Let's say your degree costs $7,000/year, so it works out to be $28,000 for a 4-year course.
Then, suppose that in place of studying, you got a job that paid $1,200/month. You'll earn $57,600 in 4 years.
Total opportunity cost: $85,600.
After buying the T-bills just once, the yield nose-dived to near 0.5%. The most recent one (26 Dec 2008) is just 0.40%.
DBS Group Holdings, South-east Asia's biggest bank by assets, said on Monday it plans to raise about S$4 billion in a rights issue.
The funds will beef up the bank's balance sheet at a time when global investors favour financial institutions with higher capital levels, DBS said in a statement.
'DBS is initiating this capital-raising exercise from a position of strength,' chief executive officer Richard Stanley said in a statement.
'Our business continues to perform well despite the challenges of the global economic downturn.
'The rights issue will enable DBS to capture opportunities to entrench our market position in key Asian markets and confidently weather the economic uncertainties ahead.'
DBS said the capital to be raised from the rights issue is not meant for mergers and acquisitions (M&A) or extraordinary provisions.
Neither is it designed for a 'clean-up of our balance sheet,' Mr Stanley said during a conference call with the media.
'On the contrary, we are currently well-provisioned and it is not to fund any M&A activities,' he said.
Mr Stanley said he expects 2009 to be a challenging year with the global economy still hurting from financial turbulence that swept across the world this year.
'The real economy continues to be challenged for reasons that we all know.
It's no secret,' he said.
The global crisis has its roots in tainted mortgage-related assets linked to US financial institutions. Governments in the US and Europe were forced to step in and bail out their troubled banks.
DBS expects its provisions and non-performing loans to be 'up somewhat but we don't expect it to be a major spike', Mr Stanley said.
Analysts from Credit Suisse cited several possible reasons for the rights issue. They said the move could be intended to plug a potential fourth-quarter loss or to fund growth of Singapore dollar-denominated loans.
It that 'the fresh equity would allay a lot of market concerns and remove some of the discount' in relation to Singapore's other banks, UOB and OCBC.
DBS said in November that third-quarter net profit fell 38 per cent year-on-year to S$379 million as market-related income took a hit from the global financial crisis and bigger provisions.
Also last month, the bank said it was cutting 900 staff to trim costs during the credit crisis. DBS became the first major Singaporean firm to announce job cuts of such magnitude.
The bank will offer 760.48 million new ordinary shares at S$5.42 each on the basis of one rights share for every two shares held on Dec 31, said DBS.
The rights issue share price is a 45 per cent discount to the bank's closing stock price of $9.85 on Friday, it said.
Singapore investment firm Temasek Holdings, the largest shareholder in DBS with a 27.6 per cent holding, will subscribe for up to 33.3 per cent of the rights issue.
Temasek Holdings' stake in DBS will remain under 30 per cent even after taking up the rights issue, said Mr Stanley.
DBS is the largest of Singapore's three major banks and has operations in 16 markets including Hong Kong, China and Dubai.
In November Standard Chartered bank, which is listed in Hong Kong and London, said it plans to raise 1.78 billion pounds (S$3.84 billion) in a rights issue to better position itself during the global financial turmoil.
DBS shares ended down 48 cents at S$9.37 Singapore.
DBS has always been very proactive in raising capital. It was the first to raise funds using preference shares. Then OCBC and UOB followed suit.
Now DBS issues rights. Could the other two banks be close behind?
FORMER labour chief Lim Boon Heng has ruled out a cut in CPF rates - which was the case in past severe economic downturns - for now.
There is already a lot that can be done to trim wage costs, as the wage system has become more flexible, he told unionists on Friday night.
'We have learnt from past recessions that the use of the CPF cut is a blunt instrument,' said Mr Lim, who is Minister in the Prime Minister's Office.
That is why a flexible wage system had been developed over the years.
'For rank-and-file workers, 20 per cent of the annual wage is in flexible bonuses and 10 per cent is in the monthly wage component (MVC). (So) 30 per cent of the annual wage is flexible. For executives and managers, the flexible component is even higher,' he noted.
'Therefore there is already a lot that can be done to trim wage costs. Apart from using the flexible wage system, companies can also use shorter work weeks. We developed this flexibility so that we do not need to use the CPF cut.
'We should therefore see how the flexible wage system works in this downturn. A CPF cut is not justified at this point in time.'
Mr Lim's remarks at a dinner on Friday night, and released to the media today, came days after the National Wages Council (NWC) announced it would take the unusual step of meeting next month to revise wage guidelines it set earlier this year.
That announcement prompted some speculation among economists that there would be a cut in contribution rates to the Central Provident Fund, the national social security savings plan.
But Mr Lim quashed this speculation in his speech at the 27th anniversary dinner of the Singapore Industrial & Services Employees' Union (Siseu), one of the largest unions here with 54,000 members.
He acknowledged that companies need to trim costs to survive the downturn, but said Singapore was fortunate to have built up a flexible wage system over the years.
'Bonuses can be cut. The monthly variable component (MVC) can also be cut if needed. Other measures include a shorter work-week with corresponding reductions in wages,' he pointed out.
'This is our advantage. There is no other country I know that has such a range of options open to employers, with unions that are willing to support such measures.
'I believe all employers here know that the proposed bail-out of the US car manufacturers failed because the unions were unwilling to concede on wage cuts. Our unions are willing to accept cuts, because when companies do well, employers will pay our workers their dues.'
Here's another way of putting it: we will cut the cash component, leaving you with less cash, rather than cutting CPF and leaving the Government with less cash.
(Let's face it. Most employers will be under pressure to reduce cost in 2009. Reducing employees' pay is an easy avenue.)
Technically, CPF is still your money. However, the Government is its custodian for most of your life.
Most people adopt the attitude that since you can't touch CPF for such a long time, you might as well make full use of it. Little wonder that anything that can be paid using CPF goes sky-high.
I always have this issue where I buy something, but I pay for it later. The transaction (or purchase) date and billed date do not match. The most common example is the credit card bill. I prefer to track the transaction date, as I have spent the money there and then. However, the bills show the billed date.
I'm going to add a new column to my bank statement tracking worksheet to track the transaction date.
0.9% rate sees more interest but analysts warn of risks
INSTALMENTS for many home loan borrowers are set to fall after the all-important interest rate at which banks lend funds to one another nosedived to about 0.9 per cent this month.
Many home loan packages are pegged to this rate - known as the three-month Singapore Interbank Offered Rate (Sibor) - so when it goes down, so do Sibor- linked home loan instalments.
According to economists, the three-month Sibor should remain at these depressed levels into the new year.
OCBC Bank economist Selena Ling said the three-month Sibor is reacting to a couple of factors.
One is the widespread market expectation that the US Federal Reserve will cut its Fed funds target rate to 0.25 per cent from 1 per cent at its meeting on Tuesday.
The Sibor closely tracks this rate.
Another factor: continued measures by the Singapore authorities to pump liquidity into the system, against a backdrop of global and domestic recession.
In September, the three- month Sibor spiked to 2 per cent as the global credit crunch hit home here. Banks were afraid to lend to one another for fear of not getting repaid.
With the rate coming down sharply, more and more home buyers are looking at Sibor- linked loan packages.
Mr Geoffrey Ying, head of the mortgage division at financial advisory firm New Independent, estimates that six out of every 10 customers he is seeing are enquiring about Sibor-linked packages not only for high-end units, but also for HDB flats.
A year ago, when Sibor was significantly above 1 per cent, only three or four customers out of 10 would show interest.
It is easy to see why Sibor- linked packages have become the talk of the town, given the potential savings.
Suppose you want to buy an HDB flat. The best rate in the market is the 2.6 per cent annual rate for those qualifying for an HDB concessionary loan. This rate is pegged at a level 0.1 percentage point above the prevailing CPF ordinary account interest rate.
By comparison, at Standard Chartered Bank, for example, if you choose a two-year lock-in, its Sibor-linked package works out to Sibor plus a spread of - in this case - 0.95 per cent.
So if three-month Sibor stands at 0.9 per cent, you pay an annual rate of 1.85 per cent - lower than the HDB concessionary rate.
Still, financial experts say homebuyers must be careful. When Sibor falls, borrowers with a loan pegged to it gain as they will be paying a lower interest rate. But conversely, if the benchmark rate heads up, mortgage instalments also rise.
'We think though, that Sibor still has the potential to spike up, given that risks still remain out there,' a United Overseas Bank spokesman said.
Borrowers need to think carefully about choosing between two loan options, experts say.
Since January 2003, when banks were first allowed to provide loans for HDB flats, many homebuyers have opted for Sibor-linked packages as Sibor was very low, said Mr Leong Sze Hian, president of the Society of Financial Service Professionals.
In June 2003, the three-month Sibor bottomed out at 0.5625 per cent, but then surged to as high as 3.56 per cent three years later.
Mr Leong said that historically, the HDB rate of 2.6 per cent has been lower than rates for Sibor-linked packages.
More importantly, homebuyers with an HDB concessionary loan who switch to a bank loan cannot go back to the HDB if bank rates suddenly rise above the board's 2.6 per cent concessionary rate.
Experts think that banks are far more inclined than the HDB to repossess properties in the case of loan default.
'During the economic slowdown, there'll be people who'll struggle to meet monthly payments. Sure, Sibor- linked rates are low now, but if you want certainty, you'll choose HDB's,' said Mr Patrick Lim, associate director of financial advisory firm PromiseLand.
Take Mr David Lee, for instance. The 35-year-old engineer said that even though he is paying more now because he chose an HDB concessionary loan, he is not going to switch to a Sibor- linked package any time soon.
'I don't mind the slightly higher rate for peace of mind,' he said.
Mrs Ong-Ang Ai Boon, director of the Association of Banks in Singapore, is on record as saying that 'repossession would be a last resort, after all other measures have failed'.
One factor to decide whether to refinance is the remaining loan duration. If it's less than five years, it's probably safe to do so as the SIBOR is expected to remain low for the next two years.
I won't opt for 1.85% just because it's lower than HDB's 2.6%. SIBOR of 0.9% will not persist for years.
THE number of defaults on HDB home loans is expected to increase if the economy 'goes down even further', said National Development Minister Mah Bow Tan on Friday.
'As we all expect, if there are further job losses, then inevitably there will be more arrears cases coming up,' he said at HDB Hub.
Measures to help struggling home owners have been in place since the last downturn. These include deferring payments, downsizing flats or extending loans.
Parliament was told recently that there are about 33,000 flat owners owing the HDB arrears of three months or more. They comprise less than 8 per cent of the 420,000 households with HDB loans.
Mr Mah was responding to a question by The Straits Times about plans to help such home owners in the downturn.
'We have to look at individual cases to see what is the situation for each particular case. The main criteria is to help them to tide over...to make sure there is a sustainable solution,' he said.
He said deferring mortgage payments does not help in the longer term as home owners still have to pay and interest builds up.
Owners are encouraged to downgrade if they cannot afford a large flat, and if they have financial difficulties, HDB could extend another loan, he added.
This is an example of a sustainable solution, 'making sure that their loans are smaller... and they are able to survive this crisis and build up their finances from then on', said Mr Mah.
This is a very interesting piece of news. The Straits Times never publish something that is not already on the pipeline. In this case, the cases must have already been happening, but the official statistics have not been released yet.
Most teens with allowances don't think recession will curb their spending: Poll
SINGAPORE'S school-going children seem unaware of terms such as 'recession' or 'economic downturn'.
To the average teenager, a budget meal costs $8 at a fast-food outlet and saving means putting aside money for a 'cool' $248 iPod nano. When they run out of cash, they just ask their parents for more.
The Straits Times polled 100 students - aged 13 to 19 - who received pocket money. Their responses showed most of them did not think the current recession here would affect their spending habits or that of their families.
The students who were polled received an average weekly allowance of $20 to $30 - in addition to extra funds for transport and mobile phone bills.
Almost 60 of those surveyed said they spent three quarters or more of their allowance. When their cash ran out, they asked for more, with as many as 86 per cent thinking that this was acceptable.
Xavier Ong, 14, gets $100 a week in addition to his transport and mobile phone expenses. However, he said that when he needs more money, he asks his parents.
Tiffany Li, 15, eats out at least four times a week, spending $6 to $8 on each meal. She dines at cafes and fast-food outlets rather than at school and eats only dinner at home because, as she puts it: 'If we can afford it, why not?'
Dr Brian Lim, head of communication at SIM University, who does research on youth social behaviour and popular culture, said many young people 'spend money like there is no tomorrow'.
He came to this conclusion after organising a focus group discussion with 30 teenagers aged 18 and 19 in early January.
He blamed working parents who do not spend enough time with their children during the week, and so 'compensate by giving money'.
It is a habit that encourages young people to think there is a never-ending source of money, and there is no need to save - except for the latest gadgets or for fancy meals and entertainment.
As Darrell Low, 16, defined it: 'My savings is the money that I put in a drawer. I take it out when I go out with my friends.'
However, parents say teens put pressure on each other to spend.
'They tend to compare what they have with one another and there is peer pressure when one teen is spending lavishly,' said Madam Athena Chong, 52, an administrator and mother of two, including a 14-year-old son.
'Peer pressure is something that happens as teenagers want to be part of a certain crowd that they hang out with,' said Mr Teo Tee Loon, 40, executive director of Lakeside Family Centre.
'Inevitably, it means having the same things, which they will try to obtain even if they cannot afford it.'
Mr Ryan Soh, chief executive officer of MoneyTree Singapore, a group that teaches young people how to save money, suggested parents work within their budgets when deciding how much pocket money to give their children.
'What needs to be emphasised is saving first before spending - a concept not reinforced by parents.'
Otherwise, the young will grow into adults without knowing the value of money, said Mrs Choo Jin Yi, who runs money management programmes for teens.
She is also the academic manager for the diploma in banking and financial services at Ngee Ann Polytechnic.
'The young will be overly optimistic about their ability to 'upkeep' their lifestyle, thinking nothing bad will happen to them. They could end up in debt, or worse, bankrupt,' she said.
Teen spending lags behind the slowdown. Parents skim on themselves while trying to maintain the same standards for their children. Wait until they can't do so anymore. That could come in another few months.
I rake my head very hard to recall the gifts I've given to other people over the years. It shouldn't be very difficult because I have not given out many gifts. :-)
I'm just not a giver. I also hope people don't give me gifts, especially on my birthday, because it means I got to reciprocate. Small gifts are still fine. Big gifts stretch my budget and I need to put in effort to find something appropriate.
I believe that the most expensive gift that I've given, other than wedding ang pows, is $100.
My father thought very poorly of my idea of turning the fridge off. To stop me, he bought some perishables to populate the fridge and now I'm forced to leave it on.
The utilities when my father was around was $65. It'll take a while to revert to our previous average.
Recently, my father gave me the unsolicited advice that I should be more generous with spending. Women like that, he said. Shows what my father think of me. I kept my mouth shut.
With a father like that, who needs enemies?
Singaporeans these days are less confident of surviving without their main source of income, according to a recent survey conducted by American International Assurance (AIA) Company.
The AIA survey showed that only 19 per cent of interviewees said they could get by for more than two years without a primary source of income — down from 27 per cent a year before.
The survey was conducted between June and July this year, so the results and findings did not take into account the recent episode of financial products linked to failed US investment bank Lehman Brothers.
It also did not factor in the global financial developments in the past few months.
