In old times, people invest in gold. As the nation develops, people starts to become savvy and started investing in many other vehicles. Many are investing in entry level investments that doesn't tie their finances down too much.
In the last couple of years, I have been considering the option of investing in properties. This mode of investment can be easy, but can be among the toughest for a few reasons (not limiting):
- Large amount involved (20% downpayment, partially in cash or fully in cash)
- Low liquidity
- Monthly maintenance
- Being on top of the curve of a product life cycle (lowest being raw land, highest point being homes itself), the curve fluctuates from there
With so much downside, why would property be worthy of consideration? A few simple reasons:
- Long term or even retirement plan
- Property price crashing
- Lower risk as compared to stocks, Unit Trust, or even savings (look at banks that collapse recently)
- Rental income to take care of monthly installment
Property Prices
Property price peaked during 1996. Thereafter, a spite of economical and social setbacks caused prices to erode. They include:
- Asian Crisis in 1998
- Terrorist Attack - 11 Sept 2001
- Sever Acute Respitory Syndrom (SARS) - Year 2003
- Tsunami - Boxing day, 2004 (this has minimal effect on us)
The economy only started to recover in 2005. Property price peak around the last quarter of 2007. Many said prices in 2007 reached the peak of 1996. Over the period of 1996 till 2007 (a period of 11 years), property price had not grown at all! It only reach the last peak (1996).
With the current global economical downturn, which is expected to last till 2010 (i hope), the next possible peak could be between 2012-2015, assuming the global crisis ease off by late 2009 and nothing else happens. But be wary, if the global financial crisis stablised and starts to clear by late 2009, the next possible recession can happen between 2012-2015. Read one of my post on Baby Boomers.
Assuming property price climbs to a healthy level by 2012, where is the growth since 1996? Even if prices reaches 1996 price in 2012, there is still room for growth (16 years growth).
The Right Price
Property (private) prices started to loose ground. Demand had fallen in recent times. Owners started to panic when the October 2008 market correction happened, wiping out many investors' savings. Some had to resort to selling their properties. This caused property price to plummer by about 20%.
Another group of owners will also resort to panic selling in coming months or a year. Some of these investors had over committed and bought more than they could chew. They are unable to secure a loan given their Debt Service Ratio.
As such, this group will end up dumping their property investment. Having paid 20% cash downpayment when they bought the property and property market softening drastically, in addition to their inability to secure a loan, they will be forced to sell their property at whatever price, which includes having to top up cash to sell.
For potential investors, there is no real right time. A savvy investor will be able to sniff out good deals. Some market research will be required to understand the price trend.
When people are buying, don't buy. When people are coughing, look out for the right gems, not germs.
Long Term Plan
Assuming, if one buys a second property as an investment, and assuming he owns it throughout his life, here is a few benefits that the investor can/may enjoy:
- Retirement plan (assuming, rental income being about current money value of $2,000 per month)
- No need to rely on childrens to give them allowance when they retire
- Fully paid by the time they retired
- Mortgage better be insured. In the event of a Total and Permenant Disability (TPD), insurance will pay off the balance mortgage
- During occurance of TPD, and having the property fully paid, the rental income will help the invalid to sustain his expenses.
- Inheritance for their childrens
The Mortgage and Rental Income
Assuming it is a 2 room condo. Here is some calculation:
- Purchase Price : $600,000
- Downpayment : $120,000
- Loan : $480,000
- Tenure : 30 years
- Interest : approximately 2% or lesser (current 3mths SIBOR = 0.92%, 12mths SIBOR = 1.243%)
- Monthly Installment : $1,774 per month (approx)
- Monthly Maintenance : $200 per month (approx)
- Rental : $2,000-$3,000 per month
With this, the monthly rental will take care of the monthly financial requirement (installment and maintenance).
The Downside
With the current economy, consumer confidence is extremely low, job security is at stake, income is uncertain. Property price may not recover in the next 3 years. 100% rental may not be available thus there may be months without rent.
The downside has to be addressed before deciding on any major investment. With most downside being addressed, the investment is one with "Calculated Risk".
Bare in mind, even in a bull market, there will still be people loosing money and make that person, Not Be YOU!
Thursday, December 18, 2008
Monday, December 15, 2008
Are Singapore's Banks Safe
Top banks admit huge losses in Wall Street 'pyramid' fraud
LONDON (AFP) - - Top world financial groups on Monday revealed massive potential losses from an alleged scam run by Wall Street trader Bernard Madoff, admitting they were fooled by a classic pyramid investment fraud.
British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.
For the rest of the news, please refer to
http://sg.news.yahoo.com/afp/20081215/tts-us-finance-fraud-world-972e412.html
This is the problem with an overly free market where government gives a free hand to the institutions to run the show, with minimal government policy and controls. There is insufficient checks and balances in place, even tho America produces among the world largest audit firms.
All these talk and financial bailout promised by the Bush Administration sounds like, a tall tale. I have little faith in their government's 'intervention'. I keep my fingers cross and hope this is among the final few skeletons in the closet. If a lot more skeletons have yet to be revealed, I worry the global financial powerhouse may not be able to sustain the collapse and that US Economy will really go into bankrupcy.
The US financial system is a financial Titanic that is a make believe and since disaster of this magnitute has struck, the ship is sinking fast and smaller rescue boats (money) from all over the world are trying to save as many lives (financial system) as possible... an up-mountain task
Back in Singapore, prior to the Asian Crisis back in 1998, banks are not run as tightly as it is today. Should the Asian Crisis not happened 10 years ago, our economy and banking system, including some of financial companies may be in deep trouble, to the extend, some banks may even collapse given this magnitute of global financial crisis.
The Asian Crisis taught the banks a dear lesson. Huge price was paid back then and not mentioned to the public. Banks take had to write off huge debts and many people went bankrupt (banks were unable to recover debts). New governing policy were put in place, by the institutions and MAS alike.
Here's an example. Before Asian Crisis, bank branch Managers were able to approve loans up to a certain amount (let's say, $2mil). There were no proper checks. Managers approve loans are their discretion, even if it means, the borrower actually couldn't afford to pay it.
Post Asian Crisis (not sure which year), the Credit Bureau were set up by the banks. Credit Bureau will list down any individuals who has loans, credit cards, OD, etc, with any member bank. With that, banks are able to better assess if the borrower are over exposed. Tho there is limitation to the system, it still acts as a first screen.
In conclusion, local banks are definitely safer than most other banks globally, due to the changes and checks in place. MAS also makes it mandatory for financial institutions (including banks, insurance co, etc) to have fixed assets of a certain percentage to their liability.
LONDON (AFP) - - Top world financial groups on Monday revealed massive potential losses from an alleged scam run by Wall Street trader Bernard Madoff, admitting they were fooled by a classic pyramid investment fraud.
British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.
For the rest of the news, please refer to
http://sg.news.yahoo.com/afp/20081215/tts-us-finance-fraud-world-972e412.html
This is the problem with an overly free market where government gives a free hand to the institutions to run the show, with minimal government policy and controls. There is insufficient checks and balances in place, even tho America produces among the world largest audit firms.
All these talk and financial bailout promised by the Bush Administration sounds like, a tall tale. I have little faith in their government's 'intervention'. I keep my fingers cross and hope this is among the final few skeletons in the closet. If a lot more skeletons have yet to be revealed, I worry the global financial powerhouse may not be able to sustain the collapse and that US Economy will really go into bankrupcy.
The US financial system is a financial Titanic that is a make believe and since disaster of this magnitute has struck, the ship is sinking fast and smaller rescue boats (money) from all over the world are trying to save as many lives (financial system) as possible... an up-mountain task
Back in Singapore, prior to the Asian Crisis back in 1998, banks are not run as tightly as it is today. Should the Asian Crisis not happened 10 years ago, our economy and banking system, including some of financial companies may be in deep trouble, to the extend, some banks may even collapse given this magnitute of global financial crisis.
The Asian Crisis taught the banks a dear lesson. Huge price was paid back then and not mentioned to the public. Banks take had to write off huge debts and many people went bankrupt (banks were unable to recover debts). New governing policy were put in place, by the institutions and MAS alike.
Here's an example. Before Asian Crisis, bank branch Managers were able to approve loans up to a certain amount (let's say, $2mil). There were no proper checks. Managers approve loans are their discretion, even if it means, the borrower actually couldn't afford to pay it.
Post Asian Crisis (not sure which year), the Credit Bureau were set up by the banks. Credit Bureau will list down any individuals who has loans, credit cards, OD, etc, with any member bank. With that, banks are able to better assess if the borrower are over exposed. Tho there is limitation to the system, it still acts as a first screen.
In conclusion, local banks are definitely safer than most other banks globally, due to the changes and checks in place. MAS also makes it mandatory for financial institutions (including banks, insurance co, etc) to have fixed assets of a certain percentage to their liability.
Friday, December 12, 2008
Bailouts Bailouts and Skeletons Out of US' Closets
In recent months, Bailout is the biggest word of the year (surveyed). What is wrong? What else will go wrong?
The US$800 billion rescue package is not going to be easy on the plate. It is the current US Administration's quick escape till the Obama Administration takes over and clear the shit done by his predecessors.
The latest bailout facing problem is the rescue of Automakers. The current Administration is only interested to bailout GM till March 2009 and said that it's up to Obama's ability to rescue the economy. Creating a mess and letting others clear it is so common from the giant.
What is wrong with the American economy and how more wrong can they get? Their economy is near bankrupcy. Their world debt is in excess of a TRILLION dollars. If they can't get out of this mess, their economy will go into bankrupcy and their Developed Nation status will be thrown out and becomes a Undeveloped Nation. More squatters will roam the streets, more in food ration queues, more tent homes, lesser cars on the road, lesser jobs available, etc.
The US may be the World's No 1 economy currently, but not for long. With a broke economy, come 2010, the retiring Baby Boomers will not be able to get their retirement pension, 401K. That will attribute to more problem for the scrapegoat President Obama. He is taking over a sinking ship. If he fails to salvage, he gets more blames, if he salvaged it, he will go down history as one of the best President ever (no prize for guessing who is the worst).
If Middle-East and China doesn't come rescue US, brace up for a rough ride all thanks to Uncle Sam.
Year 2009 will be worst than 2008. How 2009 performs can affect if the global economy will drop further into recession or even a onset of the next Great Depression. If another Great Depression occurs, it will be many times worst than that of 1929.
The US$800 billion rescue package is not going to be easy on the plate. It is the current US Administration's quick escape till the Obama Administration takes over and clear the shit done by his predecessors.
The latest bailout facing problem is the rescue of Automakers. The current Administration is only interested to bailout GM till March 2009 and said that it's up to Obama's ability to rescue the economy. Creating a mess and letting others clear it is so common from the giant.
What is wrong with the American economy and how more wrong can they get? Their economy is near bankrupcy. Their world debt is in excess of a TRILLION dollars. If they can't get out of this mess, their economy will go into bankrupcy and their Developed Nation status will be thrown out and becomes a Undeveloped Nation. More squatters will roam the streets, more in food ration queues, more tent homes, lesser cars on the road, lesser jobs available, etc.
The US may be the World's No 1 economy currently, but not for long. With a broke economy, come 2010, the retiring Baby Boomers will not be able to get their retirement pension, 401K. That will attribute to more problem for the scrapegoat President Obama. He is taking over a sinking ship. If he fails to salvage, he gets more blames, if he salvaged it, he will go down history as one of the best President ever (no prize for guessing who is the worst).
If Middle-East and China doesn't come rescue US, brace up for a rough ride all thanks to Uncle Sam.
Year 2009 will be worst than 2008. How 2009 performs can affect if the global economy will drop further into recession or even a onset of the next Great Depression. If another Great Depression occurs, it will be many times worst than that of 1929.
Thursday, December 4, 2008
Next Downturn or Prolong of Current Downturn
There is something to note where the 'next downturn' could be foreseen. The Baby Boomers!
Baby Boomer generation started in 1946, after WWII.
Each year, more than 4 million babies (now oldies) were borned in America alone. That did not take into account, Japan, Europe, UK, etc. By year 2010, these boomers will start hitting 65 years old, the 'official' retirement age.
With more than 4 million retiring each year, in America alone, we will see 20 million retirees by 2015. Rather often, these older folks are the ones with money power as compared to young aspiring new entrance to the working society.
The younger generations are unlike able to sustain the vacuum left by the older folks, that pulled out of the stock market, sells off their expensive apartments or condos in the cities, etc.
With the current economy downturn, some of these older folks may be forced into retirements (retrenchment) and with the weak economy data and stock market, things can get worst than it is today.
It may take a lot more to ride out of this economy downturn than the governments of many countries had tried to paint to us.
Baby Boomer generation started in 1946, after WWII.
Each year, more than 4 million babies (now oldies) were borned in America alone. That did not take into account, Japan, Europe, UK, etc. By year 2010, these boomers will start hitting 65 years old, the 'official' retirement age.
With more than 4 million retiring each year, in America alone, we will see 20 million retirees by 2015. Rather often, these older folks are the ones with money power as compared to young aspiring new entrance to the working society.
The younger generations are unlike able to sustain the vacuum left by the older folks, that pulled out of the stock market, sells off their expensive apartments or condos in the cities, etc.
With the current economy downturn, some of these older folks may be forced into retirements (retrenchment) and with the weak economy data and stock market, things can get worst than it is today.
It may take a lot more to ride out of this economy downturn than the governments of many countries had tried to paint to us.
Sunday, November 23, 2008
Category A COE at $2 (All time low) - To Buy Or Not To Buy
The 2nd Certification of Entitlement (COE) bidding for November 2008 had fallen to historic low of S$2 per cert.
With the current financial crisis, banks have tighten lending rate thus many potential car buyers were denied loans. The sudden shortfall of loan approval means these potential buyers are unable to buy their choice car, leading to the massive drop of COE price.
With COE at S$2, it lead to a 10 fold increase in potential car buyers flooding the car showroom, with the intention to change their older car to new car, or to buy a new car. As per last COE bidding, some of these potential buyers will not qualify for loans, thus even if they make attempt to purchase a car, they are unable to do so due to loan rejection.
Car is a liability and a good handful of people doesn't understand the true cost of car ownership. Those who has never own a car before perceive that a car is affordable to them, just by taking loan and a little other ownership cost into mind.
