce.
c) How long does it take to find a new job and what is the average salary for the new job compared to the job that was lost? This statistics may be difficult to get, but I hope that some approximate figures are available.
d) How long does it take a school leaver to find a full time job?
You can post your findings here or send them to kinlian@gmail.com
a) How many citizens and permanent residents lose their job each year, due to retrenchment or business failure of their employers, i.e. not due to change of job? It varies from one year to another, but I like to have an average over a number of years.
b) What is the proportion of people who lose their job, i.e. taking this average number as a percentage of those in the workforce.
c) How long does it take to find a new job and what is the average salary for the new job compared to the job that was lost? This statistics may be difficult to get, but I hope that some approximate figures are available.
d) How long does it take a school leaver to find a full time job?
You can post your findings here or send them to kinlian@gmail.com
Tuesday, January 12, 2010
Speech by Franklin D Roosevelt
Three score and six years ago, the greatest president of the 20th century gave one of his greatest speeches. On Jan. 11, 1944, in a State of the Union address that deserves to be ranked with Lincoln's "Gettysburg Address" and King's "I Have a Dream" speech, President Franklin D. Roosevelt called for recognition of a "Second Bill of Rights."
According to FDR:
"This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights -- among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty. As our nation has grown in size and stature, however -- as our industrial economy expanded -- these political rights proved inadequate to assure us equality in the pursuit of happiness."
"We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. 'Necessitous men are not free men.' People who are hungry and out of a job are the stuff of which dictatorships are made.
In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all -- regardless of station, race, or creed."
President Roosevelt was not promoting economic rights that were necessarily enforceable in court, but rather economic benefits and opportunities that every American should expect to enjoy by virtue of citizenship in our democratic republic.
Many of the rights he identified have been secured by programs with bipartisan support. These include "the right to a good education" (the G.I. Bill, student loans, Pell Grants, Head Start, federal aid to K-12 schools) and "the right of every family to a decent home" (federally subsidized home loans and tax breaks for home ownership). But even before the global economic crisis, the U.S. fell short when it came to full employment -- "the right to a useful and remunerative job in the industries or shops or farms or mines of the nation" -- and a living wage -- "the right to earn enough to provide adequate food and clothing and recreation."
According to FDR:
"This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights -- among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty. As our nation has grown in size and stature, however -- as our industrial economy expanded -- these political rights proved inadequate to assure us equality in the pursuit of happiness."
"We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. 'Necessitous men are not free men.' People who are hungry and out of a job are the stuff of which dictatorships are made.
In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all -- regardless of station, race, or creed."
President Roosevelt was not promoting economic rights that were necessarily enforceable in court, but rather economic benefits and opportunities that every American should expect to enjoy by virtue of citizenship in our democratic republic.
Many of the rights he identified have been secured by programs with bipartisan support. These include "the right to a good education" (the G.I. Bill, student loans, Pell Grants, Head Start, federal aid to K-12 schools) and "the right of every family to a decent home" (federally subsidized home loans and tax breaks for home ownership). But even before the global economic crisis, the U.S. fell short when it came to full employment -- "the right to a useful and remunerative job in the industries or shops or farms or mines of the nation" -- and a living wage -- "the right to earn enough to provide adequate food and clothing and recreation."
Utopia of welfare corporatism
Dear Mr. Tan,
I believe this article has strong relevance to our situation in Singapore: http://www.salon.com/news/opinion/feature/2010/01/11/second_bill_of_rights/index.html.
Some of the things that Mr. Lind mentions are occuring here.