The survey suggested that Singaporeans are now more aware that they cannot cope without an income. Due to inflation, a person's savings for future plans may only last for less than a year.
One Singaporean, who was asked if he has saved enough to get by without an income, said: "I wouldn't know if I have prepared enough as I go on. I don't know how long I'll live."
"Even if I get a big pay check, I don't go out and spend. I'm like a squirrel — I like to save my money, watch the number grow and not spend it," another added.
"I've taken away my cable TV, and I've started shifting to NTUC for grocery purchases. I'm going to sell my car. It's going to be tough times," another responded.
More than 1,200 people over 18 years old were surveyed.
This is an age-old question: how long can your savings last?
20% claimed they can survive a year without working... I am skeptical.
I only have two planned toy expenses for 2009.
The first is MP-08, Grimlock. It should be around S$120. I don't plan to buy any transformers toy except for the MP series.
The second is the Beagle Mospeada rider. Stick's figure was just released at around S$300. I'm aiming for just one figure: Houquet.
I saw a couple of books that I was interested in. In the past, I would have gotten them without a thought. They were cheap, about $20 each.
However, I did not buy them. I decided to borrow from the library instead. On the other hand, I spent $30+ on two comics. (Since they are not available from the library.)
And then, I decided to skip a colleague's church wedding, partly due to the cost consideration. If I had gone, I would need to give a $20 ang pow.
Sometimes, I wonder if I'm making the wrong choices in my attempt to reduce expenses.
I give people the impression that I am miserly. I do not think I deserve this reputation, but the truth is somewhere in-between.
Let's see. I'm not into food, so it's not natural for me to consider meals to entertain guests. My mistake was taking some relatives to a food-court when they expected restaurant-class food — it slipped my mind completely. It was dinner time and I just went to have dinner at my usual kind of place. This was a few years back. When my father let me know that my relatives think I'm cheap, I didn't bother to defend myself. (I don't care what others think of me. Perhaps I should.)
Another wrong impression is that I don't pay my share of expenses. Suppose my brother paid for a birthday dinner. I don't announce that I am sharing the cost. I just funds transfer to him. (I doubt he knows too, given his lax accounting.)
On the other hand, I sometimes ta-bao for my brother and he doesn't pay me. It would be nice if he does so automatically. But he doesn't and I don't ask for it.
A few years ago, my father asked me how come I never treat them. I just shrugged.
Another example. I was trying to find out how much water did the washing machine consume in a washing cycle. It was more to satisfy my curiosity than anything else. Bad timing, my cousin was staying with us. I hope he does not think I'm a control freak.
Still on the utilities. I want to use as little utility as possible. Not to the extreme that every appliance must not be used, but only when they are unused anyway. I finally managed to switch off the fridge after a few months of removing our dependency on it. Our utilities bill dropped from $45 to $30.
Many people took this the wrong way. Switching off the fridge sounds extreme. It is, but we didn't use it anyway. I don't aim for maximum efficiency. I am fine with leaving the modem/router on throughout the night because I usually surf to sleep. I'm not going to walk over to switch them off. I also leave the cordless phone on 24/7, although it can be switched off when I go to work.
And I'm not the one who pay the utilities bill. I take it as a challenge to reduce the usage with the least amount of effort and sacrifice.
I prefer to ride a motorcycle than drive a car. I think riding is the most economical way to get around in Singapore. This gives some people the impression that I'm cheap. Then, to cement my reputation, I got a car but still continue to ride more often.
I also give the impression that I don't like to spend. It's true, I don't like to spend unnecessarily. But if I need to, I will do it.
Perhaps it's the way I put it. Say, enjoying a branded coffee for $5 a cup. It's fine to do it once in a while, but once you start doing it regularly, then it becomes a permanent expense. Is that something you really want? Is there something else you rather do with that $5?
I'm very conscious about any permanent increase in expenses this year, because I want to keep my expenses as low as possible!
It has been quiet for a few years, then suddenly I got three red bombs from my colleagues this year, one each for the last three months of the year.
They were unexpected expenses — and unnecessary, perhaps?
Why should I attend my colleagues' wedding? Only the family, and perhaps relatives, should attend. It's really none of my business.
Indeed, I have some colleagues who didn't attend any of the three weddings. I was somewhat surprised, to tell the truth. It's not always easy to turn down social obligations.
These unexpected expenses account for 5% to 7% of my monthly expenses... quite significant when I'm trying to minimize my expenses.
It's the end of the year and it's almost time to do a "stock-take".
I tracked my expenses very meticulously this year. It works well. However, it's slightly too tedious and I will make some changes next year.
I track most expenses thrice, once in the bank statement tracking worksheet, the second in the expenses tracking worksheet and the third in a general-purpose expenses (by category) worksheet.
The word "tracking" means it's itemized.
The bank statement tracking worksheet is pretty vague. It tracks five broad categories of expenses (basic, cash, credit card, vehicle and others). I will add more details to it so that it can replace the general-purpose expenses worksheet.
I will remove CC as a category. It will be considered a mode of payment.
There were few instances where I was given cash when a loan was returned. I needed to deposit it to make it appear in the bank statement tracking worksheet. Then, I withdrew it to use it as cash. Recently, I realized that I just need to transfer an equivalent amount to my savings a/c and label it as a cash withdrawal.
The expenses tracking worksheet is still needed as it gives more details on the purchases. It is compulsary for frivolous purchases and big ticket items. Meals above $15 are now compulsary items. One-off items (such as gifts) should also be tracked.
There's a separate expenses tracking worksheet for vehicles. All the simple expenses will now be tracked in the bank statement tracking worksheet. Only the ones that require more details will be tracked separately.
Another thing I want to do is to account for annual expenses accurately. To do this, I will find out the values in my cashcards, ez-link cards, parking coupons and other stored value cards so that the unused amount will be deducted from this year's expenses.
American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) and the U.S. government have reached an agreement to clear the insurer of its obligations on about $53.5 billion in toxic mortgage debt, the giant insurer said in a regulatory filing on Tuesday.
The development is part of the U.S. Federal Reserve's agreement last month to buy up to $70 billion of toxic mortgage assets -- collateralized debt obligations -- underlying AIG credit default swaps (CDS), a type of debt guarantee.
AIG's responsibility to post collateral on the $53.5 billion in assets has been suspended, but will resume for any underlying assets that cannot be obtained, it said in the filing with the U.S. Securities and Exchange Commission.
The need to post increasing amounts of collateral to counterparties for these guarantees left AIG with deep losses over the last four quarters. It has lost $42.5 billion in that period.
Short of cash, the U.S. government saved AIG from bankruptcy in September with a rescue plan that has ballooned to about $152 billion.
Under the agreements disclosed by AIG, assets of about $46 billion have been obtained by the government. Another $7.4 billion is contingent on related counterparties obtaining underlying assets, AIG said.
The Federal Reserve has established two funds -- Maiden Lane II LLC and Maiden Lane III LLC -- to hold mortgage assets linked to AIG.
One will hold the assets underlying the AIG CDS, and the other entity will be for mortgage liabilities from a securities lending portfolio that caused additional losses for AIG.
The insurer puts up $5 billion and $1 billion for each fund, while the government provides $30 billion and $22.5 billion, respectively.
To date, the Federal Reserve has funded Maiden III, the facility which will be used to buy assets underlying CDS, with about $15 billion, according to a statement late Friday.
It had also paid out $40 billion to AIG in exchange for preferred shares. AIG has used those funds to put up the $5 billion for Maiden III, and most of the rest to pay down part of a $85 billion credit facility first extended by the government in September.
$53bil debt written off by the US government, just like that. No, it doesn't disappear. The taxpayers have to pay for it.
The US government is said to have spent $3tril out of a possible total cost of $7tril. I wonder which country will call its bluff first. And will the US then declare war on it?
Basic expenses were slightly lower than expected because the phone bills were not deducted.
I finally got some way overdue car parts ($159) that I ordered more than a year ago! I also sent my car and bike for inspection.
Other expenses were high due to yet another colleague's wedding (S$120), an outing and some "extravagant" meals.
Not being a food connoisseur, I'm easily satisfied with simple food. Thus, I don't really spend much on food.
However, I do try to eat different kinds of food every week. For me, it means fast food or western food.
I try to have 2 such meals a week. Even at this low rate, they already account for 20% – 25% of my food expenses.
Last weekend, a friend of mine asked me to go to Changi Village for dinner. Not having eaten the CV's nasi lemak for several months, I needed no persuasion. The drizzle made the weather very cooling.
It turned out my friend wanted to eat at Charlie's Place. It was very expensive: $13+ for a fish-n-chips, and then $3+ for a small bottle of root beer.
Needless to say, if my friend had mentioned to me beforehand, I would have suggested Botak Jones. It has much more economical prices. (Remember both are coffeeshop/hawker centre places.)
Now, I must admit the fish-n-chips was pretty good. But for $13+? I can only afford such "extravagant" meals once a month.
Also, the trip was around 40km round trip. I had no idea Toa Payoh was so far from Changi Village.
A few days later, my colleagues organized an "own-pay" lunch "in recognition of our hard work". Our department lunch had just been canceled due to cost cutting. One of them was also sore that his business trip was canceled.
I had the most expensive pasta ever — at $28+. However, the place had very nice deco, so you definitely know what to expect. It has a good setting for special dates.
(The $28+ was for a full meal, including starter and desert. The most expensive pasta I had eaten was $25 for just the pasta. I can't remember where I ate it. That was the best pasta I had ever eaten.)
The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments.
It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.
As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They make up less than 8 per cent of the 420,000 households with outstanding HDB loans.
Giving this update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad Maliki Osman said home owners should buy within their means.
But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit.
More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats.
Dr Maliki also said heavily subsidised rental flats should be given to those who are in dire need.
No statistics on those who took bank loans...
TWO town councils - Holland-Bukit Panjang and Pasir Ris-Punggol - have about $12 million invested in troubled structured products.
These products include Lehman Minibonds and Merrill Lynch Jubilee Series 3.
Senior Minister of State (National Development and Education) Grace Fu gave this update in Parliament on Monday, in response to a question from Nominated MP Eunice Olsen.
Since Dec 1 last year, the amount that town councils can invest in non-government stocks, funds or securities has been capped at 35 per cent of the sinking fund.
Holland-Bukit Panjang invested about 6.7 per cent of its total funds available for investment in the structured products, and Pasir Ris-Punggol, about 2.6 per cent.
The sinking funds are used to pay for long-term or cyclical expenditure, such as replacing lifts, pumps and pipes, re-roofing, and repairing and redecorating blocks.
The funds are also used to pay for lift upgrading, so that residents pay a smaller percentage of the total lift upgrading cost.
The sinking fund is distinct from the operating fund, which is used for short term expenditures.
Ms Fu said town councils need to invest their funds prudently so that the accumulated funds are not eroded by inflation.
The investment guidelines - which her ministry has no plans to change - seek to achieve an optimal balance between reasonable returns and financial prudence, she added.
She noted that investments in stocks, funds or securities must be on the advice of a qualified person, such as an investment adviser holding a licence under the Securities and Futures Act, and an approved bank or a merchant bank approved as a financial institution under the Monetary Authority of Singapore Act.
The 16 town councils manage more than $1 billion in sinking funds.
The first question on my mind was, do the TCs need so much sinking fund?
Long term expenses? Why not earmark them specifically?
LAYOFFS in Singapore are expected to surge next year, and the numbers are very likely to jump beyond the peak suffered during the 1998 Asian financial crisis. About 30,000 jobs were lost then. But it could be worse this time because the economic crisis is global, with most signs pointing to its effects slowing Singapore's economy for a longer period.
This gloom expressed by most economists and analysts interviewed yesterday was, however, not totally shared by labour chief Lim Swee Say, who is also a Minister in the Prime Minister's Office.
He believes there is 'some hope' that Singapore can stave off a higher retrenchment peak next year if companies hold off job cuts till the last minute.
But, he added, 'we are bracing ourselves for more retrenchments and rising unemployment'.
For this year, Mr Lim foresees the possibility of a retrenchment level of 'around 10,000 or less, and an overall unemployment rate of below 3 per cent'.
But this is conditional on companies being 'socially responsible' and not taking the short cut of axing jobs before implementing other cost-cutting options, he added.
In the first nine months of this year, about 6,000 jobs were lost while more than 200,000 jobs were created. Next year, jobs lost will likely outnumber jobs created.
Economists like Mr Leong Wai Ho, of investment bank Barclays Capital, pointed out that in 1998, 'we were fortunate to be able to export our way out of the slowdown'.
This time, the turmoil is worldwide, not confined to Asia. 'This suggests we are headed into rougher seas, and the voyage could be a longer one,' he said.
'The longer it lasts, the greater the pressure on corporate margins, the larger the likelihood that retrenchments could exceed what we saw in 1998.'
The treasury research head at United Overseas Bank, Mr Jimmy Koh, noted that in 1998, the countries affected accounted for only 10 per cent of global gross domestic product.
'Now, the countries affected account for 50 per cent of global GDP.'
Like most economists interviewed, he finds it difficult to predict how long it will take for the crisis to blow over.
Most economists are concerned about whether companies will move too swiftly and trim the excess workers accumulated in the last three years.
During this period, companies had been hiring aggressively in the face of strong economic growth.
Now, they may decide to downsize, said Citigroup economist Kit Wei Zheng.
But he cautioned against cutting jobs too fast as 'Asia is still the growth area'.
Like Mr Kit, Mr Kevin Ong, consulting leader for human resource consultancy Towers Perrin Singapore, does not foresee companies laying off workers at the first sign of trouble.
'Companies have learnt their lessons from previous downturns not to do so,' he added.
A survey his firm did last month shows reducing headcount is the least favoured cost-cutting tool of companies.
Most prefer to freeze hiring, cut travel and entertainment spending, and give lower pay increments.
'Companies will try to hold on to their staff and adjust the variable pay portion, such as bonuses and the monthly variable component first,' he said.
Singapore is late to the party. US firms are announcing their job cuts left and right. Perhaps it's tradition for US firms to announce before Christmas, and local firms to do so before the Chinese New Year. Best way to spoil your new year mood.
Reducing headcount may be the least favoured option, but the fact that companies do it anyway shows that either it is the easiest option or that it is inevitable (other steps have already been carried out).
Are you willing to take a 20% pay cut to save your colleagues? :-)
INVESTORS of Pinnacle Notes Series 9 and 10 on Friday received the crushing news that their investments will probably be wiped out.
The two notes are part of the Pinnacle Notes Series of credit-linked notes, issued by Pinnacle Performance and arranged by Morgan Stanley Asia.
It has emerged that the notes were linked to some of the biggest names to be battered by the global crisis, including US mortgage giants Freddie Mac and Fannie Mae and two banks in Iceland, which is virtually bankrupt as a nation.
According to notices posted on the New York bank's website on Friday, Standard & Poor's has cut the ratings of the underlying assets tied to Series 9 and 10 from AA to CCC-.
The drastic ratings downgrade was attributed to 'unprecedented events in the financial markets' which caused a writedown of the 'outstanding principal amount of the underlying assets' held by Pinnacle Performance as notes-issuer.
The underlying assets of the notes are synthetic collateralised debt obligations (CDO) securities, which backed the issuer for its obligations to noteholders and other secured creditors.
And because of the writedown, a mandatory redemption event has occured, meaning the assets of the notes would be sold, with investors getting only a 'pro-rata share' of the sales proceeds.
But the online notices hinted that noteholders are likely to not get any money back.