Car loan defaulters have increased tremendiously in recent months. These defaulters are usually those who can barely afford a car many years ago. The plunging COE from an average of $30,000 years ago, to about $10,000-$15,000 in recent years helped these car owners afford a car. They may be earning no more than $2,500 a month, which means their take home pay is no more than $2,000. True car ownership cost is anything ranging from $800-$1,400 a month.
Those on 100% loan over a 10 years loan tenure are most likely the ones who will fall victim to the current recession. Watch out, a lot more loan defaults will surface in the coming months.
Conclusion, it is unwise to buy a liability unless one could truly afford it.
With the current financial crisis, banks have tighten lending rate thus many potential car buyers were denied loans. The sudden shortfall of loan approval means these potential buyers are unable to buy their choice car, leading to the massive drop of COE price.
With COE at S$2, it lead to a 10 fold increase in potential car buyers flooding the car showroom, with the intention to change their older car to new car, or to buy a new car. As per last COE bidding, some of these potential buyers will not qualify for loans, thus even if they make attempt to purchase a car, they are unable to do so due to loan rejection.
Car is a liability and a good handful of people doesn't understand the true cost of car ownership. Those who has never own a car before perceive that a car is affordable to them, just by taking loan and a little other ownership cost into mind.
Car loan defaulters have increased tremendiously in recent months. These defaulters are usually those who can barely afford a car many years ago. The plunging COE from an average of $30,000 years ago, to about $10,000-$15,000 in recent years helped these car owners afford a car. They may be earning no more than $2,500 a month, which means their take home pay is no more than $2,000. True car ownership cost is anything ranging from $800-$1,400 a month.
Those on 100% loan over a 10 years loan tenure are most likely the ones who will fall victim to the current recession. Watch out, a lot more loan defaults will surface in the coming months.
Conclusion, it is unwise to buy a liability unless one could truly afford it.
Thursday, October 23, 2008
World Leaders Scramble To Save Financial Market
Bad news after bad news, nothing seems stopping the global financial system from sliding further. World leaders are scrambling to prevent their country's financial system from a total collapse due to the US Financial Crisis.
The global market has not seen anything this bad since the last Great Depression in 1929. With the advancement of technology and global unity, a Great Depression may be avoided with a unison effort. Governments are pouring out huge amounts of money to secure their banking system so that it will not collapse.
The problem started from the US Financial Crisis (and sub-prime) which was a huge failure of the administration who has neglected their financial system right from the start. Should they be attentive of the on-goings (instead of war), the situation wouldn't have arise today. However, this gives test to how best problems can be overcome when all are united to fight it.
If the crisis is not overcome soon, it may result in a potential Great Depression. The signs today are similar to that of 1929, i.e Global recession and collapse of stock, etc.
http://www.channelnewsasia.com/stories/afp_world_business/view/384720/1/.html
Monday, October 20, 2008
Do Your Homework - Check Your Credit Standing
Before buying any property, buyers are advised to understand where their credit rating is. During downturn, banks are usually stricter with loan approval thus some may not be able to get a loan.
Banks usually looks at a few factors to approve loans. They can include (not limiting), Credit Bureau Rating, any litigation, income, fixed expenses (eg loans), source of income, etc. Even if the applicant has good rating and no on-going litigation, sound income, etc, they may still not secure a loan.
Potential property buyer need to ensure they are able to secure a loan before they place a deposit for a new property, or face a risk of loosing their deposit.
Advise, please seek an in-principle approval before acting on a purchase.
Banks usually looks at a few factors to approve loans. They can include (not limiting), Credit Bureau Rating, any litigation, income, fixed expenses (eg loans), source of income, etc. Even if the applicant has good rating and no on-going litigation, sound income, etc, they may still not secure a loan.
Potential property buyer need to ensure they are able to secure a loan before they place a deposit for a new property, or face a risk of loosing their deposit.
Advise, please seek an in-principle approval before acting on a purchase.
The Coming Property Correction/Crash
When everyone is buying, don't buy! When people are selling, it's time to go shopping!
That statement I told myself is proving itself loud and clear. In the 2nd half of 2007, property prices sky-rocketed and many investors rushed in and some made a tidy profit. The unsavvy investors (followers) joined the fun, hoping to make a tidy profit as well. They bite more than they could chew.
The property market experienced a boom, from July to December 2007, was partly caused by the prolonged recession and economy setback between 1998 to 2004. During this period, property prices plunge. Post 2004, the economy started to recover and investors started their buying spree, causing the property market to recover and saw an exponental growth.
Some novice investors tried their hands and purchased more than their finances could afford. They could have experienced one promising return, and bought a lot more than they can truly afford. For example, their financial ratings may allow them to buy (with loan) one property, but some of these investors bought 3 or more units.
They purchase properties on Deferred Payment Scheme, where they placed a 20% deposit and hoping to sell the property before the Temporary Occupation Permit (TOP) is issued. With the sudden turn of stock market (bear market), which coincide with the TOP period, many of these investors are stuck with their property. Facing a TOP, they will be forced to sell their property or face potential bankrupcy, as they are unable to funish the balance 80% of the property price.
These investors will be forced to sell/dump their purchase, loosing their initial 20% downpayment or more. With more sellers and little buyers, property owners will end up having to sell at a very low price.
Time to look out. The worst is not over.
That statement I told myself is proving itself loud and clear. In the 2nd half of 2007, property prices sky-rocketed and many investors rushed in and some made a tidy profit. The unsavvy investors (followers) joined the fun, hoping to make a tidy profit as well. They bite more than they could chew.
The property market experienced a boom, from July to December 2007, was partly caused by the prolonged recession and economy setback between 1998 to 2004. During this period, property prices plunge. Post 2004, the economy started to recover and investors started their buying spree, causing the property market to recover and saw an exponental growth.
Some novice investors tried their hands and purchased more than their finances could afford. They could have experienced one promising return, and bought a lot more than they can truly afford. For example, their financial ratings may allow them to buy (with loan) one property, but some of these investors bought 3 or more units.
They purchase properties on Deferred Payment Scheme, where they placed a 20% deposit and hoping to sell the property before the Temporary Occupation Permit (TOP) is issued. With the sudden turn of stock market (bear market), which coincide with the TOP period, many of these investors are stuck with their property. Facing a TOP, they will be forced to sell their property or face potential bankrupcy, as they are unable to funish the balance 80% of the property price.
These investors will be forced to sell/dump their purchase, loosing their initial 20% downpayment or more. With more sellers and little buyers, property owners will end up having to sell at a very low price.
Time to look out. The worst is not over.
Monday, September 29, 2008
Break Through in US Government US$700 Billion Bailout
The US Government key lawmakers gave the greenlight to the huge financial bailout to the current credit crisis, where many large banks and institutions face collapse or take over.
While many countries corperatized financial institutions, America is nationalizing their banks by pumping in money via warrants or takeovers, to prevent a major recession or even leading the global economy into a Great Depression.
The question in mind is, "What if the bailout fails?". What other contigency plans does the US Government have in mind?
At the same time with the worst financial clot in the US, melamine was found in many milk products in China. Melamine cause kidney stones and have lead to many deaths in infants. Most countries have recalled milk products after milk products off the shelves.
The scare will affect almost all milk based products from China. At the same time, consumers have also avoided other food products from China. This will lead to lost of export to China's producers. The lost of export market leads to job lost and closure of companies.
Would this create another set of problem for the world? Afterall, China being the most populous nation in the world and having one of the largest GDP, this scare can lead to a new set of problem.
While many countries corperatized financial institutions, America is nationalizing their banks by pumping in money via warrants or takeovers, to prevent a major recession or even leading the global economy into a Great Depression.
The question in mind is, "What if the bailout fails?". What other contigency plans does the US Government have in mind?
At the same time with the worst financial clot in the US, melamine was found in many milk products in China. Melamine cause kidney stones and have lead to many deaths in infants. Most countries have recalled milk products after milk products off the shelves.
The scare will affect almost all milk based products from China. At the same time, consumers have also avoided other food products from China. This will lead to lost of export to China's producers. The lost of export market leads to job lost and closure of companies.
Would this create another set of problem for the world? Afterall, China being the most populous nation in the world and having one of the largest GDP, this scare can lead to a new set of problem.
Monday, September 22, 2008
The US$700 Billion Bailout, or Quick Fix
The Bush Administration has pledge US$700 billion rescue plan to prevent a economical collapse from failing financial institutions. Where is the money coming from?
The US is heavily in debt, they spent tens of billions a year in the Iraq war. Over the years, the US Reserve has plunge deeper into debts. They will need Tresury Bills to be issued and having other countries to buy into the Tresury Bills. The future generations of America will be caught paying for this rescue plan.
It is obvious Tax Payers will bear the blunt of the bill from the mistakes of the leaders (be it government or economy). This quick fix can leave a slightly positive legacy for George Bush as he departs the White House in a few months. But the next President will be the one introducing higher tax.
Rather than making the people pay for the mistake created by others, the government could have opt to make the 'creator' pay for it. The Inland Revenue Service (IRS) could look at the top income earners of these 'creators' and have them pay the repair bills. If the IRS targets the top 10,000 earners (of the 'creators'), taxing each one of them a range of $1 million to $50 million (top earners of the 'creators' were making $100 million a year then). If the average amount works out to $20 million each, that would raise $200 billion. Work up the ladder to raise more money.
Afterall, since the 'creators' reaped from the spoils, and created ruins in the economy it is in now, they should be liable to pay for their mistakes. Even if half of these 'creators' goes bankrupt, it saves 20 million people in America, and countless millions globally and the global economy.
The US is heavily in debt, they spent tens of billions a year in the Iraq war. Over the years, the US Reserve has plunge deeper into debts. They will need Tresury Bills to be issued and having other countries to buy into the Tresury Bills. The future generations of America will be caught paying for this rescue plan.
It is obvious Tax Payers will bear the blunt of the bill from the mistakes of the leaders (be it government or economy). This quick fix can leave a slightly positive legacy for George Bush as he departs the White House in a few months. But the next President will be the one introducing higher tax.
Rather than making the people pay for the mistake created by others, the government could have opt to make the 'creator' pay for it. The Inland Revenue Service (IRS) could look at the top income earners of these 'creators' and have them pay the repair bills. If the IRS targets the top 10,000 earners (of the 'creators'), taxing each one of them a range of $1 million to $50 million (top earners of the 'creators' were making $100 million a year then). If the average amount works out to $20 million each, that would raise $200 billion. Work up the ladder to raise more money.
Afterall, since the 'creators' reaped from the spoils, and created ruins in the economy it is in now, they should be liable to pay for their mistakes. Even if half of these 'creators' goes bankrupt, it saves 20 million people in America, and countless millions globally and the global economy.
Tuesday, September 16, 2008
Slowdown in Singapore Economy
The US Financial Crisis and it's effect on global economy caused market slowdown and turmoil. Joblessness has risen to 2.3 percent in the second quarter ending June 08. Jobless rate grew two quarters in a row.
Some 77,800 residents were jobless in June. The seasonally adjusted figure was 60,900, up 12 per cent from 54,300 in March. But MOM said it was comparable to the 59,700 in June a year ago.
But the labour market remained strong. A record 144,600 jobs were added in the first six months, compared with 113,800 in the same period last year. But the growth of 71,400 jobs was slightly lower than the first quarter's 73,200. Still, it was higher than a year ago (64,400).
Driven by robust building activities, employment in construction rose by a record 22,400 in the second quarter. But growth in the other sectors has moderated from the previous quarter.
(source : http://www.straitstimes.com/Breaking+News/Singapore/Story/STIStory_278742.html)
The growth are largely seen in construction industry, which is largely occupied by foreigners. This does not truly reflect jobs for Singaporeans. Foreigners who became jobless, will be send back or leave Singapore. Thus, the unemployment rate are mainly Singaporeans as a whole.
Further to the uncertain economic situation, private home sales in Singapore slumped 81 percent in August from a year ago, to the lowest level since March as a combination of global financial turmoil and a traditionally unlucky month spooked buyers.
Sales of new residential projects, comprising both houses and apartments, fell to 320 units from 1,723 units sold in August last year, and sales were also down 64 percent from the 901 units taken up in July 2008, government data showed on Monday.
Singapore's financial services and export-dependent manufacturing sectors could be hit by global financial turmoil, with U.S. investment bank Lehman Brothers filing for bankruptcy protection on Monday .
Worries over Singapore's economic outlook have ended a four-year housing boom in the city-state, as price growth for private homes slowed sharply in the April-June period, rising just 0.2 percent in the quarter.
Concerns about the health of Singapore's property sector has prompted analysts to slash share price targets for developers such as CapitaLand, Keppel Land and City Developments.
(Source : http://sg.news.yahoo.com/rtrs/20080915/tap-singapore-property-c3bb44c.html)
From the economic uncertainty and weaken consumer confidence, chances are, property prices will drop in the coming months.
Some 77,800 residents were jobless in June. The seasonally adjusted figure was 60,900, up 12 per cent from 54,300 in March. But MOM said it was comparable to the 59,700 in June a year ago.
But the labour market remained strong. A record 144,600 jobs were added in the first six months, compared with 113,800 in the same period last year. But the growth of 71,400 jobs was slightly lower than the first quarter's 73,200. Still, it was higher than a year ago (64,400).
Driven by robust building activities, employment in construction rose by a record 22,400 in the second quarter. But growth in the other sectors has moderated from the previous quarter.
(source : http://www.straitstimes.com/Breaking+News/Singapore/Story/STIStory_278742.html)
The growth are largely seen in construction industry, which is largely occupied by foreigners. This does not truly reflect jobs for Singaporeans. Foreigners who became jobless, will be send back or leave Singapore. Thus, the unemployment rate are mainly Singaporeans as a whole.
Further to the uncertain economic situation, private home sales in Singapore slumped 81 percent in August from a year ago, to the lowest level since March as a combination of global financial turmoil and a traditionally unlucky month spooked buyers.
Sales of new residential projects, comprising both houses and apartments, fell to 320 units from 1,723 units sold in August last year, and sales were also down 64 percent from the 901 units taken up in July 2008, government data showed on Monday.
Singapore's financial services and export-dependent manufacturing sectors could be hit by global financial turmoil, with U.S. investment bank Lehman Brothers filing for bankruptcy protection on Monday .
Worries over Singapore's economic outlook have ended a four-year housing boom in the city-state, as price growth for private homes slowed sharply in the April-June period, rising just 0.2 percent in the quarter.