"In the utopia of welfare corporatism, today's public benefits -- Social Security, Medicare, unemployment insurance and, in a few states, public family leave programs -- would be abolished and replaced by harebrained schemes dreamed up by libertarian ideologues at corporate-funded think tanks like the Cato Institute and the Heritage Foundation. Tax subsidies would be funneled to insurance companies, brokers and banks. Social Security would be replaced by a bewildering miscellany of tax-favored personal savings accounts. Medicare would be replaced by a dog's breakfast of tax subsidies for purchasing health insurance and personal medical savings accounts. Unemployment insurance would give way to yet another Rube Goldberg scheme of tax-favored unemployment insurance accounts. As for family leave -- well, if you're not wealthy enough to pay out of pocket for a nanny for your child or a nurse for your parent, you're out of luck."
I also agree with this:
"The strongest case for economic citizenship instead of welfare corporatism is economic. Economic citizenship is more efficient and cheaper in the long run, because the government need only meet costs, while subsidized private providers must make a profit."
Balbindar
I believe this article has strong relevance to our situation in Singapore: http://www.salon.com/news/opinion/feature/2010/01/11/second_bill_of_rights/index.html.
Some of the things that Mr. Lind mentions are occuring here.
"In the utopia of welfare corporatism, today's public benefits -- Social Security, Medicare, unemployment insurance and, in a few states, public family leave programs -- would be abolished and replaced by harebrained schemes dreamed up by libertarian ideologues at corporate-funded think tanks like the Cato Institute and the Heritage Foundation. Tax subsidies would be funneled to insurance companies, brokers and banks. Social Security would be replaced by a bewildering miscellany of tax-favored personal savings accounts. Medicare would be replaced by a dog's breakfast of tax subsidies for purchasing health insurance and personal medical savings accounts. Unemployment insurance would give way to yet another Rube Goldberg scheme of tax-favored unemployment insurance accounts. As for family leave -- well, if you're not wealthy enough to pay out of pocket for a nanny for your child or a nurse for your parent, you're out of luck."
I also agree with this:
"The strongest case for economic citizenship instead of welfare corporatism is economic. Economic citizenship is more efficient and cheaper in the long run, because the government need only meet costs, while subsidized private providers must make a profit."
Balbindar
Prices of HDB Flats
Some comments in the survey
1. HDB Flat used to be financed by one breadwinner with 20 years loan period in the past, but now it is financed by double-income family yet stretched to 30 years, this is a reflection of un-affordability in price.
2. Most young (<30 years old) are willing to spend more on repayment because they think that their salaries will increase and with more income in future, the repayment % will go down> They are not aware that the 23% that goes into the cpf OA when they are fresh out of school will be reduced to 19% when they are 35 and even lesser as they grow older. Even under a 5% yearly salary increment without hitting the 4k cpf cap, the 5% increment cannot cover the drop in 4% to the cpf OA.
3. I hope that HDB does not act like a private company like Capitland. If so, then it should be listed like a REIT in SGX.
4. I think prices should reflect the national income level and should not be subject to speculation or COV. Because HDB monopolises the public housing market, their priority should be to ensure prices remain within the means of the average Singaporean. HDB housing should also only be made available to Singapore citizens and not permanent residents. It is highly unfair for permanent residents to be entitled to buy a HDB flat and later on sell for a profit when there is no 100% guarantee that they intend to live in the country until the day they croak. If the government sincerely believe that Singaporeans are their priority - this is the key area they need to seriously look into or make proper adjustments before it's too late.
1. HDB Flat used to be financed by one breadwinner with 20 years loan period in the past, but now it is financed by double-income family yet stretched to 30 years, this is a reflection of un-affordability in price.
2. Most young (<30 years old) are willing to spend more on repayment because they think that their salaries will increase and with more income in future, the repayment % will go down> They are not aware that the 23% that goes into the cpf OA when they are fresh out of school will be reduced to 19% when they are 35 and even lesser as they grow older. Even under a 5% yearly salary increment without hitting the 4k cpf cap, the 5% increment cannot cover the drop in 4% to the cpf OA.
3. I hope that HDB does not act like a private company like Capitland. If so, then it should be listed like a REIT in SGX.