'Given the current market values of the underlying assets and the credit default swap transaction, we anticipate that investors will lose all of their original principal investment,' according to notices on the Morgan Stanley website.
An investor who called The Straits Times on Friday morning said: 'Terrible things have finally happened. Please help us! Get the MAS to intervene like how they did for Minibonds.'
Rumours of the plummeting value of the two notes have been circulating among investors here in recent weeks.
Industry sources and Pinnacle Notes investors said they were expecting an announcement by Morgan Stanley on Thursday that the two notes are now worthless.
The paranoia follows the fall of various structured products like Minibonds and DBS High Notes 5, linked to what used to be the fourth largest US investment bank, Lehman Brothers.
After Lehman filed for bankruptcy protection on Sept 15, investors in Singapore and Hong Kong cried foul after learning that their investments in complicated Lehman-linked products had fallen in value.
Lehman was again mentioned in the fallout of Pinnacle Notes Series 9 and 10.
A list of FAQs or 'frequently asked questions' prepared by Pinnacle Performance for distributors here explains that the principal writedown of the underlying assets, is due to credit events that have occured to reference entities related to it.
And those reference entities included Lehman, Fannie Mae and Freddie Mac, and Iceland's Kaupthing Bank and Landsbanki Islands.
Fannie Mae and Freddie Mac, which owned or guaranteed nearly 31 million US home mortgages were bailed out by the US government on Sept 6, while Kaupthing Bank and Landsbanki Islands were seized by Iceland's regulators last month.
Investors anxious to find out more about the fate of their investments in Pinnacle Notes Series 9 and 10 are advised to contact the sellers of the notes here.
Series 9 and 10 were sold at institutions and brokerages like DMG Securities, Hong Leong Finance, Kim Eng Securities, OCBC Securities and UOB Kay Hian October last year.
The second wave... won't be the last if the crisis worsens. The main worry now is not the big names. They will not be allowed to fail. (Lowered rating, still possible.) The worry is the basket of companies. Some products only allow a small number to fail before they call it a day.
Update: 700 investors who invested $26mil were affected.
Many US firms are filing for chapter 11. However, there's no need to worry because this is "merely" bankruptcy protection and not bankruptcy per-se.
Now that the US presidential election is over, we can go back to worry about the economy.
Basic expenses were low because my father refused to take the parents' allowance to help me defray my car repair cost. (I was going to repair it, but I decided to postpone it.)
Cash expenses were low because I had been having dinner at home. The expenses shifted to my father instead.
Credit card expenses were due to a lunch treat for old friends in the previous month.
Other expenses were extremely high due to a birthday treat for my mother ($96), topping my CPF Medisave a/c ($100), and attending a colleague's wedding dinner ($110).
Banks losing billions in unpaid credit card bills urge government to forgive consumer debt
With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills.
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program -- which the banks hope will become permanent -- could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
"There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling, which has 108 member organizations around the country. "We absolutely support the proposal."
In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.
Credit cards -- the ubiquitous plastic rectangles that have become an integral part of American life and the economy -- now look to be the latest domino to drop in a financial crisis that started with subprime mortgages and continually takes new twists.
Amid rising job losses, consumers -- even those with strong credit records -- have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises are bleeding tens of billions in red ink from the losses. The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.
The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.
Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.
Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures. People who are in credit counseling, on average, carry seven cards.
Many of the people now having trouble making their credit card payments are in a double or triple whammy: their mortgages or car loans also may be under stress.
And for many, the torrent of envelopes bearing credit card offers at low initial rates -- much like the old "teaser" rates on subprime mortgages -- has recently been replaced by more somber notices of crimped credit lines, hikes in interest rates or even accounts being closed as lenders tighten the reins to reduce their risk.
The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program.
It recognizes that "there are some critical problems with credit card debt," said Bert Ely, a banking industry consultant based in Alexandria, Va. "We're going to see more of these efforts to try to minimize the situation."
Under the groups' proposal to U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks, a pilot project would allow big credit card companies to sharply reduce the amounts owed by consumers in over their heads who don't qualify for the repayment plans now available.
Nearly all the biggest credit card banks have agreed to such a pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time.
The test program could reach as many as 50,000 borrowers, said Scott Talbott, senior vice president at the Roundtable. Borrowers would have to be in a counseling program for their credit card debt. The amount of debt to be forgiven would be determined case by case, depending on the borrower's financial condition; those receiving close to the maximum forgiveness level would be nearing a personal bankruptcy filing.
And there would be a tax benefit. Borrowers would be able to defer payment of income taxes they owe on the forgiven part of the debt until after the remainder was paid off. The lenders could wait until then to book their loss on the forgiven debt.
"Both parties win," Talbott said.
Current government rules don't allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.
Kevin Mukri, a spokesman for the comptroller's office, had no immediate comment on the new proposal Thursday. Peter Garuccio, a spokesman for the American Bankers Association, also declined to comment.
June Selby, who nearly filed for bankruptcy three years ago when she was buried under nearly $32,000 in school loans, saw both sides but said she didn't like the idea of anyone getting a free ride.
Selby, 60, worked with credit counselors to pay off nearly half the balance and is on track to be debt free by 2011.
"If (the proposal) makes it possible to maintain a sense of integrity and pay back debt without going into bankruptcy, that's one thing," said Selby, a certified nurse in Lawrenceville, Ga.
But she said she was against the idea of a free handout for people who've simply been irresponsible.
"There just has to be some accountability. Nobody is bailing me out. I had to work very hard to keep from bankruptcy and foreclosure," she said.
This financial crisis is making a mockery of people who live within their means.
The Federal Reserve seems to have endless amount of US$ on its hands to lend out.
It's alright if the banks hoard the money (as is the case now). However, if the money is used, it will be hyperinflationary. Not a good time to be holding cash.
The Federal Reserve just announced US$30bil swap lines each to four countries (Brazil, Mexico, Korea and Singapore). The intention is to avoid speculators making a run on these currencies.
Wow, just wow. Separately, I wonder why Singapore is on the list. It looks like Singapore is more vulnerable than reported.
Falling and still falling. If anyone is sure that it will be bailed out, then buy its shares. Remember AIG? Someone bet that it was too big to fail. LV Sands could be bailed out too, but it's due to face. (Ha ha ha!)
I wonder how does this impact Genting? I read Genting has some cashflow issues too. There were rumors it could issue rights to raise capital.
In these volatile times, today's rumors are tomorrow's news.
Update: LV Sands fell by 14.7% (to US$4.95) despite Dow Jones going up a breathtaking 10.9% (to 8,374.73).
HK banks announced a few weeks back that they would buy back the Minibonds at market rate.
Today, DBS (HK) announced that only 2 out of the 32 Lehman related structured products have 8.7% of their value left. The rest have zero.
So much for buying back at market rate. There's no market, where to get any rate?
I always ask three questions before I pay by credit card:
The first case is not supposed to happen, but it does.
The second question is very important. Someone is absorbing the transaction charges. It better not be you!
The third case fooled many people. Just because you get zero-interest installment plan doesn't mean it's a good deal. The same item is usually much cheaper elsewhere.
What a wild ride it is. STI opened at 1,496.12 (from last Friday's 1,600.28), went as low as 1,473.77 in the morning, but recovered to close at 1,666.49.
What I would do if I am still holding stocks: sell into strength.
No safety in any region as the whole world is seeing slower growth
Pain is seeping in as Singapore braces itself for a recession. And the big question is whether this pain will be reminiscent of what was felt in past downturns.
Some economists have started to warn that the current down-cycle may well turn out to be worse than the Asian financial crisis in 1998, during which the G-7 economies were still holding up well.
'This time around, we may find that there is no safety in any region because the whole world is in a slower growth trajectory,' says CIMB-GK regional economist Song Seng Wun. 'Global investment and global consumption will be adversely affected. So where can Singapore hide?'
An International Monetary Fund (IMF) study of 113 episodes of financial stress in 17 advanced economies over the past 30 years found that downturns preceded by financial turmoil tend to be more severe and protracted.
'In particular, slowdowns or recessions preceded by bank-related stress tend to involve two to three times greater cumulative output losses and tend to endure two to four times as long,' the IMF said in its semi-annual World Economic Outlook.
Taking the onset of the sub-prime crisis last July as a gauge, OCBC economist Selena Ling says she expects a recovery only in 2010. Most economists are expecting Singapore to face at least three quarters of negative year-on-year growth in 2009.
'I wouldn't rule out the possibility that the current downturn may be as painful as the Asian financial crisis, simply because the current recession story is a global one, rather than just a regional one, and the market attention has shifted from the OECD economies to emerging market risks, including Asia,' Ms Ling says.
Pain is already spreading on the corporate front through tight credit and higher costs of borrowing, eroding margins and curtailing capital spending.
Many companies here have strong balance sheets but their cashflows have become an issue because financial institutions remain skittish about lending, Mr Song notes. Some analysts are even expecting negative earnings growth for 2008 and 2009.
The knock-on effect is that wage growth will slow further, denting consumer spending and hurting the real economy.
Although the job market is still enjoying some buffer at this point from the pipeline of projects such as the integrated resorts, Singaporeans will feel the pinch from plunging stock prices, asset price deflation and slower wage growth.
During the Asian financial crisis in 1998, total wages for all employees here saw a rare dip of 0.4 per cent while private consumption spending contracted 2 per cent. Past recessions have also saw private home prices slipping, with the worst fall of 34 per cent year-on-year during the Asian financial crisis, based on Urban Redevelopment Authority data.
'With the softening of the labour market and wages, consumer sentiment is likely to weaken in the coming quarters. Consumer spending is likely to slow dramatically,' warns Ms Ling.
She is expecting private consumption, which grew 10.5 per cent in 2007, to ease to 3.3 per cent growth in 2008 and 1.5 per cent in 2009.
Higher refinancing costs and declining home values are also putting home owners at risk of negative equity when the value of their property is less than the loan taken to finance it - a plight that home owners landed in the years after the Asian crisis.
Economists reckon that the impact on Singapore this time will depend on the severity of slowdown in other Asian countries like China and India, and the policy responses from governments to assuage the downturn.
While Singapore has diversified its economic base since the Asian financial crisis, its export-oriented nature means that the impact of external problems will remain significant, given that trade revenue is still about 2.5 times its GDP.
'While diversifying the economy is well and good, it does not solve the underlying problem. I think we can never escape the fact that Singapore is a very open economy and it is essentially a parameter of global growth,' says Citi economist Kit Wei Zheng. 'The problems of the global economy, as far as GDP growth numbers are concerned, are probably going to be amplified.'
One crisis after another. After the financial storm, it'll be the currency and emerging markets.
Singapore's economy is not very diversified. It's either manufacturing, tourism, properties or financial. All are badly hit in this crisis.
Given the scale of the current financial turmoil, will the world see a repeat of the Depression of the 1930s?
AS FEARS of a prolonged and severe recession sent share prices crashing on Friday, questions are being raised about whether the world is experiencing the beginning stages of a second Great Depression. While most economists say that the situation is not as dire, there are certain indicators that point towards a slide in the depression direction.
The Great Depression marks a severe period of recession that started in the United States in 1929, but soon spread worldwide. The start of World War II is generally viewed to mark the end of the Depression. Prior to the US stock market crash in 1929 - which most economists believe is one of the biggest factors to have triggered the Depression - sentiment in the US was optimistic.
In a bid to get rich fast, Americans invested in the stock market, which did not have proper regulations on buying and selling stocks. Companies could print more common stock at whim, while many investors bought stocks on credit. Confident that a given stock's value would continue rising, an investor would put a down payment on the stock, expecting in a few months to pay off the balance of their initial investment while reaping a hefty profit.
But this was not to be. In September 1929, stock prices began to fluctuate. On Oct 24, 1929, the Dow Jones Industrial Average slid 2 per cent; four days later, it lost 13 per cent to become known as 'Black Monday'. Over the next three years, it would plunge by some 89 per cent from its peak on Sept 3, 1929.
The panic that ensued led many to take their own lives. Unemployment levels rose, sending 13 million people out of work. Between 1929 and 1932, industrial production dropped by 45 per cent and 5,000 banks went out of business.
Despite the measures undertaken by governments and central banks worldwide to rein in the crisis, the battering of stocks last Friday to multi-year lows suggests that sentiment remains extremely weak - mirroring the negativity that sent share prices plunging through much of the 1930s.
In Asia, Japan's Nikkei-225 Index plunged 9.6 per cent to its lowest close in five years, and Hong Kong's Hang Seng Index fell 8.3 per cent. South Korea's Kospi index dived 10.6 per cent, its worst performance since 2005.
In Europe, London's FTSE 100 slipped 5 per cent, the Paris CAC 40 index dropped 3.5 per cent and Frankfurt's Dax lost about 5 per cent. On Wall Street, the Dow Jones Industrial Average fell 3.6 per cent.
'This crash is different from anything I've experienced and it's hard to find ways to ride out the situation,' Yuji Ogino, an executive director at Meiji Dresdner Asset Management reportedly told Bloomberg News.
Unlike the Federal Reserve of the Depression era, which maintained a tight monetary policy on the belief that there was a speculative bubble in equity values, the Fed under Ben Bernanke has chosen to do the opposite. Since the start of the sub-prime mortgage crisis in July 2007, it has lowered the federal funds rate for interbank loans to improve lending conditions. The rate is now down 2.5 percentage points to 1.5 per cent.
The fact that Mr Bernanke is not limited by the Gold Standard has further enabled the Fed to loosen monetary policy. During the Depression, the dollar was pegged to gold, limiting the Fed's ability to provide the liquidity needed to shore up credit and funding markets.
Governments around the world have also stepped in to provide billions of dollars in emergency lending and pump liquidity into the monetary system, while central banks have slashed interest rates.
This series of measures undertaken to boost confidence and thaw credit markets has led many economists to say that the impact of the current crisis is likely to be less severe than the Great Depression.
Nanyang Technological University economist Choy Keen Meng said that while a 'prolonged and severe' recession in the US and Europe is inevitable, depression is not on the cards.
'Policymakers around the world, in general, and Ben Bernanke, in particular, have learnt well the lessons of the Great Depression,' he said.
'If you look at (the US) monetary policy for the last one-and-a-half years, it's been more or less quite loose, so I think policymakers are making sure that there's enough liquidity to prevent the credit squeeze that happened during the Great Depression.' But as the latest stock market crash suggests, financial markets are not responding to the measures.
Like the Great Depression, stock and credit markets have borne the brunt of negative sentiment. The Dow Jones Industrial Average is now 41 per cent lower than its record about a year ago, when it hit 14,164.53, while stocks in emerging markets have lost more than half their value in dollar terms since May.
'The depressed sentiment of investors and consumers in the prevailing environment might be somewhat similar to the situation during the Great Depression,' said Thomas Lam, vice-president and senior treasury economist with United Overseas Bank Group. Prior to joining UOB, Mr Lam worked as an economist in New York with Vanderbilt Capital Advisors LLC and JPMorgan Chase & Co.
A further indicator that things are not righting themselves is the financial storm's impact on the real economy. Corporate earnings have taken a huge hit, with US corporate bellwethers Boeing, Merck and Wachovia reporting poor earnings for the last quarter while warning of a bleak outlook for the remainder of the year.
Retail sales in the US in September have also fallen as consumers rein in spending. This will lead to higher unemployment worldwide as the world's single largest export market tightens its belt in the face of mounting job losses.