Concerns about the health of Singapore's property sector has prompted analysts to slash share price targets for developers such as CapitaLand, Keppel Land and City Developments.
(Source : http://sg.news.yahoo.com/rtrs/20080915/tap-singapore-property-c3bb44c.html)
From the economic uncertainty and weaken consumer confidence, chances are, property prices will drop in the coming months.
US in 'once-in-a-century' financial crisis
It appears the worst of the US Credit Crisis is unvealing more turmoil. The US government have done a bailout for Freddie Mac and Fannie Mae, while Lehman Brothers have filed for bankrupcy.
Bank of America has agreed to buy Merrill Lynch for US$50 billion. Singapore's Temasek Holdings owns about 13 to 14 percent in the US investment bank, with a total investment of US$8.3 billion.
There is high possibility that more major financial institutions will fall. What is still unknown?
Former Federal Reserve chief Alan Greenspan said on Sunday, "The United States is mired in a once-in-a century financial crisis which is now more than likely to spark a recession. He further add that there is more than 50% chance of a recession.
He said that the crisis was the worst he had seen in his career and still had a long way to go, and continue affecting home prices. The problem has not been resolved and "will continue to be a corrosive force until the price of homes in the US stabilizes".
The US financial crisis will definitely have an impact on the global economy as the US is the biggest economy and if consumers looses the ability to spend, US imports will fall thus manufacturing/exporting economies will suffer, leading to a domino effect.
This crisis IS the worst since the Great Depression. Is there a possiblity that the Great Depression is coming?
(source : http://sg.news.yahoo.com/afp/20080915/tts-us-economy-greenspan-972e412.html)
Bank of America has agreed to buy Merrill Lynch for US$50 billion. Singapore's Temasek Holdings owns about 13 to 14 percent in the US investment bank, with a total investment of US$8.3 billion.
There is high possibility that more major financial institutions will fall. What is still unknown?
Former Federal Reserve chief Alan Greenspan said on Sunday, "The United States is mired in a once-in-a century financial crisis which is now more than likely to spark a recession. He further add that there is more than 50% chance of a recession.
He said that the crisis was the worst he had seen in his career and still had a long way to go, and continue affecting home prices. The problem has not been resolved and "will continue to be a corrosive force until the price of homes in the US stabilizes".
The US financial crisis will definitely have an impact on the global economy as the US is the biggest economy and if consumers looses the ability to spend, US imports will fall thus manufacturing/exporting economies will suffer, leading to a domino effect.
This crisis IS the worst since the Great Depression. Is there a possiblity that the Great Depression is coming?
(source : http://sg.news.yahoo.com/afp/20080915/tts-us-economy-greenspan-972e412.html)
Thursday, August 21, 2008
Large US Bank Collapse Ahead
Just as the dust settled over the recent months, hoping there's no more economical and financial setbacks, the truth is yet to be known. Largely, weak governance has resulted into a global financial crisis.
SINGAPORE, Aug 19 - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.
"The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference.
"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.
"We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.
"Probably Fannie Mae and Freddie Mac -- despite what U.S. Treasury Secretary Hank Paulson said -- these giant mortgage guarantee agencies are not going to exist in their present form in a few years."
Rogoff's comments come as investors dumped shares of the largest U.S. home funding companies Fannie Mae and Freddie Mac on Monday after a newspaper report said government officials may have no choice but to effectively nationalise the U.S. housing finance titans.
A government move to recapitalise the two companies by injecting funds could wipe out existing common stock holders, the weekend Barron's story said. Preferred shareholders and even holders of the two government-sponsored entities' $19 billion of subordinated debt would also suffer losses. [ID:nN18494933]
Rogoff said multi-billion dollar investments by sovereign wealth funds from Asia and the Middle East in western financial firms may not necessarily result in large profits because they had not taken into account the broader market conditions that the industry faces.
"There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they're great buys, sovereign wealth funds come in and make a lot of money by buying them.
"That view neglects the point that the financial system has become very bloated in size and needed to shrink," Rogoff told the conference in Singapore, whose wealth funds GIC and Temasek [TEM.UL] have invested billions in Merrill Lynch and Citigroup .
In response to the sharp U.S. housing retrenchment and turmoil in credit markets, the U.S. Federal Reserve has reduced interest rates by a cumulative 3.25 percentage points to 2 percent since mid-September.
Rogoff said the U.S. Federal Reserve was wrong to cut interest rates as "dramatically" as it did.
"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States."
(Source : http://sg.news.yahoo.com/rtrs/20080819/tbs-usa-banks-crisis-7318940.html)
SINGAPORE, Aug 19 - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.
"The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference.
"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.
"We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.
"Probably Fannie Mae and Freddie Mac -- despite what U.S. Treasury Secretary Hank Paulson said -- these giant mortgage guarantee agencies are not going to exist in their present form in a few years."
Rogoff's comments come as investors dumped shares of the largest U.S. home funding companies Fannie Mae
A government move to recapitalise the two companies by injecting funds could wipe out existing common stock holders, the weekend Barron's story said. Preferred shareholders and even holders of the two government-sponsored entities' $19 billion of subordinated debt would also suffer losses. [ID:nN18494933]
Rogoff said multi-billion dollar investments by sovereign wealth funds from Asia and the Middle East in western financial firms may not necessarily result in large profits because they had not taken into account the broader market conditions that the industry faces.
"There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they're great buys, sovereign wealth funds come in and make a lot of money by buying them.
"That view neglects the point that the financial system has become very bloated in size and needed to shrink," Rogoff told the conference in Singapore, whose wealth funds GIC and Temasek [TEM.UL] have invested billions in Merrill Lynch
In response to the sharp U.S. housing retrenchment and turmoil in credit markets, the U.S. Federal Reserve has reduced interest rates by a cumulative 3.25 percentage points to 2 percent since mid-September.
Rogoff said the U.S. Federal Reserve was wrong to cut interest rates as "dramatically" as it did.
"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States."
(Source : http://sg.news.yahoo.com/rtrs/20080819/tbs-usa-banks-crisis-7318940.html)
Monday, August 11, 2008
Singapore's economy shrinks in Q2, exports seen down
There was talk that the weaken US economy months ago, are not likely to affect Singapore's economy too much. The US economy has been facing a slow down since late 2007 and has not shown signs of improvement.
Reuters - Monday, August 11
Singapore's economy contracted in the second quarter and the government forecasts exports to fall this year for the first time since 2001, a sign that sagging growth is becoming a bigger worry for Asia than inflation.
The government on Monday forecast non-oil domestic exports would fall 2-4 percent in 2008, against an earlier estimate of 2-4 percent growth, and predicted the economy would grow at a lower end of a weaker 4-5 percent forecast.
In the second quarter, the economy contracted at a annualised rate of 6 percent after seasonal adjustments, its worst performance in five years and in line with market expectations. Year-on-year the economy grew 2.1 percent.
(For a graphic of GDP data, click on: https://customers.reuters.com/d/graphics/SG_GDPQ0808.gif)
Singapore's heavy dependence on trade makes the $160 billion economy a good gauge of how the global slowdown is affecting Asia. Non-oil domestic exports to the United States fell 21 percent in the second quarter, while shipments to European Union dropped by 12 percent.
The Singapore dollar, the central bank's main policy tool, slumped to a near six-month low around S$1.41 to the U.S. dollar.
"The balance of risk is shifting away from inflation toward growth as seen from the correction of the Singapore dollar last week," said Kit Wei Zheng, an economist at Citigroup.
NO RECESSION
Like many Asian countries, Singapore has been grappling with inflation even as economic growth slows. But officials suggested on Monday that inflation may have peaked and said -- while not expecting at technical recession -- that there will be no quick turnaround in global growth.
"The macroeconomic dynamics will remain fluid over the next 12 to 18 months. It is too early to tell what 2009 will bring," Ravi Menon, a permanent secretary at the trade ministry, told reporters.
"Current indications are that global economic growth will not see a quick turnaround."
Construction grew 17.4 percent year-on-year and the financial sector grew 10.2 percent in the second quarter, but manufacturing shrank 5.2 percent.
Manufacturing, which accounts for about a quarter of economic activity, is expected to slow, reflecting weak U.S. and European demand.
Given that, economists said it was unlikely that the central bank will further tighten monetary policy at its next meeting in October, barring a spike in oil prices.
"We believe our policy remains appropriate," said Ong Chong Tee, managing director of central bank the Monetary Authority of Singapore.
The central bank steers monetary policy by managing the Singapore dollar's nominal effective exchange rate -- its relative value compared with a basket of currencies of trading partners -- rather than by adjusting interest rates. The trading band and the currencies in the basket are kept secret.
The bank moved the centre of the band up in April, its most aggressive policy change since the 2003 SARS epidemic, to tame inflation that reached a 26-year high in June. (Additional reporting by Saeed Azhar and Charmian Kok, editing by Neil Chatterjee and Tomasz Janowski)
Reuters - Monday, August 11
Singapore's economy contracted in the second quarter and the government forecasts exports to fall this year for the first time since 2001, a sign that sagging growth is becoming a bigger worry for Asia than inflation.
The government on Monday forecast non-oil domestic exports would fall 2-4 percent in 2008, against an earlier estimate of 2-4 percent growth, and predicted the economy would grow at a lower end of a weaker 4-5 percent forecast.
In the second quarter, the economy contracted at a annualised rate of 6 percent after seasonal adjustments, its worst performance in five years and in line with market expectations. Year-on-year the economy grew 2.1 percent.
(For a graphic of GDP data, click on: https://customers.reuters.com/d/graphics/SG_GDPQ0808.gif)
Singapore's heavy dependence on trade makes the $160 billion economy a good gauge of how the global slowdown is affecting Asia. Non-oil domestic exports to the United States fell 21 percent in the second quarter, while shipments to European Union dropped by 12 percent.
The Singapore dollar, the central bank's main policy tool, slumped to a near six-month low around S$1.41 to the U.S. dollar.
"The balance of risk is shifting away from inflation toward growth as seen from the correction of the Singapore dollar last week," said Kit Wei Zheng, an economist at Citigroup.
NO RECESSION
Like many Asian countries, Singapore has been grappling with inflation even as economic growth slows. But officials suggested on Monday that inflation may have peaked and said -- while not expecting at technical recession -- that there will be no quick turnaround in global growth.
"The macroeconomic dynamics will remain fluid over the next 12 to 18 months. It is too early to tell what 2009 will bring," Ravi Menon, a permanent secretary at the trade ministry, told reporters.
"Current indications are that global economic growth will not see a quick turnaround."
Construction grew 17.4 percent year-on-year and the financial sector grew 10.2 percent in the second quarter, but manufacturing shrank 5.2 percent.
Manufacturing, which accounts for about a quarter of economic activity, is expected to slow, reflecting weak U.S. and European demand.
Given that, economists said it was unlikely that the central bank will further tighten monetary policy at its next meeting in October, barring a spike in oil prices.
"We believe our policy remains appropriate," said Ong Chong Tee, managing director of central bank the Monetary Authority of Singapore.
The central bank steers monetary policy by managing the Singapore dollar's
The bank moved the centre of the band up in April, its most aggressive policy change since the 2003 SARS epidemic, to tame inflation that reached a 26-year high in June. (Additional reporting by Saeed Azhar and Charmian Kok, editing by Neil Chatterjee and Tomasz Janowski)
Wednesday, July 23, 2008
Ways to Save (5) - $5 a time
Here's a simple yet efficient way to save. It takes a lot of discipline but you'll surely be able to see more money in a short period. Here's what I read
A sum like $12,000 doesn't usually make the news, but one Boston Globe reporter has managed to trick herself into saving that amount by adopting a creative way to save.
With two daughters in college and a mortgage to pay, Marie Franklin and her husband didn't have any extra money to put into savings. While perusing online, she came across a saving trick that suggested saving every five she acquired and depositing them into a separate savings account.
Once she's collected ten fives in her wallet, Marie deposits the $50 into her designated savings account, and once that account has $2,000 she purchases a CD to earn higher interest. After three years of saving all of her fives, she has accumulated $12,000 in savings. Marie acknowledges that this method of saving requires discipline, but her unconventional habit has obviously worked for her.
(source : http://www.savvysugar.com/1802540)
If we just start somewhere, with discipline, won't we be able to see a savings soon? I have tried emptying my pocket of loose change at the end of each day, and manage to accumulate tens every month. It's a method that doesn't take too much effort, yet the returns are measurable.
For me, I don't take conscious effort to save now. I don't spend as I wish, thus I don't get tempted to spend just because I have some extra cash. In turn, I accumulate enough money and invest it each time.
A sum like $12,000 doesn't usually make the news, but one Boston Globe reporter has managed to trick herself into saving that amount by adopting a creative way to save.
With two daughters in college and a mortgage to pay, Marie Franklin and her husband didn't have any extra money to put into savings. While perusing online, she came across a saving trick that suggested saving every five she acquired and depositing them into a separate savings account.
Once she's collected ten fives in her wallet, Marie deposits the $50 into her designated savings account, and once that account has $2,000 she purchases a CD to earn higher interest. After three years of saving all of her fives, she has accumulated $12,000 in savings. Marie acknowledges that this method of saving requires discipline, but her unconventional habit has obviously worked for her.
(source : http://www.savvysugar.com/1802540)
If we just start somewhere, with discipline, won't we be able to see a savings soon? I have tried emptying my pocket of loose change at the end of each day, and manage to accumulate tens every month. It's a method that doesn't take too much effort, yet the returns are measurable.
For me, I don't take conscious effort to save now. I don't spend as I wish, thus I don't get tempted to spend just because I have some extra cash. In turn, I accumulate enough money and invest it each time.
Thursday, July 17, 2008
Singapore's non-oil domestic exports fall 10.5% in June
Recent spate of unimpressive financial news will leave people more worried. The last few days were ladden with more bad news on US financial crisis, which lead to a frenzy in the stock market and oil prices.
Coming back to Singapore, this is not the first bad news on Exports. The turmoil affected our exports, which were made worst with all time high inflation rates. The fear is, if the US goes into a deep recession, and many other economies being affected, will it lead to a deeper and more prolong global downturn?
SINGAPORE: Singapore's key non-oil domestic exports (NODX) fell an annual 10.5 per cent in June, pulled down by weaker shipments to the US market as well as to China and Europe, the government said Thursday.
The drop, compared with the same month a year earlier, was steeper than the 1.8 per cent fall tipped in a poll of economists by Dow Jones Newswires.