4. I think prices should reflect the national income level and should not be subject to speculation or COV. Because HDB monopolises the public housing market, their priority should be to ensure prices remain within the means of the average Singaporean. HDB housing should also only be made available to Singapore citizens and not permanent residents. It is highly unfair for permanent residents to be entitled to buy a HDB flat and later on sell for a profit when there is no 100% guarantee that they intend to live in the country until the day they croak. If the government sincerely believe that Singaporeans are their priority - this is the key area they need to seriously look into or make proper adjustments before it's too late.
Sports Hub to be ready by 2015
The Sports Hub was supposed to have been completed earlier. Now it will be ready by 2015, a few years behind schedule. The delay was due to financing problems faced by the developer.They were not able to raise the funds during the financial crisis and had to stop work.
I have always considered that public infrastructure and facilities should be owned by the state. The funding of these assets should not be privatized, as this would bring along a host of problems, such as the rate of return to be allowed to the investors on the monopoly. In this particular case, the financiers, i.e. the banks, had to deal with the problem of the viability of the project and the financial standing of the asset owner and hub operator.
If the state owns the assets, they will also have to deal with these issues. But, there is now a culture in Singapore to avoid taking the responsibility to make the hard decisions and to pass the them to the private sector and the market and let them find a solution.
A problem does not get solved when it is made by complicated or passed to people who have less resources to handle them. The private sector has to deal with all of the viability and operational issues, and also have to worry about raising the funds and, unlike the state, it does not have a AAA credit rating.
A better approach is for the state to own the Sports Hub and to lease it to the operator at an annual fee. I hope that the lesson of the Sports Hub will be learned and that the funding of mega-projects are not outsourced to the private sector in the future.
Tan Kin Lian
I have always considered that public infrastructure and facilities should be owned by the state. The funding of these assets should not be privatized, as this would bring along a host of problems, such as the rate of return to be allowed to the investors on the monopoly. In this particular case, the financiers, i.e. the banks, had to deal with the problem of the viability of the project and the financial standing of the asset owner and hub operator.
If the state owns the assets, they will also have to deal with these issues. But, there is now a culture in Singapore to avoid taking the responsibility to make the hard decisions and to pass the them to the private sector and the market and let them find a solution.
A problem does not get solved when it is made by complicated or passed to people who have less resources to handle them. The private sector has to deal with all of the viability and operational issues, and also have to worry about raising the funds and, unlike the state, it does not have a AAA credit rating.
A better approach is for the state to own the Sports Hub and to lease it to the operator at an annual fee. I hope that the lesson of the Sports Hub will be learned and that the funding of mega-projects are not outsourced to the private sector in the future.
Tan Kin Lian
US Congress inquiry into the Financial Crisis
The US Congress is conducting an inquiry into the cause of the financial crisis. Here are some questions to be asked.
Authorities act on money lenders
Parliament has passed the Money lender's Amendment Bill. Singaporeans can now celebrate. With this new law, the Police can now take action on this menace - the vandalism committed by loan sharks against the properties of the borrowers, and against innocent neighbors whose flats were vandalized by mistake.
It appears that in this law abiding country, there was no law against vandalism in the past - that the Police were powerless to act against the loan sharks and vandals under the existing law. Surely, this cannot be the situation in Singapore?
More worrisome is my feeling that the Police did not act, because they were waiting for a decision at the top level, that this problem needs to be tackled. It seems that we have now developed a culture in Singapore to avoid responsibility and initiative, and to wait for the "boss" to decide for us.
Tan Kin Lian
It appears that in this law abiding country, there was no law against vandalism in the past - that the Police were powerless to act against the loan sharks and vandals under the existing law. Surely, this cannot be the situation in Singapore?
More worrisome is my feeling that the Police did not act, because they were waiting for a decision at the top level, that this problem needs to be tackled. It seems that we have now developed a culture in Singapore to avoid responsibility and initiative, and to wait for the "boss" to decide for us.
Tan Kin Lian
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