The effects of a weak US economy are already visible. China's statistics bureau said last week that GDP grew by just 9 per cent year-on-year in the third quarter, sharply lower than the 10.1 per cent and 10.6 per cent in the second and first quarters respectively. Many economists expect economic growth in China to fall to as low as 8 per cent next year even if its government boosts spending. This has undermined hopes that Chinese demand could prop up the global economy through the financial crisis.
On Friday, Britain reported a worse than expected fall in GDP in the third quarter, a clear indicator that the country is heading into its first recession in 16 years. Britain's economy contracted by 0.5 per cent.
'This (crisis) potentially has the ability to be worse than the Great Depression. The wealth destruction is unprecedented,' said Joseph Tan, Asia chief economist at Credit Suisse in Singapore. 'We haven't seen unemployment double yet, but we're still in the middle of the crisis.'
We are on our way, or are we? Only time will tell.
These are the known good news in the next few weeks:
Will one of these be the turning point, or will they just cause another bear rally for the funds to unload?
AIG is playing it sly by announcing their 3rd quarter earnings on Nov 4. You know it's going to be bad news by their choice of the date.
Hang Seng free fall 12.7% today (to 11,015.84). Would this be the pre-cursor to black Monday on Dow Jones?
(I was told that Hang Seng crashed ahead of Dow Jones in 1987 too.)
What is happening right now is massive deleveraging. I wonder just how much longer can it go on? It is now slowly becoming a currency crisis...
Well, just enjoy the ride.
Update: Dow Jones dropped only 2.4% (to 8,175.77), and only in the last half hour. If you believe that funds are still selling, then this is just a trap for the retail investors.
My suggestion to instill a saving habit on your child:
The first rule is to prevent abuse where your child borrows money to artifically inflate his savings. Won't happen? Don't bet on it. People has been exploiting any arbitrage since time immortal.
What if he spent less than expected? Well, he'll just have to withdraw less the next time he needed the money.
The second rule is to make the bank work for you. Banks already accrue interest on a daily basis, but only credit it monthly. The interest is an accurate measurement of the average monthly balance.
The third rule is to promote thrift on a monthly basis. Work out a sensible budget for your child. If he manages to meet it, you should reward him. This is important because once the savings is substantial, your child may not have the motivation to save anymore. The bonus can be based on the entire balance or the amount below the expected withdrawal.
To prevent abuse, you should use the rolling 12-month withdrawal amount. Your child could make a big one-time annual withdrawal to last him the entire year. Plug this loophole.
How much extra interest should you pay? In the current environment where the best savings interest rate is 1.2% pa (from the first $1; FinatiQ), I'll say a total of 3 – 5% pa and a bonus of 0.5 – 1% pa. This may seem little, but it'll add up pretty fast.
Now, it's obvious that you cannot continue this scheme forever. What you can do is that after a substantial amount is saved, say $5,000 or $10,000, it's time to invest in real-world financial instruments, such as funds or even the stock market (but probably not). This is another reason why you should not have very high interest rate. If your return is better than in the real world, why would your child want to invest in the real world?
I noticed something about the current T-bill, BQ08142X:
|Cut-off yield and price||0.82% p.a., 99.796%|
|Allocated to non-competitive applications||100%|
|Allocated to competitive applications||13%|
Just 13% of the competitive applications were successful! This means some big player(s) must be very conservative.
How big? The lowest 13% applications were enough to use up $2.03bil (after subtracting the non-competitive applications). That's how big they are.
In the last T-bill auction, 66% of the competitive applications were successful.
With MAS guaranteeing bank deposits, I had expected T-bill yield to go up, because it is now less attractive. You can place 3-month FDs and easily get 1.5% to 2%. Even normal savings accounts easily offer 1.2% to 1.38%.
MONETARY Authority of Singapore statistics show Singaporeans have piled on debts at a fast rate up to August this year.
Total debts to individuals and professionals stand at $112 billion, almost 10 per cent up in the past 12 months. In particular, credit card rollover debt has ballooned to $3.3 billion, an increase of $296 million over the past 12 months against a $94 million increase in the previous 12 months.
It is not just credit card debt that has increased. Housing loans are up $6.6 billion. There was also a $2.5 billion (18.4 per cent) jump under 'other loans' to individuals which presently stand at almost $16 billion. The previous year's increase was only $584 million in this category.
Going into a recession with such high debts will push many into financial difficulties as jobs and incomes are affected.
Individuals need to make every effort to reduce or restructure their debts, especially credit cards and credit lines which are expensive and recallable. They should stop using more credit. Unsecured debts can be converted into instalment loans that can be paid over a longer period. Financial institutions should be more accommodating in approving such requests.
The problems of delinquent borrowers are exacerbated by heavy over limit and late payment penalties, which can add up to more than 50 per cent on an annualised basis. Although these penalties encourage borrowers to pay promptly, such high charges can also make it impossible for a defaulting borrower to be current again, let alone pay off his debts.
Collection procedures by creditors should exclude tactics which amount to undue harassment and intimidation. For example, phone calls during working and unreasonable hours should be curtailed. Writs of seizure and sale which are costly and usually realise little proceeds should be stopped. Lawyers should not write to employers stating that they are acting on behalf of an unnamed financial institution and asking for verification of employment and other details as this will trigger inquiries by employers which can often affect the career of the employee concerned.
A code of conduct for debt collectors should be drawn up and adhered to by lenders and their outsourced agents.
The Government should also accelerate implementation of the debt restructuring scheme, which is designed to give wage earners an alternative to bankruptcy.
Kuo How Nam
Credit Counselling Singapore
It is natural to draw on your credit lines in bad times. It is more prudent, though more painful, to reduce living expenses. The recession is upon us. We need to make sure we have enough savings to last a few months.
One of my biggest expenses is my car. Should I get rid of it? Every dollar that I save now can potentially be turned into $5 or $10 in 5-10 years time.
Damaging ripple effects as parent company of Marina Bay Sands integrated resort struggles to raise funds
THE Marina Bay Sands integrated resort (IR) has been visited by the desperate travails of its parent company, which is struggling to raise funds.
And local banks, which BT understands have a combined exposure of almost $2.2 billion to the $5.44 billion project, saw their stock prices take another hammering yesterday.
Already, Las Vegas Sands' share price has fallen some 95 per cent from a year ago. On Thursday, it was US$8.21, down from the high of US$148.76 on Oct 29 last year.
The company issued a statement to say that it was working with an investment bank to raise capital and that Sheldon Adelson - the company's chairman, CEO and principal stockholder - intends to take part in it, along with his family. Mr Adelson has already had to bail out the company once before, by investing US$475 million of his own money last month.
As concerns over the project increase, local banks are getting hit. BT understands that United Overseas Bank (UOB) has committed to lend almost $890 million to the project. DBS Group Holdings' exposure is in the range of $740 million while that of OCBC Bank is around $570 million. The banks themselves declined to comment on their exposure, citing customer confidentiality.
But as disbursements of the loans are progressive, according to the construction schedule, the banks are unlikely to have disbursed the entire amounts, one banker said.
'The development of Marina Bay Sands remains on track' was all that Ron Reese, vice-president, communications, Las Vegas Sands Corp, would say.
Bankers and analysts also agreed that fears of the banks' potential losses from Marina Bay Sands are overblown. If anything does happen, the project which has been touted as iconic by the government will be rescued, perhaps by one of the government- linked companies, they say.
'Indeed, given the importance of the project to Singapore, it is unlikely to fail in the development stage . . . assistance will eventually come - at a price,' said Morgan Stanley analyst Matthew Wilson.
'Hence, initial debt and equity providers may take a haircut. Since it is such an iconic project, it is a vivid reminder of just how bad things have become from an economic and credit perspective,' said Mr Wilson.
DBS closed 94 cents or 8.6 per cent down yesterday at $10.04 while UOB fell $1.72 or 12.5 per cent to $12.08, and OCBC ended 61 cents or 11.1 per cent down at $4.88. The three local banks and Goldman Sachs were the original lead arrangers of the syndicated loan. Fears that Marina Bay Sands might default stem from the falling revenues parent company Las Vegas Sands is getting as it is earning less from its casinos in Macao and Las Vegas. Recession has caused gamblers to shy away from the tables.
Repayment of interest on the bank loans is generated from the cash flows of current casino operations.
'We're expecting the turbulent economic climate to have an increasingly negative impact on the corporate gaming operators with near-term internal liquidity remaining weak,' said Michael Paladino, senior director at Fitch Ratings. 'As consumers focus more and more on necessities spending, and we enter into recession, the gaming and lodging operating environment will continue to be under pressure, causing significant challenges for issuers that have substantial near-term refinancing risk.'
In August, Marina Bay Sands said it was on schedule to open in December 2009 and about 40 per cent of the construction had been completed. And even if the parent company decides to sell the project to another outfit, there will be bidders aplenty, one banker said.
'People will compete to be here. The biggest driver of casinos is competition, the biggest fear is competition,' he added.
The Singapore Tourism Board (STB) had projected 17 million tourist arrivals by 2015, although there is now doubt if those numbers are achievable. This year's target of 10.8 million visitors may not be met because Singapore visitor arrivals are down. According to data from the board, June was down 4.1 per cent over last year, July dipped 3.8 per cent and August posted the steepest fall at 7.7 per cent.
If you believe a local developer will take over, buy its stock now.
However, it has been said the Government wants a world famous brand name to attract gamblers. IR CapitaLand doesn't have the same ring as IR Sands.
Once thought "decoupled" from economic crisis in the West, emerging markets are now taking the brunt of recent global financial turmoil with stock markets and currencies slumping in value.
Western investors and hedge funds have dumped anything considered risky, almost regardless of local fundamentals. Falling currencies have endangered repayment of foreign currency loans, threatening local banking sectors. Emerging borrowers are finding it almost impossible to refinance debt.
Below are some facts about recent emerging market falls.
Globally, emerging stock markets have lost 60 percent of their value since May, slumping to their lowest in four years and losing 38 percent in October alone.
Russia's stock market has been one of the biggest losers, down 75 percent this year as war with Georgia, worries over government interference in investments, global problems, bank worries and falling oil prices sent capital fleeing.
Among other key emerging markets, Brazilian stocks have lost 47 percent, Indian stocks have lost 57 percent and Chinese stocks 65 percent this year.
Emerging currencies are also broadly sold off, with countries with large current account deficits and political risk suffering particularly. South Africa's rand is down 40 percent against the dollar this year, while the Turkish lira has lost more than 30 percent.
Emerging sovereign debt spreads -- a measure of how risky emerging sovereign debt is seen relative to U.S. Treasuries -- have more than doubled this year to their widest in six years.
The cost of insuring emerging market debt in the credit default swaps market has also ballooned to several times the cost earlier in the year, with several countries including Pakistan and Ukraine pricing in probable default.
Ratings agencies have downgraded a string of countries particularly in central and eastern Europe on deteriorating macroeconomic conditions and the cost of bailing out troubled local banks.
Iceland's highly indebted banking sector collapsed, taking with it the currency and broader economy and leaving the country dependent on a bailout from either the International Monetary Fund or possibly Russia.
Other countries seen talking to the IMF about help include Pakistan, Belarus, Serbia, Hungary, Turkey and Ukraine.
Central and eastern European economies are seen heavily exposed, with banking sectors under increasing pressure and requiring government support.
Brazil down by 47%, Russia 75%, India 57% and China 65%. My BRIC fund is done for.
Someone asked me what the fund invests in. Actually, I have no idea. :-)
I have requested a transfer to cash a/c a week ago. I don't know when it will get executed. Well, I've done all that I can. Let us observe a moment's silence and move on to other things that can still be saved! :-D
After paying bills manually for years, I now opt for GIRO. It's more stress free. You just need to monitor the banking a/c to make sure everything is correct. This can be done at your own leisure.
I don't even try to link my bills to my credit card because they give just a few points to be worth the effort. I don't want to monitor two accounts.
Dow, S&P and Nasdaq futures all limit down. Live history. Wow.
Update: Dow went down by just 312.30 to 8,378.95 (low 8,187.48). Not the crash that many people thought would happen.
However, some people commented that crashes are usually on Monday, so the Federal Reserve better have some good news this weekend...
Anyway, there will be an interest rate cut next week. That should hold prices up for a few days...
I wanted to buy an item from the US in August, but I did not do so. It was on sale for US$46, exchange rate US$1 to S$1.40. The item is now US$33, but the exchange rate is US$1 to S$1.50.
How much did I save?
US$46 x $1.40 = S$64.40. US$33 x $1.50 = S$49.50. I saved S$14.90.
STI declined for five straight days, to close at 1,600.28 today (lowest 1590.36). Will this continue or is it just oversold?
If you believe it's oversold and there will be good news over the long weekend, you should load up. Personally, I think there may be some good news. Central banks all over the world are trying to save the market, and they usually make announcements over the weekend. There wasn't one last week, so it becomes more likely this week. Any measures by Central banks are good news these days.
Will Temasek or GIC step in to stablize the market? I think so, but not at 1600. 1600 isn't that low, historically. (If you bought in the last recession, you would still have a hefty margin of safety.)
STI 1200 is no longer an impossibility...
And if you agree with some views that this is the second worst recession since the Great Depression, then it should at least be as bad as the Asian Financial Crisis, which saw STI at 800.
Warren Buffet made two big investments recently: $5bil into Goldman Sachs (24 Sep) and $3bil into GE (1 Oct).
Recently (Oct 16), he said, "Buy American stocks. I am."
He also invoked his famous quote, "Be fearful when others are greedy, and be greedy when others are fearful."
However, I get the feeling that he is trying to inspire confidence in the market.
My company health plans cover life, accident, hospitalization & surgery, and clinical.
Life is by default 26x monthly income. You can choose 13x or 39x. 39x requires an additional $40. You need to answer some questions.
Accident is by default 26x monthly income. You can choose 13x or 39x. 39x requires an additional $9.
The default hospitalization plan is R&B $250, MMP 60k. (R&B = Room & Board, MMP = Major Medical Plan.) I can reduce it to R&B $200, MMP 30k for $66 less, or R&B $400 MMP 80k for $114 more.
Lastly, a clinical plan worth $150.
I opted for the additional 13x monthly income. $40 is cheap for this! A common advice is 5x annual income. With this, I already have covered 3x annual income.
I didn't change accident. The additional 13x coverage is cheap, but I don't think I will ever use it.
I also didn't change the hospitalization plan. Downgrade is too risky, upgrade is too costly.
I have opted out of the clinical plan for two years already. I realized that I seldom fall sick, so I don't spend $150 per year. This does mean that I sometimes skip seeing a doctor for minor illness. Also, whenever I see the doctor, I always ask for 2 days MC to maximize the claim. (I usually take 2 to 4 days MC every year.)
Questions have been raised about the health of United States gaming company Las Vegas Sands, which is building Marina Bay Sands resort here.
The company's share price has plunged from a 52-week high of US$144.15 to Tuesday's price of US$12.43 on concerns about a slowdown at its US operations, profitability of its Macau casinos and high gearing.
Mr Bill Eadington, director of the Institute for the Study of Gaming and Commercial Gaming at the University of Nevada in Reno, said the share price plunges at Las Vegas Sands and two other gaming firms reflect investor concerns about the firms, reported the online version of the Reno Gazette Journal.
"Either they are phenomenally good (stock) buys, or some of these companies are not going to be around," he said.