June's figure was unchanged from the 10.5 per cent decline seen in May, the trade promotion agency International Enterprise Singapore (IE Singapore) said in its monthly report.
"The largest contributors to the NODX contraction were the US, EU 27 and China," it said.
On a month-on-month seasonally adjusted basis, the key exports grew 4.2 per cent last month after a 9.8 per cent fall in May, the agency said.
Total trade in June grew 14.4 per cent to S$82.3 billion, while NODX was worth S$12.79 billion, the trade agency said.
IE Singapore said poorer shipments of both electronics and non-electronics goods were behind last month's export decline.
Electronics exports, which have been dropping since February last year, contracted 14.6 per cent to S$4.8 billion in June while non-electronic shipments eased 7.9 per cent to S$7.95 billion, IE Singapore said.
NODX to the US in June recorded the largest decline of 24.3 per cent, to S$1.5 billion, a deterioration from the 22.3 per cent decline posted the previous month, it said.
To the European Union economies, NODX fell 16.1 per cent to S$2 billion, while shipments to China fell 11.7 per cent to S$1.3 billion, IE Singapore said.
Exports to Singapore's other top markets also contracted, with the exception of Malaysia, South Korea and Hong Kong, it said.
The monthly figures are a closely watched barometer of Singapore's export-led economy in which gross domestic product was valued at S$243.17 billion last year.
As of 2007, US was our No 2 export partner at 10.2%, while the decline of export to US is 24.3%. With decline in exports to a few other countries, Singapore's economy seems to be facing a worst situation than expected.
Coming back to Singapore, this is not the first bad news on Exports. The turmoil affected our exports, which were made worst with all time high inflation rates. The fear is, if the US goes into a deep recession, and many other economies being affected, will it lead to a deeper and more prolong global downturn?
SINGAPORE: Singapore's key non-oil domestic exports (NODX) fell an annual 10.5 per cent in June, pulled down by weaker shipments to the US market as well as to China and Europe, the government said Thursday.
The drop, compared with the same month a year earlier, was steeper than the 1.8 per cent fall tipped in a poll of economists by Dow Jones Newswires.
June's figure was unchanged from the 10.5 per cent decline seen in May, the trade promotion agency International Enterprise Singapore (IE Singapore) said in its monthly report.
"The largest contributors to the NODX contraction were the US, EU 27 and China," it said.
On a month-on-month seasonally adjusted basis, the key exports grew 4.2 per cent last month after a 9.8 per cent fall in May, the agency said.
Total trade in June grew 14.4 per cent to S$82.3 billion, while NODX was worth S$12.79 billion, the trade agency said.
IE Singapore said poorer shipments of both electronics and non-electronics goods were behind last month's export decline.
Electronics exports, which have been dropping since February last year, contracted 14.6 per cent to S$4.8 billion in June while non-electronic shipments eased 7.9 per cent to S$7.95 billion, IE Singapore said.
NODX to the US in June recorded the largest decline of 24.3 per cent, to S$1.5 billion, a deterioration from the 22.3 per cent decline posted the previous month, it said.
To the European Union economies, NODX fell 16.1 per cent to S$2 billion, while shipments to China fell 11.7 per cent to S$1.3 billion, IE Singapore said.
Exports to Singapore's other top markets also contracted, with the exception of Malaysia, South Korea and Hong Kong, it said.
The monthly figures are a closely watched barometer of Singapore's export-led economy in which gross domestic product was valued at S$243.17 billion last year.
As of 2007, US was our No 2 export partner at 10.2%, while the decline of export to US is 24.3%. With decline in exports to a few other countries, Singapore's economy seems to be facing a worst situation than expected.
Wednesday, July 2, 2008
US automakers face tough road as June sales plummet
Was reading this article that stated:
"Automakers hit more bumps in the road in June as US sales fell precipitously, and manufacturers failed to adapt to a shift in demand to more fuel-efficient cars, company reports showed Tuesday.
Overall sales were down 13 percent year-to-year, according to market research firm Autodata.
"The four-dollar (per gallon) gasoline, the recession in housing and a collapse in consumer confidence has kept people sitting on their hands," said David Healy, analyst at Burnham Securities."
With the current Credit Crunch, credit approval is stricter, people's spending power has decline, inflation is at all time high, cost of pump is all time high, etc. With the same amount of money, we can now get lesser. This will in turn, affect the overall economy.
With the onset of potential global economy slowdown, most countries and their economy are facing the same situation as the U.S. Credit is getting tighter, inflation is high, spending power is lower, cost of living is tougher.
This will create a domino effect and may cause the economy to depress further.
"Automakers hit more bumps in the road in June as US sales fell precipitously, and manufacturers failed to adapt to a shift in demand to more fuel-efficient cars, company reports showed Tuesday.
Overall sales were down 13 percent year-to-year, according to market research firm Autodata.
"The four-dollar (per gallon) gasoline, the recession in housing and a collapse in consumer confidence has kept people sitting on their hands," said David Healy, analyst at Burnham Securities."
With the current Credit Crunch, credit approval is stricter, people's spending power has decline, inflation is at all time high, cost of pump is all time high, etc. With the same amount of money, we can now get lesser. This will in turn, affect the overall economy.
With the onset of potential global economy slowdown, most countries and their economy are facing the same situation as the U.S. Credit is getting tighter, inflation is high, spending power is lower, cost of living is tougher.
This will create a domino effect and may cause the economy to depress further.
Monday, June 23, 2008
Singapore Inflation rises 7.5% on—year in May on higher food, transport costs
As reported in Channel News Asia.
Singapore's annual inflation rate stayed at 7.5 percent in May, boosted by rising food, transport and housing costs, the government said.
The monthly consumer price index (CPI) was the same as the 7.5 percent recorded for April -- which was a 26-year high -- but lower than the 7.7 percent forecast by economists polled by Dow Jones Newswires.
Food prices rose by 9.0 percent year-on-year in May, more than the 8.5 percent in April, while housing costs jumped by 12.4 percent, against April's 11.8 percent, data from the statistics department showed.
Transport and communications costs rose by 6.0 percent last month, slower than the 7.0 percent rise for April, figures showed.
From April to May, the CPI rose by 0.2 percent, the statistics department said.
In the first five months of the year, the CPI was 7.0 percent higher compared with the same period last year, it said.
Singapore, Southeast Asia's most advanced economy, imports most of its needs because it lacks the natural resources and agricultural base of its bigger neighbours.
The trade ministry is forecasting inflation of five to six percent for the year.
Governments around the region are grappling with rising prices, particularly as the global cost of oil hovers near record levels.
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/355799/1/.html)
With inflation at all time high, and uncertainty in the global ecnomy and high oil prices, it escalate the fear of a massive onslaugh of global slowdown.
Inflation reduced spending power as people are buying lesser with the same amount of goods. This will in turn cause people to cut back on spending. With that, it may lead to further slowdown in the economy. Should major economies goes into recession, this recession are likely going to be a rather nasty one.
Singapore's annual inflation rate stayed at 7.5 percent in May, boosted by rising food, transport and housing costs, the government said.
The monthly consumer price index (CPI) was the same as the 7.5 percent recorded for April -- which was a 26-year high -- but lower than the 7.7 percent forecast by economists polled by Dow Jones Newswires.
Food prices rose by 9.0 percent year-on-year in May, more than the 8.5 percent in April, while housing costs jumped by 12.4 percent, against April's 11.8 percent, data from the statistics department showed.
Transport and communications costs rose by 6.0 percent last month, slower than the 7.0 percent rise for April, figures showed.
From April to May, the CPI rose by 0.2 percent, the statistics department said.
In the first five months of the year, the CPI was 7.0 percent higher compared with the same period last year, it said.
Singapore, Southeast Asia's most advanced economy, imports most of its needs because it lacks the natural resources and agricultural base of its bigger neighbours.
The trade ministry is forecasting inflation of five to six percent for the year.
Governments around the region are grappling with rising prices, particularly as the global cost of oil hovers near record levels.
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/355799/1/.html)
With inflation at all time high, and uncertainty in the global ecnomy and high oil prices, it escalate the fear of a massive onslaugh of global slowdown.
Inflation reduced spending power as people are buying lesser with the same amount of goods. This will in turn cause people to cut back on spending. With that, it may lead to further slowdown in the economy. Should major economies goes into recession, this recession are likely going to be a rather nasty one.
Monday, June 16, 2008
U.S Is Already In Recession
This article was taken from Reuters about 2 weeks ago.
Mr Warren Buffett had cited that the United States is already in a recession and it will be longer as well as deeper than many people expect.
He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.
He further said that even though the United States are in recession, he will still be investing in companies. He however doesn't believe in investing in a company just to tear it apart due to investor's financial bet, "It's not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health."
Thus, in good times, as well as bad times, there will still be good companies and industries to invest in. Keep a look out.
Governments are usually the last to announce that the country’s economy is in recession as that will cause a panic among people. With such high inflation this year, announcing a recession will cause the economy to dip further.
Mr Warren Buffett had cited that the United States is already in a recession and it will be longer as well as deeper than many people expect.
He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.
He further said that even though the United States are in recession, he will still be investing in companies. He however doesn't believe in investing in a company just to tear it apart due to investor's financial bet, "It's not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health."
Thus, in good times, as well as bad times, there will still be good companies and industries to invest in. Keep a look out.
Governments are usually the last to announce that the country’s economy is in recession as that will cause a panic among people. With such high inflation this year, announcing a recession will cause the economy to dip further.
Monday, June 2, 2008
Lessons From the U.S Credit Crisis
In the last few months, focus have shifted to rising oil price, inflation and global food shortages. The U.S Sub-prime issue is soon to be forgotten as U.S starts showing signs of bottoming out of their crisis that plague their economy since August 2007.
As per Asian Financial Crisis, 911 and SARS, lessons learnt were soon forgotten. People were indulging in big spending once again when economy is booming. Many forgotten the painful lessons and are recreating a new wave of problem for themselves.
Before we start getting all too optimistic and complacent, people needs to consider what we've learned in the past several months on how major global economies can affect us. We saw the U.S housing bubble, sub-prime, credit crisis, declining job rates, decline in spending, etc. But how did it happen? Why was its bursting so painful? Without answers, we can't hope to reduce chances of a repeat.
The bubble form due to many factors, including lenders, buyers, investors and lack of government control.
Financial Institutions
Lenders had deem property loan as safer than other underlying loans (which is true) thus they gave out aggressive loans of even up to 100%. During periods of growth, property prices will appreciate, thus 100% loan will soon appears like 90% or 80%, but soon after, when prices reaches the top of the property curve, it'll start going down (coupled with economy downturn). These loans will soon appears bigger than the value of property.
Consumers
Property buyers here in Singapore are paying between 6 to 8 times their annual household income while out in the West, people are only paying 3 to 6 times their annual household inncome. Illustration, an example average household with income of $80,000 p.a ends up buying a property surpassing the half million dollars mark (eg condo).
When jobs are in abundance, where job security are strong, people are able to stay employed and continue earning these income, but when economy weakens, where job is at stake, mortgage delinquency showed up and home owners default on payment, while home prices starts falling. They lack financial strength to hold on to their mortgage, causing a further depression of property prices as they starts to dump their property.
Speculators/Investors
Investors are there for a quick profit. Some tends to buy and sell within the shortest time, with a quick profit. Some buys to hold and rent out. Where there is a profit, there will be investors. This leads to false price inflation and when these investors pulls out, the average buyers are unable to sustain the higher price. This happened in Singapore, became prominent between July to November 2007.
Government
Government being the regulators of the modern capitalist system allows them to act as a watchdog and provide guardrails to keep markets from driving the economy off a cliff. The regulators failed terribly. Was it complacent or poor foresight to blame? Intervention by regulating bodies are often too late. It is like, till death do they realise. Suicidal systems without watchful eyes to plug the plunge often results in crippling economy.
Regulators should be there to protect unsophisticated consumers by restricting their purchases with policies. The current property purchase policy in Singapore is great, where buyers are required to pay 20% downpayment, being 5% Cash, 15% CPF (Provident funds). Financial institutions are reluctant to provide 90% Loan to Valuation.
As I have mentioned several times in different post, Singapore's 'sup-prime' are in the making with the lack of control and poor policy in the automobil sector. Car value dips the moment the car is secured by buyers yet loans are provided for up to 100% of the car value, (quite often, MORE than the value of car value with the cash rebates).
Yes, car loans appears negligible to individuals. What is a $50,000 loan to the average car owner earning $40,000 p.a? This works out to only $520 per month on a Gross salary of $3,330. What about running cost, that takes up another $600-700 per month? What about the borrower's other financial commitments? A balloning problem I say.
If the regulators in Singapore doesn't do something about this loophole soon, I would think it may lead to our credit bubble in time to come.
Collaterals should only be a backstop, where value of collaterals are higher than the mortgage, and where economy appears sound. Regulators shouldn't neglect the potential pitfall where collaterals are lesser than the loan.
On the property regulation, has the government forced property buyers to the grave of a credit constrain? I would think so. Income ceiling has made it hard for some families to purchase public housing. (refer to http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=2388609&isCFP=&FolderID=27928&ProjectId=7597756&reAskpage=answer%2Easp&SelectedCategory=&RecordQuestion=)
Last word of advise as usual, we better take care of ourselves than rely on 'parental help'.
As per Asian Financial Crisis, 911 and SARS, lessons learnt were soon forgotten. People were indulging in big spending once again when economy is booming. Many forgotten the painful lessons and are recreating a new wave of problem for themselves.
Before we start getting all too optimistic and complacent, people needs to consider what we've learned in the past several months on how major global economies can affect us. We saw the U.S housing bubble, sub-prime, credit crisis, declining job rates, decline in spending, etc. But how did it happen? Why was its bursting so painful? Without answers, we can't hope to reduce chances of a repeat.
The bubble form due to many factors, including lenders, buyers, investors and lack of government control.
Financial Institutions
Lenders had deem property loan as safer than other underlying loans (which is true) thus they gave out aggressive loans of even up to 100%. During periods of growth, property prices will appreciate, thus 100% loan will soon appears like 90% or 80%, but soon after, when prices reaches the top of the property curve, it'll start going down (coupled with economy downturn). These loans will soon appears bigger than the value of property.
Consumers
Property buyers here in Singapore are paying between 6 to 8 times their annual household income while out in the West, people are only paying 3 to 6 times their annual household inncome. Illustration, an example average household with income of $80,000 p.a ends up buying a property surpassing the half million dollars mark (eg condo).