In the worst-case scenario, if the US company goes bankrupt, Marina Bay Sands is unlikely to escape unscathed, said market observers.
"Generally speaking, if the parent company goes through financial difficulty before it has injected all the capital necessary to complete the construction, clearly that's a problem," said Mr Leon Perera from Spire Research and Consulting.
In the extreme scenario, if the parent company is liquidated, it needs to find a buyer for its stake in the subsidiary, which could affect the construction schedule, he said.
In response to a query about the impact on Marina Bay Sands' operations here Mr Ron Reese, vice-president, Communications, Las Vegas Sands Corp: "The development of Marina Bay Sands remains on track."
It said in February that it had obtained all the necessary financing - amounting to S$5.25 billion - to develop the integrated resort, which is due to open at the end of 2009.
There are more and more reports on Las Vegas Sands these days. Interestingly, there's not a single report on Genting.
This is not a good time to be holding (unbuilt) properties around Marina Bay.
I just did the unthinkable: I actually topped up my CPF a/c. Specifically, I topped up my medisave a/c. (You are allowed to top up all three a/c in one go, or directly to the medisave a/c.)
I dislike CPF, yet I think it makes sense to top up. This is because I recently opted for a private medishield plan, so I'm paying more out of my medisave a/c — much more in fact; I'm still wondering if I made the right decision.
Some people feel that they should use medisave whenever possible. I feel it is better to let medisave a/c accumulate to its max (currently $34.5k). There are three reasons:
The last one is the real reason why I topped up my medisave a/c. If you keep using your medisave a/c, you will never hit MMS, hence you will need to top up from your MS excess. In that case, why not do it upfront so that you enjoy the 4% interest rate?
Note that MS and MMS are money you'll never see again. You'll feel better if you think of them this way. Hence, any topping up must be thought over very carefully.
Some interesting statistics from DBS announcement.
4,700 investors from Singapore and HK invested S$360mil. Breakdown:
DBS is likely to pay back S$70-80mil in total. DBS expects the worst case scenario to materialize — that investors (who do not fall under the vulnerable group) get back nothing.
Hong Leong Finance, Maybank and DBS are offering full compensation for vulnerable customers
INVESTORS who lost huge sums in the High Notes and Minibonds fiasco may get some - or even all - of their cash back after dramatic late-night moves by the financial institutions that sold the discredited products.
Maybank, Hong Leong Finance and DBS will pay compensation with the 'highly vulnerable', including the elderly and less educated, heading the queue.
And those who do not fall into this category also had hopeful news on Wednesday when the MAS announced that two international institutions may take over the Minibond programme and let them run their course.
In a day of fast-moving events, the unified response by the banks to the compensation issue was led by Maybank.
It said that it will 'give priority to vulnerable customers and to take full responsibility in cases where the product was clearly inappropriate given the customer's profile and circumstances'.
This refers to the mis-selling of the risky product to people such as retirees.
Hong Leong Finance followed suit moments later, saying it will 'purchase Lehman Minibond programme notes from its elderly and less well-educated customers who meet the two conditions'.
These are: Main account holders must have been 62 years or older at the time of investing and they should not have an education level higher than primary school.
In joint accounts, neither investor can have a post-primary school education.
Then DBS Group Holdings stated that it has found 'a number of cases did not meet the standards DBS upholds and the bank will be compensating these customers' with effect from Thursday.
It said the move could involve paying out $70 to $80 million.
There was no indication from any of the institutions about how many investors will be affected and neither Hong Leong or Maybank mentioned how much money was involved.
About 10,000 people here here put cash into the products - DBS High Notes 5 and Minibonds Series 5 and 6 - that were linked to failed US investment bank, Lehman Brothers.
Wednesday night's move by the three institutions came after weeks of high-profile protests and emotional meetings by affected investors, including many retirees who had lost much of their life savings.
Their calls for compensation were echoed by MAS managing director Heng Swee Keat last week when he urged banks to do the right thing.
Last night's news was greeted with relief by investors, who heard about the developments only when The Straits Times contacted them.
Mrs Ng Ai Hua, 58, who bought Minibonds from Hong Leong Finance, said: 'I am so relieved to hear this, thank you so much for telling me.'
Light at the end of the tunnel. If the Minibonds investors are as risk-averse as they claim to be, I doubt they will want the notes to run their course. The chance of credit event is still present.
I find it interesting that DBS say that they expect to pay out $70mil to $80mil. They really sold a lot to old folks.
JUST over a year ago, I quit my job with plans to retire early and play the stock market with the money I'd saved.
Back then, the Straits Times Index was soaring and I was making a few hundred bucks easily on most days. But it wasn't long before the bubble burst.
I still kick myself for not seeing it coming. Or rather, not wanting to see it coming. Surely, it was all too good to be true. Stock prices were escalating to record highs every day, and it was all too easy to make money.
If the stocks I bought dipped, it was almost certain to recover in a few days or weeks. Or so I thought, until that fateful period when everything just spiralled downwards and there was no looking back.
At first it was a matter of hanging on, and then hanging on some more, and then when it was clear the s*** had hit the fan, I had no choice but to grit my teeth and suffer the paper losses.
So call it foolishness, stubbornness, optimism or greed; this was how I got burnt. I am certain the financial crisis will subside one day because, historically, there has been no financial crisis that did not; so, logically, this should be the same. For now, I'll just have to practise patience and tenacity so my paper losses will hopefully be just that.
But all's not lost either; as investment gurus will tell you, a bargain-hunting opportunity like this doesn't come by every day.
I'm reading up as much as I can to figure out how to recoup my losses. To quote legendary investor Warren Buffett: "Be fearful when others are greedy, and be greedy when others are fearful" (Mr Buffett is currently picking up battered American stocks, like GE).
Also, cut your losses early - sell when stocks fall below 80 per cent of the price you paid for them; don't put all your eggs in one basket; and long-term investments are a better option than short-term speculative buying.
On the whole, this episode has taught me some valuable (albeit expensive) lessons.
I've learnt not to be so impulsive and greedy. I've learnt it's best to let go when I still have the opportunity to do so; stubbornness does not pay.
I've learnt to invest only what I can afford to lose. And I've learnt to diversify my investments.
Fortunately, my lifestyle has never been overly indulgent, so I haven't had to adjust too much. I know it'll take some time for everything to get back on track, but I've learnt that in life, sometimes you just have no choice but to be patient and wait for the right moment.
I doubt anyone realized the severity. One quote to everyone who tries to hold or average down: the market will remain irrational longer than you can remain solvent.
Three days before Lehman Brothers went bust, triggering one of the world's most horrific financial meltdowns, DBS Bank relationship manager Wilfred Quek was having coffee with his colleagues and debating the fate of the American investment bank.
'My call was that there was no way the Fed was going to let it go down. Some people said it was possible, but not to me and many others,' said the 31-year-old.
'When it happened, I was honestly shocked.'
When he went to work that Monday morning of Sept15, his fifth-floor office at Ngee Ann City was already buzzing with talk of what might have happened to Lehman Brothers over that weekend.
Shortly after noon, he found out that the 158-year-old institution had collapsed.
Soon after, he received a call and an e-mail message from his supervisor asking him and other relationship managers to go to the headquarters of DBS Bank in Shenton Way for an emergency 'townhall meeting' at 6.30pm that day.
In between receiving non-stop SMS messages from friends and colleagues about the grim news, Mr Quek was pulling out clients' telephone numbers from the bank's database: He realised with a sinking heart that those who had bought DBS High Notes5 from him were likely to be affected by Lehman's downfall.
The structured product, which the bank launched last year, is linked to eight underlying shares - including Goldman Sachs, Morgan Stanley, Merrill Lynch, Macquarie Bank and Lehman - on a 'first to default' basis.
This means that should any of these eight reference entities fail, the notes will be terminated and the investor will receive zero payout in the worst-case scenario. This, unfortunately, is likely to be a worst-case scenario.
The DBS High Notes5, to be held for 51/2years, were sold to more than 1,400 retail investors in Singapore for a total of $103million. More than half of them invested $50,000 or less. Some had invested as much as $600,000.
'It was chaos,' said Mr Quek, an engineering graduate who has been with the bank for two years and is with DBS Treasures Priority Banking, which serves customers who have at least $200,000 in their bank accounts.
'I didn't know what to expect, what the magnitude of this collapse was like and how it was going to affect the whole industry and our economy. I was also worried about my customers' portfolios, regardless of whether they had bought High Notes5 or not.'
When more Singaporeans got wind of the news, calls from panic-stricken customers came fast and furious, and some were not even High Notes5 buyers. Everyone wanted to know only one thing: How would Lehman's downfall affect their investments?
Mr Quek did not have ready answers. The management at DBS Bank was also trying to figure out what this dire turn of events would mean.
At the townhall meeting that evening, senior management met with product and markets colleagues at the bank's auditorium.
It became apparent to the few hundred relationship managers that they would have to break some pretty bad news to their High Notes5 customers.
As the week progressed, stories of retirees having put their retirement funds into the notes emerged, as well as how buyers of other Lehman-linked products like Minibonds and Merrill Lynch Jubilee Series3 LinkEarner Notes had also been hit hard.
In all, nearly 10,000 retail investors bought products linked to Lehman Brothers amounting to $501million.
Mr Quek's phone continued to ring off the hook from 8am to midnight for the next week, even as he made calls to customers, dropped in at their homes, or met them over coffee to tell them that their money could be wiped out.
Some were upset, others understanding, but luckily for him, no one turned nasty.
Those who were unsatisfied with his explanation were referred to DBS' Investor Care Centre, a new unit set up to take complaints from the Lehman fallout.
Said Mr Quek: 'People were moving funds from foreign to local banks and they were worried. 'Is DBS safe as a bank?' They were asking questions like that. It had gone to a stage that was beyond logic. Everyone was going through an emotional frenzy then.'
Structured products like High Notes5 and Lehman-issued Minibonds have been gaining popularity in the last seven or eight years and were snatched up like hot cakes by investors in Singapore.
After all, the economy was sailing along nicely after getting over the Sars crisis of 2003.
Singaporeans were cash-rich from crazy en-bloc property sales. Early last year, around the time High Notes5 was launched, Leedon Heights in Holland Road smashed the record for the largest collective sale in the country with a whopping $835million.
Financial institutions were rolling out a dizzying array of products, all calling out for people's money. At bank branch offices from Hougang to Holland, well-mannered, well-groomed relationship managers staked out potential customers.
They were all armed with rehearsed speeches on why the public should put their money in perfectly safe financial instruments, instead of leaving it in fixed deposits with near-zero interest.
In April 2006, Mr Chua Meng Teck, 40, was invited to OCBC Securities in OCBC Centre's South Tower. There, he and about 30 others were given a nice presentation by Lehman, a buffet spread and a 'marketing talk' about the investment bank's Minibonds.
Mr Chua, a financial controller and savvy investor, knows he is supposed to take marketing talks with a pinch of salt, but he was won over by the Minibonds.
They were supposed to give you fixed returns which were respectable but not too high, so how risky could it be, he thought.
He was not looking at striking rich with it anyway.
'I consciously bought it just to balance my equity investments because I didn't want to lose sleep over it. In case my shares go down, I still have this,' said Mr Chua, who sank in about $140,000.
Besides, investors were not required to monitor the performance of their investments hawkishly. They were told that they just needed to wait out the five years to get back their principal sum. It sounded pretty perfect.
Mr Chua was one of 8,000 people in Singapore who ended up buying an astonishing $375million worth of Lehman's Minibonds.
Whether DBS High Notes5 or Lehman Minibonds were being dangled, the man in the street with a humble stash of cash suddenly found himself the new darling of banks.
These banks took to modifying products - once the exclusive domain of the wealthy - and lowering the minimum investment sum.
For anything between $5,000 and $25,000, you could buy into structured products, equity-linked notes and hedge funds.
Banks say they introduced these products to meet the needs of increasingly affluent and sophisticated retail investors who were not satisfied parking their money in low-interest fixed deposits.
In Hong Kong, people were snapping up structured products, which they thought to be low-risk and linked to stocks and bonds, as early as 2002.
The Hong Kong market became so saturated - at its peak, six products were rolled out each month - that banks started turning their attention to Singapore and Taiwan.
Singapore, with some US$118billion (S$175billion) sitting in bank deposits in 2004, was ripe for the picking by structured product providers.
They were appealing, no doubt: Said to be marketed as an alternative to fixed deposits, they gave higher fixed returns at an average of 5per cent with a maturity period.
The reference entities trotted out were also highly rated players: century-old brand-name institutions like Lehman Brothers.
In fact, Lehman's Minibonds in Hong Kong and Singapore were named Best Credit Structured Deal last year by a Hong Kong-based financial magazine, The Asset.
Its treasury editor, Mr Rodney Diola, told The Sunday Times it used a scoring system based on such criteria as the product's relevance to investors and the capital market; the degree of transparency, simplicity and elegance, innovation and timeliness that characterised the product; and past performance.
'Lehman's Minibond products in Hong Kong enjoyed a well-established track record among investors,' he said in an e-mail interview.
Lehman launched 25 different Minibonds in Hong Kong after its first issue in 2003. By November 2006, the Minibonds had attracted at least US$1.1billion in investor funds around Asia, said Mr Diola.
He conceded that the product did require a sophisticated type of retail investor, and added: 'For this reason, distributors, together with the structurers, should exercise a high degree of responsibility when they are explaining the product to investors. We understand this may not always have been the case.'
Nearly 10 Minibonds were offered in Singapore, of which the values of Series5 and 6 have been determined to be zero.
HSBC Trustee, which is the trustee of the Minibonds programme, is currently trying to find a new swap counterparty to replace Lehman and is due to update investors this week of the results.
DBS Bank, too, said the climate at the time it launched High Notes5 was one of retail investors wanting in on higher-yield products.
It is a sentiment echoed by other financial institutions.
'We offer a suite of alternative investment products that range from government bonds to structured warrants with the aim of providing investors with varying solutions for diversifying their portfolios,' said OCBC Securities' executive director and general manager Yeow Chin Wee.
The firm distributed Minibonds.
And for a time, investors had nothing to complain about.
One investor who put $200,000 into High Notes5 remembers receiving payouts of $2,500 every three months since last year.
But by January this year, rumours of Lehman's troubles were already brewing in the financial market.
A former head of an investment bank here said that those working in the financial market had all been aware of Lehman's problem 'for some time'.
'The collapse of Bear Stearns in March, which was also active as an issurer in structured products, should have made DBS more aware of such issuer risks,' he added.
But Mr Rajan Raju, DBS Bank's head of consumer banking group, played down the market talk.
'People keep asking us, could we have predicted this? Yes, there was Bear Stearns, Fannie Mae, Freddie Mac, but nothing had gone under,' he told The Sunday Times in an interview at the bank's headquarters last Friday.
'Even the independent rating agencies hadn't downgraded the entire global or US economy.'
An investor who wanted to be known only as Mrs Tay, 49, claimed she had had a bad feeling shortly after putting $200,000 of her retirement fund into DBS High Notes5 in April last year.
She had shown the prospectus to a lawyer friend and another in finance. Both told her that contrary to what she said she was led to believe, she could get nothing if any one of the eight reference entities bombed.
'I'm the aunty who queues up at POSB with my passbook. I don't even dare to try Internet banking because I'm so scared of losing my money,' said the teacher of her zero-risk appetite.
But she said her relationship manager had ticked 'growth' under her risk profile - just one category shy of 'aggressive'.
The first-time investor had since been watching her Notes' performance with jitters.
'When Freddie Mac, Fannie Mae and Bear Stearns had their meltdowns, I called DBS. I found to my horror the underlying collaterals had these things in it. But they said, don't worry, the basket is intact,' she said.
In June, when she heard rumours that Lehman was ailing, she called her relationship manager who assured her that her investment was still 'A grade'.
While many others like Mrs Tay were also concerned about an impending crisis, some like Mrs S. K. Lim, 59, decided to keep faith with DBS.
After all, she had received letters from the bank, which repeatedly assured her and other High Notes5 investors that the declining prices of the notes until then represented only 'a paper and not actual loss'.
The letters also reiterated that the notes were 'designed to be held to maturity' along with the kicker that regular coupons or interest would still be 'paid along the way'.
The retired secretary, who invested $25,000 of her retirement funds in High Notes5, received two such letters this year alone.
'They sent one in March and another in June,' she said. 'I understood from both letters and others before that if I held on to the notes, somehow there would be a way out.'
Hold on she did. But by July, her $25,000 had been reduced to about $12,000.
'My July statement came and I saw the losses but yet I held on because of the letters. But now they tell me, my investment is zero,' she said.
Then, Sept15 came.
At DBS Bank, top executives spent the day looking at documents and trying to figure out what Lehman's demise meant, then drafting letters to its High Notes investors, building up FAQs for its relationship managers, and calling for an emergency meeting with them.
On Sept16, stock markets in Japan, Hong Kong, China and South Korea dived as anxious investors reeled from the carnage.
A week later, DBS Bank started an Investor Care Centre (ICC) headed by senior managers. It took care of mounting complaints about mis-selling and other grievances. It has received more than 300 complaints so far.
Some meetings with investors were civil enough, while others exploded into confrontation. One investor recounted how his meeting with a senior employee of the bank on Sept30 degenerated into a staring match.
'I felt badgered. They were butting in and cutting you off in mid-sentence. Many people found them very belligerent. Someone told an investor to go fly a kite,' said another investor who met the team.
Mr Raju, who has also spent the last month talking to affected customers at their homes or offices, is aware of such complaints.
'There have been cases where clients came back and told us that the ICC officer was not polite, or was there to defend the bank, etc,' he said.
'In my mind, I'm very clear that the bank values integrity, and if a client feels he has not been heard, not a problem. We'll get someone else to hear him out. That's what we're here for.'
Over the days, Minibond and High Notes investors started receiving calls from their relationship managers who told them to brace themselves for a big hit to their wallets.
Desperate and angry at the same time, many cried foul, charging their relationship managers with misrepresentation and criticising the banks for putting out risky products to retail investors, many of whom were financially clueless.
Minibond investors wasted no time in organising themselves. On Sept24, some 200 gathered at the National Library to sign a petition which was given to the Monetary Authority of Singapore (MAS).
Up until then, the central bank had been measured - some would say too hands-off - in its approach to the Lehman debacle.
On Sept22, a week after Lehman's crash, the regulator finally spoke up, asking banks and finance companies to make it a priority to deal with affected investors, and telling investors to go straight to their banks with their complaints.
Two days later, it took a more pro-active stance by ordering financial institutions to appoint an independent party to investigate complaints of mis-selling after similar accusations began to surface.
The gripping daily headlines disturbed one person greatly.
Former NTUC Income chief executive officer Tan Kin Lian has never been a fan of structured products, but he had no idea so many people were mired in it.
'I believe there is something seriously wrong with the creation and marketing of these products, and that there is some possible wrongdoing,' he told The Sunday Times.
He organised two petitions to pressure the authorities to investigate and rallied more than 500 investors at Speakers' Corner last Saturday and again yesterday, to cheers.
'I consider it to be a public duty. If I find that there is something wrong and so many people are affected so badly, it is my responsibility as a citizen to help them to find redress,' he said.
'I am angry that these structured products were allowed to be marketed to retail investors and that they were pushed by the financial institutions which had the responsibility to make the appropriate recommendation to the retail investors,' he said.
Investors and netizens hailed Mr Tan as a national hero, but his comeback was: 'I understand from history that many heroes died in the battle. I hope that I can survive and live to an older age.'
He has also encouraged disgruntled investors to lodge complaints with their banks.
On Friday, MAS made its strongest stance yet on the case when it called on the financial institutions to 'do the right thing' and take special care of lowly educated retiree investors during their investigations into their complaints.
It also told banks not to take an 'overly legalistic' approach when dealing with such cases.
Asked what he hopes to see happen, Mr Tan said: 'I hope that there can be a fair settlement. I hope that the financial institutions will offer to compensate the investors for 50 to 80per cent of their loss.'
Among the hundreds who gathered for the Speakers' Corner rally on Oct11 was Ms Lin Ling, 37, a China-born Singaporean who was persuaded to move $60,000 from her fixed deposit into Minibonds in July this year.
'I haven't slept well or eaten well for the past few weeks,' the part-time worker and mother of two young children said in Mandarin.
'The Chinese have always thought the best of Singapore. Now, the behaviour of these financial institutions has completely destroyed this impression. I want them to give me back my money,' she said angrily.
Perhaps buoyed by the investor activism since the episode began, a small group of frustrated investors planned a gathering outside DBS' Shenton Way headquarters last Wednesday to seek out the bank's senior management.
Their plan, however, was foiled when the police got wind of it and issued a warning that it would be illegal.
In the end, only 11 investors showed up at DBS' door. The bank was expecting them: It deployed a band of staff members armed with refreshments and welcomed them into its auditorium to meet Mr Raju and his team.
They were not alone. Marked police patrol cars and even policemen on foot were circling the buildings. Several other men, dressed in casual T-shirts and jeans but believed to be plainclothes officers, were also trying to blend into the landscape.
One investor and his wife, both retirees, said they had gone there to voice their anger at being misled into buying DBS High Notes5.
'I paid $100,000 to learn a new word called 'credit event',' he said bitterly.
'It's already so embarrassing, so please don't take my picture or quote my name,' he said as he and his wife were leaving the auditorium.
Mr Raju said DBS would take responsibility if there had indeed been cases of mis-selling, which means possibly compensating such aggrieved investors.
He said one question he asked his relationship managers at the townhall meeting was: 'Are you sure you sold it the right way?'
'At the end of the day, it's a discussion between the relationship manager and the customer. I got a 'yes' consistently. And that gave me some comfort.'
High Notes5 was sold at selected DBS branches and never made available at POSB branches since it was targeted at a more sophisticated, affluent audience, he said.
It needed a minimum of $25,000 to participate, while Minibonds were sold at a minimum of $5,000.
Many lessons will surely come out of this wreckage. As it is, MAS has already launched a review of the way structured products are marketed and sold here.
Banks have come out to say they will compensate consumers if investigations show there was mis-selling.
The central bank has also asked the chief executive officers of the various institutions to personally chair internal review panels to study customers' complaints.
The panels should take no longer than four weeks to decide in each case. Those still unsatisfied can go to the Financial Industry Disputes Resolution Centre, which has agreed to hear all 'deserving cases'. (It usually deals only with claims not exceeding $50,000).
Look at the losses in perspective, MAS chairman Goh Chok Tong advised at a Hari Raya dinner last night.
'The global financial crisis came without warning, like a tsunami,' he said.
'Banks have collapsed. Stock prices have plunged. Millions of people in the world, not just in Singapore, have lost money. So we must be realistic in our expectation of recovering all our losses.'
Hopefully, those who have had their fingers burnt will take heed.
Very long article, but worth the read.
On Monday, I'm going to sell all my local stocks that I bought in the past year. I'm tired of waiting for the next rally. This, in my past experience, signals the bottom and the stock market will go up and up from that point onwards.
If I don't enter hell, who will?
Of course, this time it'll be different. I believe the market will continue to go down for the next six months, so why not sell now and buy back later? In other words, I believe we are not within 20% of the bottom yet.
I attended Mr Tan's talk on financial planning in the NUS business school today. Mr Tan is the ex-CEO of NTUC Income. I was somewhat overdressed because the dress code stated "smart casual". Most students wore t-shirt and jeans. So much for "smart casual".
Some thoughts and comments:
Mr Tan advise people to save at least 15% per month, buy term insurance and invest the rest. 15% may sound little, but it's really tough to do it every month.
Mr Tan said Government bonds yield 3% pa. One year SGS only yields 1% pa now. Even 5-year SGS yields just 2% to 2.5% pa.
Mr Tan said decreasing term insurance is not available. It is, although I don't find it particularly attractive.
In the QA, someone asked if the structured deposits are safer now that MAS is guaranteeing the deposits. Mr Tan said yes. I believe the answer is no. Structured products are not covered.
Somone asked what about life insurance after 60 years old? Mr Tan said there's no need to have one. The person then asked what about medical insurance? Well, Mr Tan said, sometimes, it's better to let go than to be a financial burden to your family — with little chance of recovery. This is easy to say, but not always easy to do.
Someone asked about land banking and wine investment. Mr Tan dismissed them as rip-offs and con jobs, but he did not elaborate. I know the guy wasn't really convinced.
I was rather surprised that there were refreshments after the talk — it was free, after all.
During the refreshment, the same guy asked Mr Tan the land banking question again. He then said he did his own investment, from an engineering perspective. He wondered how understanding finance would help. Someone then asked him how he fared. The guy then said he tripled his CPF money in seven years, but Mr Tan reminded him that he now lost half of it. The guy was undeterred and claimed this is just a temporary setback, as he is investing for the long term. He still intend to buy more over the next two years to average down, but will not do so in the good years to avoid averaging up. I usually don't comment on investment strategies. If it works for you, then good for you.
Lastly, Mr Tan parked in the staff carpark. Beyond the first 15 minutes grace period, I believe it's 10 cents/minute, which is quite expensive!
The protection, to run until end-2010, is precautionary, following similar steps elsewhere
THE Government has guaranteed all bank deposits of individuals and corporates here with immediate effect.
The guarantee, which runs till Dec 31, 2010, will cover all Singapore dollar and foreign currency deposits in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (MAS).
It will be backed by $150 billion worth of Government reserves, said the MAS and the Ministry of Finance (MOF) in a joint statement yesterday.
The move follows similar steps taken in recent weeks by several other countries including Australia, New Zealand, several European nations and critically, Singapore's great financial rival, Hong Kong.
It comes amid a worsening financial meltdown that has put banks around the world at risk and left depositors fearful about their savings.
MAS said that the guarantees offered by a few regional jurisdictions have 'set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors'.
'This is why although Singapore's banking system continues to be sound and resilient, the Government has decided to take precautionary action to avoid an erosion of banks' deposit base and ensure a level international playing field for banks in Singapore,' it added.
Prior to the MAS move, some bankers had been privately concerned that, with other jurisdictions like Hong Kong guaranteeing deposits, money could flow out of Singapore in search of 'safer' pastures.
Malaysia announced a similar move yesterday, a decision likely taken in step with Singapore. It will guarantee all ringgit and foreign currency deposits in banks, investment banks and financial firms.
Singapore's guarantee - believed to be the first in its history - significantly expands existing protection, which comes under the Deposit Insurance Scheme administered by the Singapore Deposit Insurance Corporation.
It insured all savings for up to $20,000 but now savers have Government protection on the full amount of their deposits.
And to ensure it is a true blanket guarantee, the Government will also extend protection to deposits placed with credit cooperatives registered with the Registry of Cooperative Societies.
The Government said last night that a guarantee of up to $150 billion will be sufficient to safeguard against liabilities that could arise from the collapse of any financial institution here.
Senior bankers and economists welcomed the move, seeing it more as a confidence-booster after a harrowing few weeks of bank failures overseas, and not an attempt to avert a potential crisis.
'Given the financial strength of the Singapore banks, this is clearly a precautionary measure,' said OCBC Bank's chief executive David Conner.
'What is important is that Singapore as a financial centre is now at par with the countries that have implemented similar measures.'
Citi Singapore's country head, Mr Jonathan Larsen, said the move 'will ensure the continued competitiveness of Singapore as a financial centre during this challenging period...and will reinforce the already strong standing of Singapore- licensed banks here and abroad'.
But OCBC economist Selena Ling also noted: 'The move came as quite a surprise, because earlier comments did not really suggest that they would do something like this.
'This suggests that they probably had a long debate over whether to do it or not. But for the long-term future of Singapore as a regional and financial hub, this is a concrete measure.'
Dr Chua Hak Bin, Citi's head of research for Singapore, said the move is 'prudent and necessary...and assures all individuals and companies that their deposits in Singapore are safe and sound'.
He also believed it might nudge other Asean nations to quickly follow suit.
CIMB-GK economist Song Seng Wun said that it was clear that Singapore and Malaysia were in discussions before the announcements but maintained that the measures are pre-emptive and precautionary in nature rather than out of necessity.
Looks like I don't have to shift my cash around anymore. :-) I may just put my cash in the savings accounts that give the best interest rate.
I thought MAS would step in when things are going badly for the local banks. However, the fear of losing deposits to HK banks did the trick. I can imagine MAS being really pissed off that it has no choice in the matter!
I believe that bank interest rates may go even lower than now. However, there may be a brief period where banks try to entice you to lock your money in.
I became interested in T-bills after its yield went above 1% recently.
A new 3-month T-bill is announced on every Friday. However, the bank (primary dealer) will accept your order all week round. The T-bill is closed on the following Monday 12pm and are auctioned to determine the cut-off yield. The result is shown on the day itself, but, the T-bill will only start on Thursday. (The amount is deducted from your bank a/c on Thursday morning.)
Being a DIYer, I went down to the bank to buy the T-bill myself. Many people thought you need $250k to invest. It's not true. The minimum is just $1,000 and there are no charges.
It's not too much of a hassle. Just enter the bank, wait for the next financial officer (not teller), fill in the form and that's it. The whole process takes just five minutes. However, there is no auto-renewal or rollover. You need to come back every 3 months.
There are two main things to fill on the form: the amount and the yield. If you don't specify the yield, then you are putting in a so-called non-competitive bid, meaning you will buy the T-bill, no matter the yield. If you specify the yield, you will only buy the T-bill if your yield is less or equal to the cut-off yield.
Personally, I would put in a competitive bid all the time. This is because I do not want to buy T-bills if the yield is less than the interest rate of an ordinary savings a/c (which is currently 1.2%).
The good thing about T-bills is that it is a uniform bid auction and the cut-off yield is used. Even if you specify just 1%, you'll get the cut-off yield, as long as it's higher. (If the cut-off yield is lower, you are out-bidded.) Of course, if everyone is conservative, then the cut-off yield will be low. Just take a look below. There is S$5.2bil bidding for S$2bil worth of bonds.
|Maturity date||15 Jan 2009|
|Cut-off yield and price||1.27% p.a., 99.683%|
Some online financial portals do auto-renewal for you. They deduct 0.15% from the yield for the first placement and 0.1% for (non-competitive) renewal. I think it's fine to pay these spreads when the yield is around 3%, but not when the yield is around 1%.
Fed to offer dollars to Bank of England, European Central Bank and Swiss National Bank to lend to private banks.
The Federal Reserve announced Monday it will offer an unlimited amount of dollars to three other central banks in an unprecedented move to provide liquidity to the global banking system.
The U.S. central bank will lend dollars at a fixed interest rate to the central banks of England, Switzerland and the European Union, according to a joint statement from the banks.