When jobs are in abundance, where job security are strong, people are able to stay employed and continue earning these income, but when economy weakens, where job is at stake, mortgage delinquency showed up and home owners default on payment, while home prices starts falling. They lack financial strength to hold on to their mortgage, causing a further depression of property prices as they starts to dump their property.
Speculators/Investors
Investors are there for a quick profit. Some tends to buy and sell within the shortest time, with a quick profit. Some buys to hold and rent out. Where there is a profit, there will be investors. This leads to false price inflation and when these investors pulls out, the average buyers are unable to sustain the higher price. This happened in Singapore, became prominent between July to November 2007.
Government
Government being the regulators of the modern capitalist system allows them to act as a watchdog and provide guardrails to keep markets from driving the economy off a cliff. The regulators failed terribly. Was it complacent or poor foresight to blame? Intervention by regulating bodies are often too late. It is like, till death do they realise. Suicidal systems without watchful eyes to plug the plunge often results in crippling economy.
Regulators should be there to protect unsophisticated consumers by restricting their purchases with policies. The current property purchase policy in Singapore is great, where buyers are required to pay 20% downpayment, being 5% Cash, 15% CPF (Provident funds). Financial institutions are reluctant to provide 90% Loan to Valuation.
As I have mentioned several times in different post, Singapore's 'sup-prime' are in the making with the lack of control and poor policy in the automobil sector. Car value dips the moment the car is secured by buyers yet loans are provided for up to 100% of the car value, (quite often, MORE than the value of car value with the cash rebates).
Yes, car loans appears negligible to individuals. What is a $50,000 loan to the average car owner earning $40,000 p.a? This works out to only $520 per month on a Gross salary of $3,330. What about running cost, that takes up another $600-700 per month? What about the borrower's other financial commitments? A balloning problem I say.
If the regulators in Singapore doesn't do something about this loophole soon, I would think it may lead to our credit bubble in time to come.
Collaterals should only be a backstop, where value of collaterals are higher than the mortgage, and where economy appears sound. Regulators shouldn't neglect the potential pitfall where collaterals are lesser than the loan.
On the property regulation, has the government forced property buyers to the grave of a credit constrain? I would think so. Income ceiling has made it hard for some families to purchase public housing. (refer to http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=2388609&isCFP=&FolderID=27928&ProjectId=7597756&reAskpage=answer%2Easp&SelectedCategory=&RecordQuestion=)
Last word of advise as usual, we better take care of ourselves than rely on 'parental help'.
Sunday, May 25, 2008
Buffett Blames Banks for Credit Crisis
I Read this article on Reuters and wonders if it was really just the banks at fault for the current U.S. credit crisis or should the relevent monetary authority be responsible?
U.S. billionaire investor Warren Buffett told newspaper El Pais that the banks should be for the sub-prime crisis as the banks took too many risks in mortgage lending
Mr Buffett further shared, "The banks exposed themselves too much, they took on too much risk .... It's their fault. There's no need to blame anyone else,". He believed the situation in financial markets would not deteriorate further.
"I don't think the situation will get worse in financial markets. General conditions in the business world will get worse, but it will only last a while," he said, adding he had no idea when an upturn would come.
I would like to pour some views on why I presume the relevent Monetary Authority should also be responsible. As a Monetary Authority, or the Central bank, the authority should observe the credit crisis brewing and taken earlier actions to avoid a meltdown turning a blind eye to the situation, expecting that the financial institutions in a mature financial market should be able to judge themselves what risk level to take.
Coming back to Singapore financial market. The Monetary Authority of Singapore relaxed car financing rules in year 2003. Previously, car buyers needs to have a deposit of up to 30% and are only able to take a maximum of 7 years loan. The relaxation of rule now permits banks to allow up to 100% financing, for up to 10 years duration.
Car ownership here in Singapore is based on a 10 year Certificate of Entitlement (COE). Thus, a new car will only have a road life of 10 years before they need to undergo a renewal of COE.
If a car buyer were to take a maximum of 100% loan over 10 years and decides to change car (or get rid of car) just before 5 years is up, he will loose more than 50% of the car's value, but still have more than 50% of the car loan outstanding.
If the car owner decides to change car, he may need to top up an amount above $10,000. If he were to buy a new car, banks are giving loans with Cash Rebates. Car buyer then takes the Cash Rebate to roll over the outstanding loan on the previous car. He ends up ballooning his debt while the banks are providing a loan larger than the value of the property. Isn't this sub-prime or credit-crisis in the brewing?
Let's look at the car population in Singapore. There are about 500,000 cars in Singapore. If each car has an average outstanding debt of $20,000 each, the total car debt market is S$10 billion.
Since the Monetary Authority controls the credit market, who would be blame should the mini sub-prime brews over here in Singapore? The Authority or the Banks?
U.S. billionaire investor Warren Buffett told newspaper El Pais that the banks should be for the sub-prime crisis as the banks took too many risks in mortgage lending
Mr Buffett further shared, "The banks exposed themselves too much, they took on too much risk .... It's their fault. There's no need to blame anyone else,". He believed the situation in financial markets would not deteriorate further.
"I don't think the situation will get worse in financial markets. General conditions in the business world will get worse, but it will only last a while," he said, adding he had no idea when an upturn would come.
I would like to pour some views on why I presume the relevent Monetary Authority should also be responsible. As a Monetary Authority, or the Central bank, the authority should observe the credit crisis brewing and taken earlier actions to avoid a meltdown turning a blind eye to the situation, expecting that the financial institutions in a mature financial market should be able to judge themselves what risk level to take.
Coming back to Singapore financial market. The Monetary Authority of Singapore relaxed car financing rules in year 2003. Previously, car buyers needs to have a deposit of up to 30% and are only able to take a maximum of 7 years loan. The relaxation of rule now permits banks to allow up to 100% financing, for up to 10 years duration.
Car ownership here in Singapore is based on a 10 year Certificate of Entitlement (COE). Thus, a new car will only have a road life of 10 years before they need to undergo a renewal of COE.
If a car buyer were to take a maximum of 100% loan over 10 years and decides to change car (or get rid of car) just before 5 years is up, he will loose more than 50% of the car's value, but still have more than 50% of the car loan outstanding.
If the car owner decides to change car, he may need to top up an amount above $10,000. If he were to buy a new car, banks are giving loans with Cash Rebates. Car buyer then takes the Cash Rebate to roll over the outstanding loan on the previous car. He ends up ballooning his debt while the banks are providing a loan larger than the value of the property. Isn't this sub-prime or credit-crisis in the brewing?
Let's look at the car population in Singapore. There are about 500,000 cars in Singapore. If each car has an average outstanding debt of $20,000 each, the total car debt market is S$10 billion.
Since the Monetary Authority controls the credit market, who would be blame should the mini sub-prime brews over here in Singapore? The Authority or the Banks?
Wednesday, May 14, 2008
Turn $451 a Month Into a Million Bucks
Here's something interesting I read awhile back.
If you're 30 years old, you need to set aside $448 per month for next 35 years to become a millionaire -- if you earn a reasonable 8% annualized return in a retirement account. Many people may say they don't have $448 to spare. Think again, maybe you do and don't realize it.
Save on Taxes
Maximise any tax exemption. This is hard here in Singapore but not totally impossible. Nothing against the law either. Example, for married couples who are planning their 2nd child, do it before the wife turns 30 (or whatever the age) and the couple will be granted a certain amount of tax exemption.
Another way, don't spend unnecessarily on goods and save on Goods & Services Tax (7%).
Save $100 Per Month on Food
Here’s How: Bring your own breakfast or lunch to work. Rather than having hawker food for breakfast, one could opt for bread with spread. A loaf of bread cost about $1.60 and can serve 6 (total of 12 slices). Another healthy and good alternative, oats. Beverages can be made in the office than buying from the drink stall.
Save $80 Per Month on Entertainment
Fewer dinner-and-a-movie night every month. That assumes you and your significant other pay the average $33 per person for a restaurant meal and that you spend $10 per ticket, the average price at the movies.
Save on Health Care
Manage our health. Watch our diet, drink more water and exercise. Also, rest more. These helps strengthen the body's immune system.
Plan Your Route (for those who drive)
Avoid unnecessary driving and avoid jams. This will ensure you save on fuel. Petrol prices have past S$2 per litre, which works out to $0.17 per kilometer travelled (assuming each litre gives 12km). Be gentle on your foot and take more to highway, these helps on fuel efficiency.
Maintained Your Car Well
Keep your car’s engine tuned and tires inflated to the proper air pressure. Those minor improvements can save you up to $100 on gas each year.
If we do those sums, we should be able to save a couple of hundreds a month. Translate the savings to proper investment that earns an average of 8% return per year, over the next 35 years, and you'll have a tidy sum for retirement. That wasn't too hard, right? It just takes some discipline and getting use to.
(source : Kiplinger.com [Turn-451-A-Month-Into-A-Million-Bucks[)
If you're 30 years old, you need to set aside $448 per month for next 35 years to become a millionaire -- if you earn a reasonable 8% annualized return in a retirement account. Many people may say they don't have $448 to spare. Think again, maybe you do and don't realize it.
Save on Taxes
Maximise any tax exemption. This is hard here in Singapore but not totally impossible. Nothing against the law either. Example, for married couples who are planning their 2nd child, do it before the wife turns 30 (or whatever the age) and the couple will be granted a certain amount of tax exemption.
Another way, don't spend unnecessarily on goods and save on Goods & Services Tax (7%).
Save $100 Per Month on Food
Here’s How: Bring your own breakfast or lunch to work. Rather than having hawker food for breakfast, one could opt for bread with spread. A loaf of bread cost about $1.60 and can serve 6 (total of 12 slices). Another healthy and good alternative, oats. Beverages can be made in the office than buying from the drink stall.
Save $80 Per Month on Entertainment
Fewer dinner-and-a-movie night every month. That assumes you and your significant other pay the average $33 per person for a restaurant meal and that you spend $10 per ticket, the average price at the movies.
Save on Health Care
Manage our health. Watch our diet, drink more water and exercise. Also, rest more. These helps strengthen the body's immune system.
Plan Your Route (for those who drive)
Avoid unnecessary driving and avoid jams. This will ensure you save on fuel. Petrol prices have past S$2 per litre, which works out to $0.17 per kilometer travelled (assuming each litre gives 12km). Be gentle on your foot and take more to highway, these helps on fuel efficiency.
Maintained Your Car Well
Keep your car’s engine tuned and tires inflated to the proper air pressure. Those minor improvements can save you up to $100 on gas each year.
Go for House Brand
When doing grocery shopping, opt more for house brands than manufacturer's brand. House brands usually cost 10-20% cheaper.
How Much Saved in Total?
If we do those sums, we should be able to save a couple of hundreds a month. Translate the savings to proper investment that earns an average of 8% return per year, over the next 35 years, and you'll have a tidy sum for retirement. That wasn't too hard, right? It just takes some discipline and getting use to.
(source : Kiplinger.com [Turn-451-A-Month-Into-A-Million-Bucks[)
Wednesday, May 7, 2008
Worst of Financial Crisis is Past
This is the best piece of financial/economic news in awhile. But do hold your spending. The worst may appear to be over (as shared by US Secretary Treasury Henry Paulson), but there will still be some bumps ahead. Here's the article:
The credit crisis that has scorched international financial markets is on the wane but more shocks are ahead, US Secretary Treasury Henry Paulson told the Wall Street Journal in an interview published on Wednesday.
"The worst is likely to be behind us," Paulson told the paper, in one of the most optomistic comments by a top US finance official since sub-prime mortgage losses set a domino effect in motion in mid 2007.
Paulson said it would take "some months longer" for the situation to stabilize and cautioned there would likely be further "bumps along the road."
But, he said, "there's no doubt that things feel better today, by a lot, than they did in March."
Paulson said the decision by the US Federal Reserve to rescue US investment giant Stearns and to inject liquidity into other investment banks proved to be a turning or "inflection point" in the crisis.
He expressed confidence that Congress would soon approve two measures he sees as key to stabilizing markets, to improve regulation of government-sponsored mortgage firms Fannie Mae and Freddie Mac and the Federal Housing Agency, which insures private housing loans.
(source : http://sg.news.yahoo.com/afp/20080507/tts-us-economy-paulson-972e412.html)
Even if the worst is over, it will take months for the dust to settle. The financial turmoil affected many countries thus the ripple effect will still be seen. Even if it's over in the US, it doesn't mean there won't be any yet to be seen effect in other countries.
We can only hope there's no new setbacks while the dust settles.
The credit crisis that has scorched international financial markets is on the wane but more shocks are ahead, US Secretary Treasury Henry Paulson told the Wall Street Journal in an interview published on Wednesday.
"The worst is likely to be behind us," Paulson told the paper, in one of the most optomistic comments by a top US finance official since sub-prime mortgage losses set a domino effect in motion in mid 2007.
Paulson said it would take "some months longer" for the situation to stabilize and cautioned there would likely be further "bumps along the road."
But, he said, "there's no doubt that things feel better today, by a lot, than they did in March."
Paulson said the decision by the US Federal Reserve to rescue US investment giant Stearns and to inject liquidity into other investment banks proved to be a turning or "inflection point" in the crisis.
He expressed confidence that Congress would soon approve two measures he sees as key to stabilizing markets, to improve regulation of government-sponsored mortgage firms Fannie Mae and Freddie Mac and the Federal Housing Agency, which insures private housing loans.
(source : http://sg.news.yahoo.com/afp/20080507/tts-us-economy-paulson-972e412.html)
Even if the worst is over, it will take months for the dust to settle. The financial turmoil affected many countries thus the ripple effect will still be seen. Even if it's over in the US, it doesn't mean there won't be any yet to be seen effect in other countries.
We can only hope there's no new setbacks while the dust settles.
Tuesday, April 29, 2008
MediShield Premiums to Go Up on 1 December 2008
This post serve to notify you, that you better be prepared to take care of yourself than rely on your government to care for you in your older years. Thus, please put in efforts to ensure you are sufficiently covered. Please take your money seriously, invest and make sure your funds are sufficient when you retire. Here's the can of worms fellow Singaporeans:
1. Report on 27 Apr 2008
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/343983/1/.html).
SINGAPORE: MediShield premiums will go up between a few dollars and S$40 a month from December 1, depending on age.
The Health Ministry (MOH) is raising the premiums so that it can increase the MediShield payouts to reduce the financial burden on Singaporeans with large Class B2 and Class C hospital bills.
The deductible stays the same for those under 80 – S$1,500 for Class B2 and S$1,000 for Class C. But it will be raised to S$3,000 for Class B2 and S$2,000 for Class C for those aged 81 to 85.
MOH will also raise the annual Medisave withdrawal limit to S$1,150 for policyholders aged above 80. For the rest, it stays at S$800.
2. Life Expectancy of Singaporeans
Refer to another source https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html
Life expectancy at birth:
total population: 81.89 years
male: 79.29 years
female: 84.68 years (2008 est.)
Refer to the first Para, increase in MediShield claims/payouts are for those above 80 years old. This applies only to B2 and below class wards.
The life expectancy refers to those born in this current few years, not applying to those who are already born years ago and working. Our life expectancy is not those stated above, but shorter.
3. Current MediShield Premium
http://mycpf.cpf.gov.sg/CPF/Templates/SubPage_Template.aspx?NRMODE=Published&NRORIGINALURL=%2fMembers%2fGen-Info%2fFAQ%2fHealthCare%2fMSH%2ehtm&NRNODEGUID=%7b19A871A3-E1A4-4C7C-AD0E-42686AE7E9A5%7d&NRCACHEHINT=Guest#SEC4Q17
Table F:
Annual Premium Table Age Next Birthday Yearly Premium
30 and under - $30
31 - 40 - $40
41 - 50 - $80
51 - 60 - $160
61 - 65 - $225
66 - 70 - $265
71 - 73 - $335
74 - 75 - $375
# 76 - 78 - $420
# 79 - 80 - $510
# 81 - 83 - $600
# 84 - 85 - $705
4. The Cruel Fact, The Percentage of Increase
Let's look at figures. If premium is increased by $40/month, or $480/year for those above 80 years old, what is the percentage of increase?
a. Age 81 - 83 = $600/year. Increase by $480/year works out to 80% increase
b. Age 84 - 85 = $705/year. Increase by $480/year works out to 68% increase.
c. Age 86 onwards. Sorry, not covered.
As stated in CIA Fact Book, the median age is 38.4yrs old. Let's assume, the MediShield premium increase is $3/mth for this group. That works out to $36/year. The premium for this age group is $40/year. The increase is, 90%.
Reports are not being transparent by publishing the bigger picture, by percentage of increase. By saying, a few dollars a month, it sounds palatable.
5. What Next
With so much increase, first Goods & Services Tax, follow by Transportational Cost, now MediShield Premiums, what next?
We must make sure we do our own dues, to be sufficiently prepared for our older years.
1. Report on 27 Apr 2008
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/343983/1/.html).
SINGAPORE: MediShield premiums will go up between a few dollars and S$40 a month from December 1, depending on age.
The Health Ministry (MOH) is raising the premiums so that it can increase the MediShield payouts to reduce the financial burden on Singaporeans with large Class B2 and Class C hospital bills.
The deductible stays the same for those under 80 – S$1,500 for Class B2 and S$1,000 for Class C. But it will be raised to S$3,000 for Class B2 and S$2,000 for Class C for those aged 81 to 85.
MOH will also raise the annual Medisave withdrawal limit to S$1,150 for policyholders aged above 80. For the rest, it stays at S$800.
2. Life Expectancy of Singaporeans
Refer to another source https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html
Life expectancy at birth:
total population: 81.89 years
male: 79.29 years
female: 84.68 years (2008 est.)
Refer to the first Para, increase in MediShield claims/payouts are for those above 80 years old. This applies only to B2 and below class wards.
The life expectancy refers to those born in this current few years, not applying to those who are already born years ago and working. Our life expectancy is not those stated above, but shorter.
3. Current MediShield Premium
http://mycpf.cpf.gov.sg/CPF/Templates/SubPage_Template.aspx?NRMODE=Published&NRORIGINALURL=%2fMembers%2fGen-Info%2fFAQ%2fHealthCare%2fMSH%2ehtm&NRNODEGUID=%7b19A871A3-E1A4-4C7C-AD0E-42686AE7E9A5%7d&NRCACHEHINT=Guest#SEC4Q17
Table F:
Annual Premium Table Age Next Birthday Yearly Premium
30 and under - $30
31 - 40 - $40
41 - 50 - $80
51 - 60 - $160
61 - 65 - $225
66 - 70 - $265
71 - 73 - $335
74 - 75 - $375
# 76 - 78 - $420
# 79 - 80 - $510
# 81 - 83 - $600
# 84 - 85 - $705
4. The Cruel Fact, The Percentage of Increase
Let's look at figures. If premium is increased by $40/month, or $480/year for those above 80 years old, what is the percentage of increase?
a. Age 81 - 83 = $600/year. Increase by $480/year works out to 80% increase
b. Age 84 - 85 = $705/year. Increase by $480/year works out to 68% increase.
c. Age 86 onwards. Sorry, not covered.
As stated in CIA Fact Book, the median age is 38.4yrs old. Let's assume, the MediShield premium increase is $3/mth for this group. That works out to $36/year. The premium for this age group is $40/year. The increase is, 90%.
Reports are not being transparent by publishing the bigger picture, by percentage of increase. By saying, a few dollars a month, it sounds palatable.
5. What Next
With so much increase, first Goods & Services Tax, follow by Transportational Cost, now MediShield Premiums, what next?
We must make sure we do our own dues, to be sufficiently prepared for our older years.
Friday, April 25, 2008
Global Slowdown Not The Worst Yet
The current global growth slowdown, and potential recession, may be the worst in the last 30 years. The current situation started with the US Sub-prime, leading to financial crisis which spread globally.
This may not be the worst that is yet to come.
Last October (2007), I wrote about the "Anticipation of Next Recession" (http://globalcookie.blogspot.com/2007/10/anticipation-of-next-recession-or-great.html), which I was making a guess that it will happen some time around year 2014. In recent period, there were news coming from global financial leaders about the US Recession which is the worst since the last Great Depression (1929).
Many countries and funds have scrambled to bail out financial institutions trapped in the US Crisis that threatened to cause some to wind up. Billions of dollars have been pumped into US financial institutions over recent months. Singapore alone had contributed at least US$40 billion through the Government Investment Corp (GIC) and Temasek Holdings.
Is this the worst?
Going back to my posting in October 2007, the anticipation of the next Great Depression was based on my assumption that the Baby Boomers' retirement will create a vaccum, etc. That was just talking about retirement of Baby Boomers. I like to shine more light into that post.
China had seen double digit growth over the last 20 years, since opening up of their economy. China economy have evolved and the Chinese spending power have grown so much, they become the biggest consumers now.
However, a worrying trend have evolved together with their growth. Chinese (no statistics) are spending beyond their means. Their car population have outgrown anywhere else in the world. Are these car owners really affluent enough to afford cars as part of their lifestyle?
Should a melt down happen in China years from now, coupled with global greying population (not just US), it may create a major problem for economies around the world. Emerging countries currently do not have the financial and consumption ability to sustain the consumer power of the Developed Nations and China.
Will this lead to a real Great Depression years from now? The worst may yet to have been seen.
This may not be the worst that is yet to come.
Last October (2007), I wrote about the "Anticipation of Next Recession" (http://globalcookie.blogspot.com/2007/10/anticipation-of-next-recession-or-great.html), which I was making a guess that it will happen some time around year 2014. In recent period, there were news coming from global financial leaders about the US Recession which is the worst since the last Great Depression (1929).
Many countries and funds have scrambled to bail out financial institutions trapped in the US Crisis that threatened to cause some to wind up. Billions of dollars have been pumped into US financial institutions over recent months. Singapore alone had contributed at least US$40 billion through the Government Investment Corp (GIC) and Temasek Holdings.
Is this the worst?
Going back to my posting in October 2007, the anticipation of the next Great Depression was based on my assumption that the Baby Boomers' retirement will create a vaccum, etc. That was just talking about retirement of Baby Boomers. I like to shine more light into that post.
China had seen double digit growth over the last 20 years, since opening up of their economy. China economy have evolved and the Chinese spending power have grown so much, they become the biggest consumers now.
However, a worrying trend have evolved together with their growth. Chinese (no statistics) are spending beyond their means. Their car population have outgrown anywhere else in the world. Are these car owners really affluent enough to afford cars as part of their lifestyle?
Should a melt down happen in China years from now, coupled with global greying population (not just US), it may create a major problem for economies around the world. Emerging countries currently do not have the financial and consumption ability to sustain the consumer power of the Developed Nations and China.
Will this lead to a real Great Depression years from now? The worst may yet to have been seen.
Strengthening of Sing Dollar
Singapore's Year on Year inflation as at January 2008 was 6.6%, up from 4.4% in December 2007. (Source : http://www.mas.gov.sg/eco_research/eco_dev_ana/Inflation_Monthly.html)
While the world frets about a possible U.S. recession, global inflation has quietly climbed to historic levels, confronting policy makers with tough choices that could end up hurting the euro and lifting Asian currencies.
At a time when global growth is slowing and prices are rising, a strengthening currency can help protect consumers by increasing their buying power.
(Source : http://banderasnews.com/0802/nw-globalinflation.htm)
In recent reports, Monetary Authority of Singapore is set to strengthen Singapore Currency further and may meet exchange rate of $1.32 against US$ by year end (2008). Stronger Singapore Dollar can help lower inflation as it will cost lesser to import from other countries.
However, adjusting the currency is a double edge sword. With stronger Singapore Dollar, our exports becomes less attractive. Singapore's export are already facing competition from developing nations, where labour cost are much lower, which helped lower cost of exports.
As such, the Monetary Authority will be watchful on how far the currency appreciates in value so that we do not end up edging ourselves out of global competition.
While the world frets about a possible U.S. recession, global inflation has quietly climbed to historic levels, confronting policy makers with tough choices that could end up hurting the euro and lifting Asian currencies.
At a time when global growth is slowing and prices are rising, a strengthening currency can help protect consumers by increasing their buying power.
(Source : http://banderasnews.com/0802/nw-globalinflation.htm)
In recent reports, Monetary Authority of Singapore is set to strengthen Singapore Currency further and may meet exchange rate of $1.32 against US$ by year end (2008). Stronger Singapore Dollar can help lower inflation as it will cost lesser to import from other countries.
However, adjusting the currency is a double edge sword. With stronger Singapore Dollar, our exports becomes less attractive. Singapore's export are already facing competition from developing nations, where labour cost are much lower, which helped lower cost of exports.
As such, the Monetary Authority will be watchful on how far the currency appreciates in value so that we do not end up edging ourselves out of global competition.
Saturday, April 12, 2008
Global Financial Crisis (US & G7 seeks Financial Reforms)
Here's the joke. Had the US financial system be tighter in boom years, the global economy will not be weary today. Is it a lack of governance or the ruins of democratic financial system, in the US that created such a huge mess today?
The Denial
To think that the current financial turmoil started from their mishandling, they are still out holding their might to teach the global financial heads how to better manage global financial controls. Their leaders are not admiting to the problem and in denial claiming IMF is "Unduly pessimistic" about the US Economy. They are more focus on war in Iraq it appears, or the outgoing Administration are worry of a bad legacy.
Financial System & Controls
When banks starts getting overly aggressive and optimistic, we have to get cautious. The other joke about banks is, "they'll lend you and umbrella during sunny days, and take it back during rainy days".
In Singapore, banks tends to be conservative. Larger loans are usually subjected to strong collateral, such as properties. However, banks are stringent in lending beyond 80% Loan To Valuation as this expose them to greater risk that if the borrower defaults on payment, they may not be able to recover their loan.
With such controls, the financial institutions are limiting their risk.
Borrowers Personal Responsibility
Borrowers should learn to understand more about the economy and interest rate patterns to avoid over commiting into a loan they will have problem servicing later. This may be hard as some are overly naive and created false expectation of themselves and their potentials.
Let us not forget the lesson learnt since the Asian Financial Crisis to the most current Global Financial Crisis. We have to embrace these valuable lessons to avoid being trapped. The governments have too much to be concern about than to be responsible for our financial education.
US will work with partners to avert future crisis: Paulson
WASHINGTON (AFP) - - US Treasury Secretary Henry Paulson warned Friday that the struggling US economy may face rougher times ahead but insisted its fundamental prospects are in good shape.
The Treasury chief also said Washington would work with its global partners to take steps aimed at averting future financial crises.
"The financial market turmoil and its impact on global growth underscore the need for all countries to remain open to trade and investment," Paulson said after a meeting here of finance ministers and officials from the Group of Seven major industrialized countries.
"We have worked, and will continue to work, closely to address global challenges and take concrete actions," Paulson said.
G7 officials endorsed a plan earlier Friday aimed at preventing a repetition of the recent financial market turmoil which has caused tens of billions of dollars of losses for major banks and securities firms.
"There may be more bumps in the road" for the US economy, Paulson cautioned.
The current slowdown in the world's biggest economy has been called a recession by the International Monetary Fund, an assessment dismissed by President George W. Bush's administration as "unduly pessimistic."
But it is clear that a persistent US housing slump and a related credit crunch have slowed US economic growth dramatically in recent months.
"I am confident in the long-term economic prospects of the United States," Paulson said. "However, the housing correction, together with high energy prices and financial market turmoil are weighing on US economic growth."
Paulson, a former chief executive of Goldman Sachs, said the US economy would likely get out of a first-quarter rut by later this year and possibly as early as the second quarter.
"The first quarter was a tough quarter," he told journalists at a press briefing.
A growing number of economists believe America's economy has already slipped into a recession.
Bush administration officials say a flurry of Federal Reserve interest-rate cuts and a giant 168-billion-dollar economic stimulus package should revive growth in coming months.
Paulson said the economy could benefit from "positive results" as early as the second quarter as it continues to weather stressed housing and credit markets.
He said some media headlines on the economy appeared to be overly bleak and stressed that America's economy is broad-based and dynamic.
Addressing reporters' questions about the foreign exchange markets and the weakened dollar, Paulson said G7 officials always debate currencies.
"I reiterated in very strong terms our commitment to a strong dollar," he said of his participation in the G7 finance meeting, adding that ministers also discussed other global currencies and their values.
The US dollar has weakened markedly on foreign exchange markets in recent months, partly due to aggressive Fed rate cuts.
Paulson also reiterated calls for Beijing to increase the flexibility of its yuan currency.