The other central banks will be able to borrow "any amount they wish" in exchange for collateral. The goal is to flood the financial system with much-needed dollars.
After they borrow dollars from the Fed, the Bank of England, the European Central Bank and the Swiss National Bank will provide private financial institutions with one-week, 28-day and 84-day U.S. dollar loans in the latest attempt to unfreeze credit.
"The plan allows the central banks to exchange assets on their books for more liquid assets," said John Silvia, chief economist for Wachovia. "It will then allow institutions that need dollars to conduct the business they need to conduct."
The new plan will continue through April 30, and the Bank of Japan will consider introducing similar measures.
"Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets," the Federal Reserve said in a statement on its Web site.
With inter-bank lending frozen, and financial institutions unable to acquire short-term money to fund daily operations, central banks have searched for methods to boost liquidity and restore the credit markets to normal operations.
"People have become extremely risk-averse because of the legacy of Lehman Brothers," said Silvia. "If a bank like Lehman can turn over and die in a matter of days, it would be hard to convince banks to lend to other institutions for any given time period."
The latest move follows last week's global coordinated interest rate cuts, as well as Sunday's announcements that European governments will guarantee new bank loans and the British government will invest $63 billion in three major banks.
Monday's plan is the first time in which central banks have issued uncapped loans to other financial institutions. Previously, the Fed had allotted $620 billion in swap arrangements with nine other central banks. That number has ballooned since December, when the Fed announced a $24 billion swap cap only with the ECB and the SNB.
The huge increase in swap funds has been especially necessary during the recent crisis, as banks have become more and more reliant on central banks to provide them with essential loans.
"Before the crisis, central banks were dealing in much smaller numbers, and banks accepted a wide array of collateral and exchanged many different currencies," Silvia said. "Now, the dollar and collateral from central banks is much more highly favored."
In a separate move, the Fed last week doubled the size of its lending facility to private banks - its so-called term auction facility - to $300 billion.
This should put an end to last week's credit freeze.
Is this the turning point? Or is it just the next bear rally?
There's no point selling once the turning point is reached because most bad news after it will be discounted.
On the other hand, I believe the central banks are now very vulnerable. Some speculators may try to mount some sort of attack on them to bleed them dry... do they really have unlimited cash?
You get some interesting stats from MAS statement on the failed structured products.
Minibonds' issue size was S$508mil, of which S$375mil was sold to about 8,000 retail investors through nine distributors.
ML Jubilee series 3 issue size was S$38mil, of which S$23mil was sold to about 350 investors through six stockbroking firms.
For these two, 28% bought S$10k or less. Over 80% bought S$50k or less.
DBS High Notes 5 issue size was S$103mil, bought by over 1,400 investors. More than half bought S$50k or less.
Stock prices have come down substantially. Should I still consider cutting loss?
I cannot decide between the two scenario:
There are still plenty of bad news to go around in the next 2 weeks.
Is there anything that has not dropped, other than gold?
Gold is a barometer of confidence in the US$. As such, it is truly negatively corelated with the US$. (One can say that gold has an absolute value, and it is US$ that is losing value.)
SHE's a 27-year-old whose job it is to advise bank clients and sell them investment products.
Her job title is bank relationship manager. But, going by her own investments, she now jokingly refers to herself as a "relationship damager".
Reason: She's lost about $90,000 of her own money in the stock market.
And she managed to do it mostly in the last two days.
She did not mind sharing her story but only wanted to be referred to as "Jane" because she does not want her parents to know of her loss.
Jane, who holds an Arts and Social Sciences degree from the National University of Singapore, said: "If they knew, they would be completely shocked. It's so much money.
"Two days ago, they asked me if I managed to sell my shares in time, because they heard about the crash in the news."
"I just said I was okay. 'Nothing lah'. I didn't want them to worry."
Even her two younger siblings do not know.
"That's my own investment. I won't go around telling people," she said.
"But the truth is that I'm already seeing a loss of 60 per cent compared to one year ago," said Jane, who has about $150,000 stuck in the stock market.
"It's quite sad to see your portfolio going down. So far, in my career, I've never seen something so bad."
She's been in the banking sector since 2003.
All the 12 counters in her portfolio have nosedived, some by up to 89 per cent.
For example, she bought two lots of Cosco Corp at $3.25 six weeks ago. Cosco Corp was down to $1.47 yesterday morning.
"During the past year, I've tried to cut losses by averaging, buying at lower prices. But they (the prices) became lower again.
"I expected a drop in the market, but it's falling too much already. Two weeks ago, before Lehman Brothers collapsed, we thought the market was already coming to a bottom."
The sudden plunge in the market "was a shock".
"The market suddenly turned around and I did not adopt the cut-loss strategy. I didn't cut. So when some of my counters dropped by 30 per cent, then 50 per cent, then 80 per cent, how to cut? You just hold onto it.
"A lot of the penny stocks that I bought were initially for short-term trading, but it looks like I have to hold onto them for a longer time now."
Jane said one of her friends, who has lost over $160,000, closed all his accounts a few months ago because "he feels that the more he trades, the more he loses"."
Is she thinking of doing the same?
"Maybe. I'll just wait and see. I think I'm okay, since it's just paper losses."
Although she believes prices can still fall another 20 per cent, Jane is hopeful for a good technical rebound. She will then try to cut her losses.
With the financial turmoil spreading to Europe, "even with the US$700 billion($1 trillion) rescue plan coming up, people are quite worried as to which organisation will be hit next".
By her own admission, Jane's $90,000 loss could have bought her another car to accompany her Peugeot, which she bought last year for about $120,000.
"The last few years, the market has been very good."
She earns a basic monthly salary of $6,000, and used to earn about $3,500 in commission.
"In good times, we can earn up to $10,000 a month in commission."
But now, Jane said she would be happy with $1,000, because "maybe we'll earn nothing".
She also said she would cut down on luxury goods, like Louis Vuitton bags and $600 Ferragamo shoes, from once every three months to once a year.
Instead of eating in restaurants three times a week, she will do so only once a week, and "eat more at home", which is a four-room flat she shares with her parents. She gives them about $1,000 a month.
Jane also has about $100,000 in Australian and New Zealand currencies in fixed deposits, but "even that is down".
She believes that with the financial turmoil, a lot of people in the banking sector will be hit.
"Now, every month, I just wait for my pay."
The headline is misleading. Jane did not lose $90k in two days. She just lost the amount due to the sharp drop in the past two days.
27 years old, 5 years in the banking sector, with $150k invested and $100k in currencies... she is paid pretty well.
Unwinding proceeds not enough to cover original collateral
Investors of the Merrill Lynch Jubilee Series 3 LinkEarner Notes are said to be walking around shell-shocked after receiving letters telling them that their investments are worth zero.
The current financial crisis meant that the proceeds from the unwinding process were not enough to cover the original collateral value of the notes which were complex products involving credit default swaps and derivatives.
The Jubilee Series 3 notes are the first structured products linked to the bankrupt Lehman Brothers to be unwound here.
A total of S$26.29 million and US$1.4 million had been sold by six broking houses at minimum amounts of S$20,000 or US$10,000.
Beside the Jubilee Series 3 notes, DBS High Notes 5 and Lehman Minibonds have gone belly up. Over half a billion dollars worth of these products were sold over the last two years to thousands of people.
According to the letter dated Oct 6 sent to noteholders from Merrill Lynch, it said that 'as the credit event redemption for both the SGD notes and the USD notes is zero, no amounts are due and payable to noteholders on the credit event redemption date.'
The credit redemption date is Oct 17, 2008.
Merrill said bids were asked from five dealers for the debt obligations of Lehman Brothers and securities which were notes whose performance is credit-linked to a pool of 120 underlying securities.
'Because Lehman Brothers Holdings Inc has filed for bankruptcy, these ...debt obligations are trading significantly below their face value... are currently valued below 20 per cent of their value value,' it said.
'The current US financial crisis has led to unfavourable market conditions in the broad credit markets which has led to significant decline in the value of the securities,' it said.
Although the proceeds came to several millions of dollars, they were less than the market value adjustment of S$20.9 million, so consequently the credit event redemption amount was determined to be zero.
Martin Lee, a financial adviser, said many investors have difficulty understanding that they will get nothing from the proceeds.
'It shows how complex the product is,' said Mr Lee.
Tomorrow, many investors of the failed structured products will gather at Hong Lim Park to listen to former NTUC Income chief executive Tan Kin Lian, who has handed a petition to the government on the matter.
The Monetary Authority of Singapore last night said it has received the petition from Mr Tan and said that it understands the anxiety of investors and is committed to ensuring a quick and fair resolution of their complaints.
Jubilee series 3 is just small fries, with just $26.3mil sold. Over $500mil of Minibonds were sold.
Five-year lows of these two currencies hit S'poreans with big paper losses
INVESTORS tempted by the attractive interest rates offered for Aussie and Kiwi dollar fixed deposits are licking their wounds after the two currencies plunged to five-year lows.
Both types of fixed deposits offer generous interest rates, but they cannot cover for the dramatic loss in the value of the currencies.
One unhappy investor, who declined to be named, is sitting on a whopping $50,000 paper loss from a $200,000 Aussie dollar fixed deposit she had placed in July. That is a 25 per cent loss in just four months.
The interest rate offered was 5.765 per cent per year, almost 10 times better than the 0.6 per cent she was earning in a Singapore-denominated fixed deposit.
At the time, the Australian dollar was at a high of $1.319 to the Sing dollar. The currency fell to $1.025 to the Sing dollar late yesterday.
Now that the Australian and Singapore dollars are practically at parity, the woman, who is in her 20s, is regretting that investment.
She is holding on to the investment for as long as she can. She told The Straits Times ruefully: 'In the span of the next 20 years, hopefully the Aussie dollar will appreciate.'
Operations manager Kenneth Ang is nursing paper losses of about $8,000 on his Aussie-dollar fixed deposit.
He had put a 'large sum' of cash into a 12-month fixed deposit in a Singapore bank about eight months ago, when the Aussie was markedly stronger - trading at about $1.295 to the Sing dollar.
He said he was 'a bundle of nerves' on Wednesday when the currency fell to a six-year low of 96.17 Singapore cents, before bouncing back somewhat yesterday.
But he is not about to cash out yet.
'Thankfully, the Aussie dollar recovered the next day, and I hope it stays that way,' he said. 'I'm not going to withdraw my deposit prematurely as I don't want to fork out the penalty on top of all my losses.'
Another investor, who gave his name only as Mr Chan, has been hit by paper losses of $10,000 on his $70,000 deposit and is also planning 'to wait it out'.
Meanwhile, the Kiwi dollar fell to as low as 86.76 Singapore cents this week, down from $1.1215 a year ago.
Until this August, banks had seen steady investor interest in the fixed deposits of these two currencies. This is thanks to the relatively high rates of over 6.3 per cent for Aussie-dollar deposits and over 8.1 per cent for the New Zealand-dollar ones - a far cry from the 1 per cent on similar Singapore-dollar deposits.
These interest rates had been among the highest among medium-sized economies. The currencies' popularity was also boosted by a commodities boom, since both countries are major exporters of metals and other resources.
But now, banks say there is scant interest.
Ms Janice Poon, Standard Chartered Bank Singapore's general manager of wealth management, noted that the Australian dollar and New Zealand dollar are both likely to weaken even further against the Singapore dollar over the coming months.
That is because Australia's and New Zealand's central banks are likely to cut interest rates drastically as the global credit crisis unfolds, she explained.
Lower rates make the currencies less attractive to hold. Global investors sell them, causing them to weaken further.
Some analysts also think the currencies will drop because of weakening global demand for commodities.
In addition, experts warn that interest rates on these deposits are also likely to come down.
Earlier this week, the Reserve Bank of Australia (RBA) set the ball rolling by cutting the benchmark interest rate Down Under by a full percentage point from 7 per cent to 6 per cent.
Mr Emmanuel Ng, OCBC Bank forex strategist, noted that 'the potential for both the RBA and the Reserve Bank of New Zealand to deliver further interest rate cuts remain a very real proposition'.
High yield, high risk.
It seems these two currencies are affected by the appreciating yen. People borrow yen and put them in high yielding currencies. When yen appreciated, people withdrew to pay back the yen, in case it goes higher.
SINGAPORE'S central bank eased monetary policy for the first time since 2003 on Friday, in a widely expected move that will slow the rise of the currency to limit the economic fallout from the deepening financial crisis.
The Monetary Authority of Singapore (MAS) sets policy by managing the Singapore dollar in a secret trade-weighted band against a basket of currencies, instead of setting interest rates.
'MAS is therefore shifting its policy stance to a zero percent appreciation of the S$NEER policy band,' the central bank said in a twice-yearly monetary policy statement.
'This policy maintains the current level of the policy band, and there will be no re-centring of the band or change to its width.'
It said it expected inflation to remain within the 6-7 per cent target for 2008 and forecast inflation to ease to 2.5-3.5 per cent in 2009.
Intensifying market turbulence from the global financial crisis have prompted central banks across the world to loosen policy to avoid a global recession.
All 13 economists polled by Reuters had expected Singapore's central bank to loosen policy by letting the currency rise at a slower pace.
Ten analysts had forecast the central bank to ease policy by reducing the slope of the band within which the currency trades, while three economists expected it to switch to a neutral stance.
A neutral stance means the central bank will keep the value of the Singapore dollar stable against the basket of currencies.
In hindsight, it is obvious that Singapore has to ease its monetary policy due to the impact to its exports. Too bad only hindsight is 20-20.
MAS should be maintaining S$ in the range of S$1.45 to S$1.55. Will it go back to S$1.80? If you think so, you should change some US$ today, even though you have missed the lowest point.
I placed a US$ FCFD at US$1 to S$1.78. Shows what foresight I have. (I thought MAS would maintain the exchange rate to maintain Singapore's competitiveness.)
Now, people will say that don't put all your eggs in one basket. Put a bit first, then see how. This is difficult to carry out in practice because the minimum amount is US$5,000. How many US$5,000 do you have?
Here's how the Jubilee Notes series 3 work: in a credit event, you exchange your good underlying securities for the bonds of the defaulted entity. Then, you need to pay the unwinding fees and make good any shortfall in the underlying securities.
The underlying securities is worth $5.4mil, from the original $26.3mil. The Lehman Brothers' bonds are worth $4.7mil, from the original $26.1mil. The unwinding fee is $2.6mil.
The noteholders get back zero. ($4.7mil - $2.6mil - ($26.3mil - $5.4mil))
It seems to me someone lost $20.9mil.
If we extrapolate this to the Lehman Brothers Minibonds, then we can expect the underlying securities to have just 20.5% of their original value!
SHE put $66,000 of her family's money into what she thought would give her quick and lucrative returns.
But a year on, the 20-year-old undergraduate could end up losing most of it because she has no idea what has happened to the controversial company in which she had invested - Sunshine Empire.
A check by The New Paper found that the company, which used to occupy a seventh-storey unit at the HDB Hub in Toa Payoh, is no longer there.
In its place is another company called Niu Lifestyle, which was registered on 20 Mar this year.
However, the corporate websites of Sunshine Empire, which is under investigation by the authorities, are still online, although details of its supposed property ventures have since been taken down.
The undergraduate, who wanted to be known only as Pamela, does not have the faintest clue how to recover the $66,000 she put into the multi-level marketing company.
Lured by the promise of cash rebates of up to $1,000 a month, Pamela bought a total of six packages called Gold Prime under the Sunshine Empire product line.