"As someone who has just got back from China, I believe that China understands ... it's in their interests, as they're are dealing with some of the issues they have ... to have a currency that's more reflective of underlying economic fundamentals," he said.
Some US economic commentators accuse China of keeping its currency artificially undervalued to support China's ballooning trade surplus with the United States.
(Source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-statement-u-972e412.html)
When problem brews, the weak blames others.
G7 finance chiefs back financial reforms amid crisis
WASHINGTON (AFP) - - The Group of Seven warned Friday the global economy is sputtering and vigorously backed measures to prevent a recurrence of what is being called the worst financial crisis in seven decades.
Finance ministers and central bank governors of the G7 major industrialized countries said banks should adopt steps to "fully and promptly" reveal their risk exposure due to the current financial market turmoil within 100 days.
The world economy "continues to face a difficult period ... (and) near-term economic prospects have weakened," the G7 officials said in a statement after their meeting here.
The finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States stared into the abyss of a complex crisis that began in the US subprime home-loan market in August and has spread into a global credit squeeze draining world growth.
"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," they said ahead of the weekend meetings here of the board of governors of the International Monetary Fund and World Bank.
"While economic conditions differ in our countries, downside risks to the outlook persist in view of the ongoing weakness in US residential housing markets, stressed global financial market conditions, the international impact of high oil and commodity prices, and consequent inflation pressures."
The G7 finance chiefs also noted that since their last meeting in February, there have been "sharp fluctuations" in major currencies and members "continue to monitor exchange markets closely and cooperate as appropriate."
Major central banks have coordinated multi-billion dollar cash injections into stressed financial markets in recent months and the dollar has plunged to record lows.
In response to the spreading crisis, they said they approved a Financial Stability Forum (FSF) report on ways to prevent a repetition and had identified several recommendations for implementation "within the next 100 days."
"Rapid implementation of the FSF report will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the markets," they said.
Ranked first, "firms should fully and promptly disclose their risk exposures, write-downs, and fair value estimates for complex and illiquid instruments.
"We strongly encourage financial institutions to make robust risk disclosures in their upcoming mid-year reporting consistent with leading disclosure practices as set out in the FSF's report."
Among other measures for early implementation, the G7 said the International Accounting Standards Board (IASB) and standard-setters should "initiate urgent action to improve the accounting and disclosure standards for off-balance sheet entities."
It should also enhance its guidance on fair value accounting, particularly on valuing financial instruments in periods of stress.
Off-balance sheet entities have been blamed for concealing the true extent of the banks' exposure to the US high-risk subprime mortgage crisis and the risks involved in assets that could not be fairly valued in times of distress.
In its report, the FSF said watchdogs around the world should improve their "responsiveness to risks," and "robust arrangements" should be put in place to deal with stress in the global financial system.
"To restore confidence in the soundness of markets and instutitions, it is essential that steps are taken now to enhance the resilience of the global system," the FSF urged.
The G7 ministers reaffirmed "our strong commitment to continue working closely together to restore sustained growth, maintain price stability, and ensure the smooth and orderly functioning of our financial systems."
US Treasury Secretary Henry Paulson, his country at the epicenter of the crisis, said: "We have worked, and will continue to work, closely to address global challenges and take concrete actions".
(source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-c1b2fc3.html)
The Denial
To think that the current financial turmoil started from their mishandling, they are still out holding their might to teach the global financial heads how to better manage global financial controls. Their leaders are not admiting to the problem and in denial claiming IMF is "Unduly pessimistic" about the US Economy. They are more focus on war in Iraq it appears, or the outgoing Administration are worry of a bad legacy.
Financial System & Controls
When banks starts getting overly aggressive and optimistic, we have to get cautious. The other joke about banks is, "they'll lend you and umbrella during sunny days, and take it back during rainy days".
In Singapore, banks tends to be conservative. Larger loans are usually subjected to strong collateral, such as properties. However, banks are stringent in lending beyond 80% Loan To Valuation as this expose them to greater risk that if the borrower defaults on payment, they may not be able to recover their loan.
With such controls, the financial institutions are limiting their risk.
Borrowers Personal Responsibility
Borrowers should learn to understand more about the economy and interest rate patterns to avoid over commiting into a loan they will have problem servicing later. This may be hard as some are overly naive and created false expectation of themselves and their potentials.
Let us not forget the lesson learnt since the Asian Financial Crisis to the most current Global Financial Crisis. We have to embrace these valuable lessons to avoid being trapped. The governments have too much to be concern about than to be responsible for our financial education.
US will work with partners to avert future crisis: Paulson
WASHINGTON (AFP) - - US Treasury Secretary Henry Paulson warned Friday that the struggling US economy may face rougher times ahead but insisted its fundamental prospects are in good shape.
The Treasury chief also said Washington would work with its global partners to take steps aimed at averting future financial crises.
"The financial market turmoil and its impact on global growth underscore the need for all countries to remain open to trade and investment," Paulson said after a meeting here of finance ministers and officials from the Group of Seven major industrialized countries.
"We have worked, and will continue to work, closely to address global challenges and take concrete actions," Paulson said.
G7 officials endorsed a plan earlier Friday aimed at preventing a repetition of the recent financial market turmoil which has caused tens of billions of dollars of losses for major banks and securities firms.
"There may be more bumps in the road" for the US economy, Paulson cautioned.
The current slowdown in the world's biggest economy has been called a recession by the International Monetary Fund, an assessment dismissed by President George W. Bush's administration as "unduly pessimistic."
But it is clear that a persistent US housing slump and a related credit crunch have slowed US economic growth dramatically in recent months.
"I am confident in the long-term economic prospects of the United States," Paulson said. "However, the housing correction, together with high energy prices and financial market turmoil are weighing on US economic growth."
Paulson, a former chief executive of Goldman Sachs, said the US economy would likely get out of a first-quarter rut by later this year and possibly as early as the second quarter.
"The first quarter was a tough quarter," he told journalists at a press briefing.
A growing number of economists believe America's economy has already slipped into a recession.
Bush administration officials say a flurry of Federal Reserve interest-rate cuts and a giant 168-billion-dollar economic stimulus package should revive growth in coming months.
Paulson said the economy could benefit from "positive results" as early as the second quarter as it continues to weather stressed housing and credit markets.
He said some media headlines on the economy appeared to be overly bleak and stressed that America's economy is broad-based and dynamic.
Addressing reporters' questions about the foreign exchange markets and the weakened dollar, Paulson said G7 officials always debate currencies.
"I reiterated in very strong terms our commitment to a strong dollar," he said of his participation in the G7 finance meeting, adding that ministers also discussed other global currencies and their values.
The US dollar has weakened markedly on foreign exchange markets in recent months, partly due to aggressive Fed rate cuts.
Paulson also reiterated calls for Beijing to increase the flexibility of its yuan currency.
"As someone who has just got back from China, I believe that China understands ... it's in their interests, as they're are dealing with some of the issues they have ... to have a currency that's more reflective of underlying economic fundamentals," he said.
Some US economic commentators accuse China of keeping its currency artificially undervalued to support China's ballooning trade surplus with the United States.
(Source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-statement-u-972e412.html)
When problem brews, the weak blames others.
G7 finance chiefs back financial reforms amid crisis
WASHINGTON (AFP) - - The Group of Seven warned Friday the global economy is sputtering and vigorously backed measures to prevent a recurrence of what is being called the worst financial crisis in seven decades.
Finance ministers and central bank governors of the G7 major industrialized countries said banks should adopt steps to "fully and promptly" reveal their risk exposure due to the current financial market turmoil within 100 days.
The world economy "continues to face a difficult period ... (and) near-term economic prospects have weakened," the G7 officials said in a statement after their meeting here.
The finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States stared into the abyss of a complex crisis that began in the US subprime home-loan market in August and has spread into a global credit squeeze draining world growth.
"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," they said ahead of the weekend meetings here of the board of governors of the International Monetary Fund and World Bank.
"While economic conditions differ in our countries, downside risks to the outlook persist in view of the ongoing weakness in US residential housing markets, stressed global financial market conditions, the international impact of high oil and commodity prices, and consequent inflation pressures."
The G7 finance chiefs also noted that since their last meeting in February, there have been "sharp fluctuations" in major currencies and members "continue to monitor exchange markets closely and cooperate as appropriate."
Major central banks have coordinated multi-billion dollar cash injections into stressed financial markets in recent months and the dollar has plunged to record lows.
In response to the spreading crisis, they said they approved a Financial Stability Forum (FSF) report on ways to prevent a repetition and had identified several recommendations for implementation "within the next 100 days."
"Rapid implementation of the FSF report will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the markets," they said.
Ranked first, "firms should fully and promptly disclose their risk exposures, write-downs, and fair value estimates for complex and illiquid instruments.
"We strongly encourage financial institutions to make robust risk disclosures in their upcoming mid-year reporting consistent with leading disclosure practices as set out in the FSF's report."
Among other measures for early implementation, the G7 said the International Accounting Standards Board (IASB) and standard-setters should "initiate urgent action to improve the accounting and disclosure standards for off-balance sheet entities."
It should also enhance its guidance on fair value accounting, particularly on valuing financial instruments in periods of stress.
Off-balance sheet entities have been blamed for concealing the true extent of the banks' exposure to the US high-risk subprime mortgage crisis and the risks involved in assets that could not be fairly valued in times of distress.
In its report, the FSF said watchdogs around the world should improve their "responsiveness to risks," and "robust arrangements" should be put in place to deal with stress in the global financial system.
"To restore confidence in the soundness of markets and instutitions, it is essential that steps are taken now to enhance the resilience of the global system," the FSF urged.
The G7 ministers reaffirmed "our strong commitment to continue working closely together to restore sustained growth, maintain price stability, and ensure the smooth and orderly functioning of our financial systems."
US Treasury Secretary Henry Paulson, his country at the epicenter of the crisis, said: "We have worked, and will continue to work, closely to address global challenges and take concrete actions".
(source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-c1b2fc3.html)
Thursday, April 10, 2008
Global Recession Forecasted
In International Monetary Fund (IMF) semi-annual World Economic Report released on 9 Apr 08, they warn that there is now a 0ne-in-four chance of a global recession. IMF also declare that the United States faces a recession this year.
The report said : "The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system."
It also predict that global growth would slow to just 3.7 per cent this year while US economy will expand by just 0.5%. "The US is projected to tip into a mild recession in 2008 despite aggressive rate cuts by the Federal Reserve and timely implementation of a fiscal stimulus package." This would be the worst performance for the US economy for well over a decade.
Unless the global financial crisis worsens, Asia is set for slower yet still robust economic growth of about 4.0%, especially in newly industrialised economies of South Korea, Taiwan, Hong Kong and Singapore.
The IMF estimated that the worldwide losses stemming from the US sub-prime mortgage crisis could hit US$945 billion.
In a seperate report, ex-Federal Reserve chairman, Alan Greenspan, says US is already in recession.
The big cut in its most important interest rate capped the most aggressive Fed intervention in 25 years could help avoid a deep recession. The Fed has been urgently moving to prevent the trio of economic woes - housing, credit and financial - from plunging the country into a deep recession.
However, with the scoring energy prices and high food cost,, worry is that inflation could potentially become unhinged. If people, investors and businesses expect prices to rise sharply, they will act in ways that will make inflation worse.
The report said : "The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system."
It also predict that global growth would slow to just 3.7 per cent this year while US economy will expand by just 0.5%. "The US is projected to tip into a mild recession in 2008 despite aggressive rate cuts by the Federal Reserve and timely implementation of a fiscal stimulus package." This would be the worst performance for the US economy for well over a decade.
Unless the global financial crisis worsens, Asia is set for slower yet still robust economic growth of about 4.0%, especially in newly industrialised economies of South Korea, Taiwan, Hong Kong and Singapore.
The IMF estimated that the worldwide losses stemming from the US sub-prime mortgage crisis could hit US$945 billion.
In a seperate report, ex-Federal Reserve chairman, Alan Greenspan, says US is already in recession.
The big cut in its most important interest rate capped the most aggressive Fed intervention in 25 years could help avoid a deep recession. The Fed has been urgently moving to prevent the trio of economic woes - housing, credit and financial - from plunging the country into a deep recession.
However, with the scoring energy prices and high food cost,, worry is that inflation could potentially become unhinged. If people, investors and businesses expect prices to rise sharply, they will act in ways that will make inflation worse.
Tuesday, April 8, 2008
Double Whammy For Low-Income
I read on newspaper, Today (8 Apr 08 issue), on the above subject and wonders if the writer has shone appropriate light onto the matter.
He wrote,
1. Increasing rate of inflation must be discussed together with declining interest rates
2. Real interest rates (nominal rates less inflation) have steadily declined in the recent past because of increase in inflation
3. Double whammy for low-income households - Purchasing power has fallen because of higher inflation while their ability to grow their savings has declined
4. Higher income households benefit from the higher inflation rate by being able to invest in alternative options that offer better returns than savings accounts, such as gold, exchange-traded funds and commodities that have boomed in recent past.
5. Lower-income households are unable to take advantage of such financial instruments because of lack of awareness and capital required for participation
6. Current situation seems hopeless for them.
He failed to share, with High Inflation and Low Interest, it errodes the value of money. This means, the funds we hold are erroded fast.
By sharing point 4 above, he may send the wrong signal to non-savvy investor-wannabe to invest in commodities like gold and equity based funds that had grown tremendiously over the recent period.
It is indeed true that lower-income families have lesser savings and may not even have any disposable funds. With that, they are unlikely to be able to open themselves to opportunities that others would have. The lower-income families are more concern of making ends meet with rising living cost.
As I read last year, people were spending more on luxury goods. As shared with several friends, if we could, conserve funds during good times and vest it into good returns investments while others spend away their hard earned monies.
During economic slowdown or downturn, our funds are magnified to allow us to take on more than what we would be able to afford during good economy.
He wrote,
1. Increasing rate of inflation must be discussed together with declining interest rates
2. Real interest rates (nominal rates less inflation) have steadily declined in the recent past because of increase in inflation
3. Double whammy for low-income households - Purchasing power has fallen because of higher inflation while their ability to grow their savings has declined
4. Higher income households benefit from the higher inflation rate by being able to invest in alternative options that offer better returns than savings accounts, such as gold, exchange-traded funds and commodities that have boomed in recent past.