She paid $11,000 for each package, using money she borrowed from her parents.
She said: 'I don't know if I will ever see the money again. I was naive and foolish.
'I thought that was a smart way to earn money.'
She said her father was hospitalised some time in the middle of last year and she was in need of money. 'My friend told me about Sunshine Empire, and how I should make my money work for me,' she recalled, and started buying through her friend.
'At first, I thought it was too good to be true, but for the first two months, I got cash rebates of $4,000,' she said.
Convinced that the scheme worked, she borrowed another $44,000 from her parents to buy more packages.
She even persuaded two more of her friends to buy packages with her, as by selling the packages, she could earn 'bonus points', which could supposedly be converted into cash.
'I really thought it was easy money, and it wasn't wrong because I wasn't prostituting myself or cheating people.
'We went for motivational talks at the company, which sold us not only the packages promising good rebates, but also the idea of being able to change our lives and live our dreams.'
But in October and November last year, media reports were published about the Sunshine Empire's unsupported claims of grandiose investments in water theme parks in Malaysia and a wireless broadband project in Taiwan.
'My parents were worried and started to warn me and told me to take my money out, but I was stubborn and refused to heed their advice,' she said, her voice tinged with regret.
'My friends in Sunshine Empire said that any media publicity is good publicity and it only showed that our company was famous. I believed them.'
Only in November, when it was reported that the company was under investigation by the Commercial Affairs Department (CAD), did Pamela start to panic.
She called her 'upline' (the person who recruited her) asking to withdraw her cash, but was told that all accounts were frozen and there was no cash available.
Then, she was hounded by her two friends whom she had recruited.
'I feel very bad that I got them into the same situation as myself,' she said.
Then in March, she was told by her 'upline' that a new company called Niu Lifestyle had been set up at the former office of Sunshine Empire.
'I asked what was this company about, and I was told it was fengshui-related, but to find out more, I had to meet her there at the 'office',' she said.
'If it is a totally different company, why did my Sunshine Empire's upline tell me to meet at the same office, even when it is called Niu Lifestyle now?' she asked.
'I was sceptical by then, and it seemed that it was just a change in name.
'When I asked about Sunshine Empire, I was only told my money was stuck, but I could transfer my account to another new company called Em Max.'
Her 'upline' told her Em Max was a new start-up in Hong Kong.
'By then, I didn't believe anything I was told anymore. I was furious but I was desperate. So I made the account transfer. I don't think I will see my money again, but I am just trying anyway,' she said.
'I feel very stupid, and I felt I was brainwashed. The money I borrowed from my parents was hard-earned, and I feel guilty and that I let them down.
'My relationship with my parents have become strained because of this.
'There is no such thing as easy money,' she said ruefully.
When approached, the Monetary Association of Singapore declined to comment. It had put Sunshine Empire on its investor alert list on its website last year.
When contacted, the police said Sunshine Empire was still under investigation.
The Consumers Association of Singapore's executive director, Mr Seah Seng Choon, had earlier cautioned participants against transferring their money to Hong Kong, as it would put their investment outside Singapore's jurisdiction.
A fool and her money are soon parted. This is the eternal truth.
Ever tried convincing someone that this is a scam? Don't bother. Let them learn on their own.
Today is another unprecedented day where the STI dropped by 150 points before recovering.
What would be your answer when someone asked you what you were doing a few years down the road?
For me, it would be, "I'm working."
Perhaps a better answer would be, "I bought some."
Millionaires made a beeline for United Overseas Bank (UOB) last week, swelling its coffers and causing the bank to end its fixed deposit drive just six days after it began.
UOB declined to disclose the amount it had taken in for its $1 million minimum fixed deposit campaign targeted at the rich but a back of the envelope calculation estimated that the bank could have garnered as much as $1 billion. Sources said that such an amount was not unreasonable - it works out to $1 million from 1,000 people - given the 77,000 millionaires in Singapore.
'Our recent fixed deposit drive was part of our on-going efforts to attract potential privilege banking clients and deepen our relationship with existing clients,' said Eddie Khoo, executive vice-president of personal financial services at UOB.
'This move is especially relevant for clients who prefer plain vanilla savings products during periods of uncertainty and high market volatility,' said Mr Khoo.
'It is also consistent with our objective of introducing competitively priced products to meet the financial objectives and risk profiles of different clients,' he said.
UOB had taken out a full page advertisement on Sept24, targeting those willing to park $1 million or more with it.
It offered to pay 1.708 per cent for a 13-month fixed deposit for amounts of at least $1 million.
Amid the financial carnage, wealthy individuals have taken to diversifying their holdings and local banks seem to be benefiting from this movement.
So there are so many risk-averse rich people around.
Banks see term deposits as alternative source of funds amid credit crisis
BANKS that are hungry for cash amid the global credit crunch have unleashed a string of eye-catching promotional rates for fixed deposit accounts.
This spells good news for customers with cash parked in bank deposits.
The interest rates on offer may still be well below the inflation rate, but they are far higher than typical term deposit rates in Singapore.
And amid severe stock market volatility and a cooling property market, cash in the bank is a fairly safe investment.
Take Standard Chartered Bank (Stanchart), for example, which is dangling a rate of 1.688 per cent a year for a 100-day tenor on a deposit of at least $50,000.
If you have more money to put in the bank, you stand to reap a solid 1.958 per cent a year for a minimum deposit amount of $500,000 over two years.
This means after two years, $500,000 placed with Stanchart should return a depositer close to $520,000.
At Citibank, customers enjoy a rate of 1.65 per cent a year on a one-year time deposit of $10,000 and above if they set up a new salary credit account with the bank.
At Maybank, customers who place $25,000 to $500,000 receive a healthy interest rate of 1.9 per cent a year, for a three-year term.
Consumers even get their interest paid upfront, said Ms Helen Neo, Maybank Singapore's head of consumer banking.
'The upfront time deposit promotion is to reward our customers so that they can re-invest their interest earned. Customers would also appreciate receiving their interest earlier rather than upon maturity,' she said.
Some local banks have also got into the fixed deposit promotional rates frenzy.
United Overseas Bank, for instance, is offering customers 2 per cent a year on a three-month fixed deposit, and 1.36 per cent a year on a 15-month fixed deposit when they place a minimum of $25,000 for each deposit. This dual-term fixed deposit promotion is available only for a limited period, the bank said.
Consumers point out that these rates are attractive, given that average three-month fixed deposit rates and savings rates from banks in Singapore can be as low as 0.425 per cent and around 0.25 per cent respectively.
'I might move about $50,000 or more into one of these promotional offerings, because deposit rates are so low and inflation is eating away at my money,' said 26-year old business owner Justin Kho.
Mr Kho, who currently has a one-month fixed deposit with DBS Bank yielding around 0.325 per cent, said he would review his options with the bank, in the light of these better returns.
Analysts say it is understandable why some of these banks are dishing out these tantalising returns.
'The global credit crunch and interbank liquidity squeeze may have contributed to banks turning to fixed deposits as an alternative source of near-term funding,' said OCBC Bank economist Selena Ling.
Basically, with the tighter credit conditions, banks are unwilling to lend money to each other, and this has the effect of making money harder to borrow.
This scarcity of short-term liquidity has seen the three-month Singapore Interbank Offered Rate (Sibor) jump by one percentage point in just a month to more than 2 per cent.
With banks needing fresh capital for their operational needs or to shore up their balance sheets, money roped in from fixed deposits would certainly come in handy.
'If you're a foreign bank, you either borrow from the interbank market or tap your own deposit base for capital, but unlike local banks, foreign banks may not have such a large deposit base,' said Mr Joseph Chong, chief executive of financial advisory firm New Independent.
Phillip Securities Research analyst Brandon Ng suggested that DBS, for instance, has a huge retail deposit base. This could be one reason why the bank has not been launching promotional fixed deposit rates, unlike foreign banks.
Not surprisingly, DBS said it has not seen a rise in fixed deposits.
Stanchart consumer banking head Ajay Kanwal said that in the last month, the bank has seen a quick rise in deposit interest rates, mainly on account of the rise in three-month Sibor.
That, he said, is in turn influenced by two key factors: United States interest rates and domestic loans demand.
FD rates are still too low. The longest FD term I'm willing to commit is 6 months.
The StanChart's rate of 1.688% for a 100-day tenor is very attractive. Too bad you need $50k. It's too much to commit.
I told my father about topping up his Maybank iSavvy a/c — with my money — to $50k to take advantage of the extra 0.3% interest. He was in favour of it.
For Maybank iSavvy a/c, <$50k earns 0.88% and >=$50k earns 1.18%. It is not tiered — the rate applies to the entire sum.
This will increase complexity of the account management.
A few years ago, I invested in a BRIC fund at 0.99. Its last valuation is 0.99.
Same as before? Nope, I lost the upfront 5% charge and the annual 1% management fee.
It looks like I need to change my buy-and-hold strategy for unit trusts.
I intend to buy more, perhaps at 0.8, but this time I will use an online service to cut down on the commissions.
Trusts are supposedly good for dividends. There are three reasons why I distrust them, however:
I sent this enquiry to the CPF board. Let's see what they say.
I would like to know if I am allowed to top-up my medisave account directly using cash. I do not wish to top-up my OA and SA.
If so, how do I do it? If not, why not? tia.
Edit: I found that I am allowed to top up medisave account directly.
For the DBS High Notes 5 and Merrill Lynch Jubilee LinkEarner Series 3, Lehman Brothers was one of the reference entities. As such, the investors are expected to be totally wiped out.
These notes are very likely to be some credit default swap against a basket of companies. In other words, you're insuring that these companies will not go bankrupt. If they do, you pay out. In the mean time, the insured pays you a regular premium.
If one entity out of six failed, you may expect the notes to have 5/6 of the value left, even though the prospectus says there is no direct proportion. However, there is no reason to do so because of the first-to-default clause. If anyone default, you're going to close shop anyway, so why not buy the maximum that you can for each entity? Now, when one entity default, you'll lose everything. In other words, the notes is highly leveraged.
Misled investors should sue the issuers, since they are still around. :-)
For the Lehman Brothers Minibonds, the issuer no longer exists. Even if you want to sue it, you stand behind a long line of creditors. Should you sue the distributors, then?
I would not, at this point in time. The trustee, HSBC, is trying to determine the best course of action. It is still not clear if the notes will be terminated. If the notes can continue to pay out the interest, then all is fine — for the time being.
It is also not clear if the notes are worthless. Most investors are assuming the worst case, that's why they are in distress. However, in this case, only the issuer has gone bankrupt, the underlying securities representing the notes are still okay.
It is not known how much the underlying securities are currently worth. Before its demise, Lehman Brothers valued the notes at 30% to 50% of their face value. It has been said this was artificially low — apparently structured products have low redeem values to discourage redemption. If the notes are really worth 50% to 80%, the investors may be happy to take it.
Senior Minister Mr Goh said,
"I know (individual) Singaporeans have been hurt; they have invested in Lehman Brothers mini-bonds, in High Notes ... and more have been hurt investing in equities," he said.
"But that's life — if you want to have a good rewards, you've got to take risk."
"Otherwise, leave your money in your CPF ... Four per cent is a fabulous return without risk. Singaporeans complained it was too low, (but) now they know the meaning of a capitalistic existence."
Some people said Mr Goh is insensitive to the plights of the old people. Others said he has a point.
Would I leave my money with the CPF for 4%? No way! At least not the entire amount — you can't take out the lump sum, until your death.
Confused by all the structured products out there? Don't worry, just ignore all of them and create your own.
Here's the basic idea behind structured products: buy a bond or bond-like instrument with the bulk of the capital and invest in some options with the rest.
The bond is the one that allows the capital protection, and the options determine your returns.
For example, if you invest in a $1,000 1-year bond paying 5%, you only need to pay $950 upfront. You use the $50 to buy some high risk options that may pay 100% or more! (But usually zero due to their high risk nature.)
If things don't work out, you still get back your $1,000. If things work out, you will get $1,100 instead of just $1,050. That's a 10% return!
Note that this is capital protected rather than guaranteed. If the bond defaulted, you'll lose your capital. You want guarantee? Find a guarantor... :-)
A group of 180 Chinese construction workers protested recently when their company wanted to reduce their pay from $1,700 to $1,200. For $1,700, they have to work 28 days a month (2 off days), 14 hours a day.
Apparently they were fine with it. Not for $1,200, though. That's why they protested.
They were here less than two months. I suspect the company is attempting a switch-and-bait. It's not the first time that the employees were enticed to come to Singapore with higher salaries, but were forced to accept a lower salary after they arrived.
I remembered that it happened to NTUC too. Store managers were offered $2,000, but $600 was deducted for "training". They were not told until they came here, of course.
The sole reason why they were offered $2,000 was that this made them eligible for the Employment Pass, which didn't have the Foreign Worker Levy. (The cutoff is now $2,500.)
SGS = Singapore Government Securities.
The 3-month rate finally went beyond 1% recently. Perhaps it's time to buy some. The minimum denomination is just $1,000.
Singaporeans will see an increase of 21 per cent in their electricity bills in the last quarter of this year.
The average electricity tariffs from October to December would go up by 5.38 cents per kilowatt per hour. The Energy Market Authority (EMA) said the increase is due to higher fuel oil prices.
For the last quarter of this year, oil prices were nearly S$155 per barrel, 38 per cent more than the third quarter.
So average monthly electricity bills look set to rise by S$5.70 to S$22.92 for those living in one- to five-room public housing flats.
For those living in the one- to three-room flats, this works out to an increase of between S$90 and S$223 in electricity bills for this year.
"I am jobless, so burden for me also," one individual said.
"Even though I don't pay the bill, my son does so I still feel the pinch for him," said another.
Seah Choon Seng, executive director, Consumers Association of Singapore, said: "The 20 per cent adjustment in tariff price is quite hefty for consumers to bear and I suppose one of those very high adjustments we see in many years. We feel that the companies involved in the utilities business should work harder in improving their efficiency to bring down the costs for consumers."
The EMA said the government's U-save rebates of S$310 to S$330 to help offset increases in utilities bills is more than enough to cover this year's electricity price increase for one-, two- and three-room HDB flats.
For four-room HDB households, the increase to the bill size for this year would be marginally higher than the U-save rebate given. These homes received S$295 in U-save rebates. But the total bill size for 2008 is estimated at S$316.
The EMA feels there is more room for Singaporeans to conserve and use less energy. That's because the EMA's surveys and findings show that nearly 40 per cent of Singapore homes are using more energy than they require to. And the air conditioner is one of the largest energy guzzlers in homes here.
Khoo Chin Hean, chief executive, EMA, said: "There is a lot of use which can be curtailed. There is probably quite a bit of wasteful usage. It is this kind of usage we can be more mindful of and take measures to manage our consumption."
The authority said if the forward fuel prices come down next month, the electricity tariff from January to March 2009 will be reduced accordingly.
This is not unexpected. After all, SP Power has indicated the fuel price used in its previous tariffs. What struck me was that the prices were really low. At least now we know this is the highest it can go.
Surely you don't expect a subsidy? :-) (Nothing less than market rate for Singapore!)
Basic expenses have gone up permanently from last month (September) due to an increase in rental. My landlord increased my rental by almost 50%!
Vehicle expenses were very low due to parking reimbursements from my company. The reimbursements were delayed from previous months.
The bulk of Others was due to a large DVD order ($163.48). Another reason was treating an ex-colleague who visited Singapore ($40).