5. Lower-income households are unable to take advantage of such financial instruments because of lack of awareness and capital required for participation
6. Current situation seems hopeless for them.
He failed to share, with High Inflation and Low Interest, it errodes the value of money. This means, the funds we hold are erroded fast.
By sharing point 4 above, he may send the wrong signal to non-savvy investor-wannabe to invest in commodities like gold and equity based funds that had grown tremendiously over the recent period.
It is indeed true that lower-income families have lesser savings and may not even have any disposable funds. With that, they are unlikely to be able to open themselves to opportunities that others would have. The lower-income families are more concern of making ends meet with rising living cost.
As I read last year, people were spending more on luxury goods. As shared with several friends, if we could, conserve funds during good times and vest it into good returns investments while others spend away their hard earned monies.
During economic slowdown or downturn, our funds are magnified to allow us to take on more than what we would be able to afford during good economy.
Asian Firms Freezing Pay and Headcount
A survey by global management consultancy Hay Group released last Friday (4 Apr 08), shows Asian employers are starting to brace themselves for the economic downturn. it found that 81% of Asian companies polled are planning to freeze or decrease headcount in 2008.
About 33% of the 140 Asian companies polled are also currently freezing or looking to freeze their employees' base salaries. In comparison, only 15% of the 863 non-Asian companies polled are preparing to do the same.
A total of 1,003 companies comprising mostly of multi-natoinal corporations across sectors such as energy, retail, healthcare, and finance and banking, were from 80 countries worldwide. Of these, 770 are from non-Asian countries. There are no figures of Singapore companies polled.
Although Singapore doesn't look as gloom as compared to the region, we would need to brace ourselves for cyclical downturns. Besides, the inflation has escalated in the last 1 year. Cost of basic necessities have climbed vigorously during this period, causing some extend of panic buying of basic necessities (eg, Rice) by consumers.
I had a recent look at my financial aspiration. If I could vest some funds separately, into various investment that matures every 3 to 5 years, it could result in having mature investment every 2 to 3 years interval. With that, I will not be at the mercy of economical upheaval wouldn't I?
About 33% of the 140 Asian companies polled are also currently freezing or looking to freeze their employees' base salaries. In comparison, only 15% of the 863 non-Asian companies polled are preparing to do the same.
A total of 1,003 companies comprising mostly of multi-natoinal corporations across sectors such as energy, retail, healthcare, and finance and banking, were from 80 countries worldwide. Of these, 770 are from non-Asian countries. There are no figures of Singapore companies polled.
Although Singapore doesn't look as gloom as compared to the region, we would need to brace ourselves for cyclical downturns. Besides, the inflation has escalated in the last 1 year. Cost of basic necessities have climbed vigorously during this period, causing some extend of panic buying of basic necessities (eg, Rice) by consumers.
I had a recent look at my financial aspiration. If I could vest some funds separately, into various investment that matures every 3 to 5 years, it could result in having mature investment every 2 to 3 years interval. With that, I will not be at the mercy of economical upheaval wouldn't I?
Friday, April 4, 2008
6 More Months of Uncertainty
As published on local newspaper (My Paper Friday 4 Apr 08), property tycoon Mr Kwek Leng Beng (Singapore's 5th richest - 23 Aug 07 [http://www.forbes.com/2007/08/23/biz-cz_07singapore_Singapores-40-Richest_land.html]) shared, "the uncertainty surrounding the local property market will last at least another six months and stake holders must stay nimble to deal with the changing tides".
He mentioned that the standstill in the local property market would end only after the United States sub-prime crisis clears. Any restoration of confidence in the property market will also hinge on private and public stakeholders remaining nimble and reviewingtheir strategies to meet changing market conditions swiftly.
In another report, Property Fever Here Starting to Cool, it was reported that bids for land has dropped in numbers of bidders and price offered. In recent land tender, the residential site bordering Choa Chu Kang Road and Woodlands Road attracted just two bids. The highest offer being $61 million, which works out to just $162 psf per plot ratio.
The low point came last month when just $78 psf was offered for land in Westwood Avenue, which was rejected by the Urban Redevelopment Authority.
The property market boom between August to November 2007 lead to a massive inflation of property prices. Property prices raised by percentages not seen before within such short span of time. The property market started to cooled off in December 2007 and January 2008 onwards saw a complete slow down in property deals.
My take would be, hold onto buying till after mid 2008. At that point, the dust would have settled a little more, but not clear yet.
He mentioned that the standstill in the local property market would end only after the United States sub-prime crisis clears. Any restoration of confidence in the property market will also hinge on private and public stakeholders remaining nimble and reviewingtheir strategies to meet changing market conditions swiftly.
In another report, Property Fever Here Starting to Cool, it was reported that bids for land has dropped in numbers of bidders and price offered. In recent land tender, the residential site bordering Choa Chu Kang Road and Woodlands Road attracted just two bids. The highest offer being $61 million, which works out to just $162 psf per plot ratio.
The low point came last month when just $78 psf was offered for land in Westwood Avenue, which was rejected by the Urban Redevelopment Authority.
The property market boom between August to November 2007 lead to a massive inflation of property prices. Property prices raised by percentages not seen before within such short span of time. The property market started to cooled off in December 2007 and January 2008 onwards saw a complete slow down in property deals.
My take would be, hold onto buying till after mid 2008. At that point, the dust would have settled a little more, but not clear yet.
Saturday, March 29, 2008
Going the Opposite
Economics teaches about Demand and Supply. When Demand is higher than Supply, price of goods goes up. When Demand is Lower than Supply, prices goes down.
Singapore went through years of economy downturn, starting with the Asian Financial Crisis to SARS. The economy recovered and experienced economical growth since 2006. The property price upheaval during the period of June to October/November 2007 saw huge profits for property investors. Investors became more affluent during this period.
With 2 years of high growth, people began to splurge on big ticket items, such as changing to better cars with higher engine capacity, etc. While many spent on such luxuries, I choose to go the opposite.
Going the opposite to me is, when the demand is high, when everybody else is spending on big ticket items, don't buy, don't spend. During good times, demand for goods, especially high ticket items, goes up. The increased demand will force prices of goods to go upwards and the main stream people tends to spend during this period.
During this time, I choose to invest my funds into some good vehicle that gives good yield. Years later, my original amount would have grown/multiply.
During bad times, demand naturally falls. The drop in demand will force price downwards. People runs out of funds, digs into savings, starts selling their high ticket items. This contribute to further price erossion. I will be spoilt for choice. With lesser money, I can buy the same item that people used to pay much more for.
When the economy faces a recession next time, I hope my investments now will give me enough funds to plough into bargin investments that will give even better yield later on.
Go the opposite.
Singapore went through years of economy downturn, starting with the Asian Financial Crisis to SARS. The economy recovered and experienced economical growth since 2006. The property price upheaval during the period of June to October/November 2007 saw huge profits for property investors. Investors became more affluent during this period.
With 2 years of high growth, people began to splurge on big ticket items, such as changing to better cars with higher engine capacity, etc. While many spent on such luxuries, I choose to go the opposite.
Going the opposite to me is, when the demand is high, when everybody else is spending on big ticket items, don't buy, don't spend. During good times, demand for goods, especially high ticket items, goes up. The increased demand will force prices of goods to go upwards and the main stream people tends to spend during this period.
During this time, I choose to invest my funds into some good vehicle that gives good yield. Years later, my original amount would have grown/multiply.
During bad times, demand naturally falls. The drop in demand will force price downwards. People runs out of funds, digs into savings, starts selling their high ticket items. This contribute to further price erossion. I will be spoilt for choice. With lesser money, I can buy the same item that people used to pay much more for.
When the economy faces a recession next time, I hope my investments now will give me enough funds to plough into bargin investments that will give even better yield later on.
Go the opposite.
Tuesday, March 18, 2008
Global Financial Crisis Worsening?
The stunning collapse of US investment bank Bear Stearns is just one example. It shows the global financial crisis is more serious and more widespread than policy makers realised even a few weeks ago, the head of the International Monetary Fund (Dominique Strauss-Kahn) said.
He further add, "The risks and dangers are very high. The economic environment is still worsening." He said that US woes will impact other economies and will require a "global answer".
Not admiting, US President says "the United States is on top of the situation." while acknowledging that the economy is going through "challenging times".
(source : The New Paper, 18 Mar 08)
Even Chinese Premier, Wen Jiabao, is concern about the US economy, as quoted "I am paying great attention to the world economy, I am especially worried about the US economy," Wen said at a press conference at the end of China's parliament.
"What I'm worried about is that the US dollar continues to depreciate, when will we see it hit the bottom? What kind of monetary policy will the US take and what direction will its economy take?"
With the global economy increasingly linked, fluctuations on the world market were bound to influence China's economic growth, Wen said.
The US subprime loan crisis was not only driving down the dollar, but also interest rates and stock markets around the world, Wen said, all the while pushing up the price of oil to over 100 dollars a barrel price.
(Source : http://sg.news.yahoo.com/afp/20080318/tbs-china-economy-inflation-us-wen-ec2362a.html)
He further add, "The risks and dangers are very high. The economic environment is still worsening." He said that US woes will impact other economies and will require a "global answer".
Not admiting, US President says "the United States is on top of the situation." while acknowledging that the economy is going through "challenging times".
(source : The New Paper, 18 Mar 08)
Even Chinese Premier, Wen Jiabao, is concern about the US economy, as quoted "I am paying great attention to the world economy, I am especially worried about the US economy," Wen said at a press conference at the end of China's parliament.
"What I'm worried about is that the US dollar continues to depreciate, when will we see it hit the bottom? What kind of monetary policy will the US take and what direction will its economy take?"
With the global economy increasingly linked, fluctuations on the world market were bound to influence China's economic growth, Wen said.
The US subprime loan crisis was not only driving down the dollar, but also interest rates and stock markets around the world, Wen said, all the while pushing up the price of oil to over 100 dollars a barrel price.
(Source : http://sg.news.yahoo.com/afp/20080318/tbs-china-economy-inflation-us-wen-ec2362a.html)
Tuesday, March 11, 2008
Savings Eroded By Record Inflation Rates
Cash rich Singaporeans averse to risky alternatives are in an unhappy spot of having their savings eroded by inflation, said The Business Times.
Not only is inflation clearly on the rise - it hit a 26-years high of 6.6% in January - banks are further cutting their already miserable deposit rates.
I still recall, in year 2006, 12-months Fixed Deposit rates were as high as 3% (or more) but has fallen to 1.2% currently (Mar 2008). With inflation estimation at 5% per year, how does our savings in the bank ever match inflation. This goes to say, the same amount of money kept in the bank, with interest, will only see you getting poorer and poorer. Let me re-highlight some assumption,
- Current value of savings : $10,000
- Value after 1yr (5% Inflation) : $9,500
- Value after 7% GST (Upon spending) : $8,835
Does it still make any sense to stay conservative and leave money in the bank, or to be a high risk taker in equity investment? Please note, there are investments out there that provides Capital Protection and Guaranteed Returns. Look at what gives you more than what will be taken from you (abv illustration).
Not only is inflation clearly on the rise - it hit a 26-years high of 6.6% in January - banks are further cutting their already miserable deposit rates.
I still recall, in year 2006, 12-months Fixed Deposit rates were as high as 3% (or more) but has fallen to 1.2% currently (Mar 2008). With inflation estimation at 5% per year, how does our savings in the bank ever match inflation. This goes to say, the same amount of money kept in the bank, with interest, will only see you getting poorer and poorer. Let me re-highlight some assumption,
- Current value of savings : $10,000
- Value after 1yr (5% Inflation) : $9,500
- Value after 7% GST (Upon spending) : $8,835
Does it still make any sense to stay conservative and leave money in the bank, or to be a high risk taker in equity investment? Please note, there are investments out there that provides Capital Protection and Guaranteed Returns. Look at what gives you more than what will be taken from you (abv illustration).
Monday, March 10, 2008
PM Lee says important to focus on long-term investments
Reading in the news, Prime Minister Mr Lee said Singapore is a country that has gotten to where it is because it has been frugal, with Singaporeans working hard and living within their means.
His statement came in the wake of people's expectation of more relief and giveouts from last year's economy surplus. The expectation came from the high inflation and cost of living.
He further added, "If you change your mindset - we used to save, now that we have money, we don't need to save anymore, then the growth will stop. Singapore will go down and we will all be in serious trouble. We must maintain our basic philosophy - work together to grow the economy, to grow the pie so that everybody gets a lager slice instead of just redistributing a smaller pie
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/333849/1/.html)
The public's expectation of government give out was a natural expectation since the government started giving some incentives since the early days of our Goods & Services Tax (GST). Last year, GST was raised from 5% to 7% (40% increase). Apart from GST, other government linked revenue (eg ERP) had increased over the same period.
Rather than advising people on not to expect huge give outs, people would be better if taught how to stretch their dollar, to improve money handling and learn how to grow their funds.
His statement came in the wake of people's expectation of more relief and giveouts from last year's economy surplus. The expectation came from the high inflation and cost of living.
He further added, "If you change your mindset - we used to save, now that we have money, we don't need to save anymore, then the growth will stop. Singapore will go down and we will all be in serious trouble. We must maintain our basic philosophy - work together to grow the economy, to grow the pie so that everybody gets a lager slice instead of just redistributing a smaller pie
(source : http://www.channelnewsasia.com/stories/singaporelocalnews/view/333849/1/.html)
The public's expectation of government give out was a natural expectation since the government started giving some incentives since the early days of our Goods & Services Tax (GST). Last year, GST was raised from 5% to 7% (40% increase). Apart from GST, other government linked revenue (eg ERP) had increased over the same period.
Rather than advising people on not to expect huge give outs, people would be better if taught how to stretch their dollar, to improve money handling and learn how to grow their funds.
Saturday, March 1, 2008
Signs of Economy Slowdown
A sign that property market in Singapore has cooled since the peak in late 2007 was reflected in slower sales and take up rate. At it's peak, new property launch could be completely sold out within days (with one development in Thomson being sold out before actual launch).
It was also reported in "weekend Today" newspaper dated 1 March 2008, "Small development tax increase sign of property slowdown". In the article, the writer cited that the Ministry of National Development yesterday announced minimal changes in development charges for residential sites. Other extracts from the article as follows:
"It is encouraging to know that the Government has made minimal changes to the development charges for residential use, a reflection that it is mindful of the current market sentiment and the uncertainties ahead," said Mr Li Hiaw Ho, executive director of CBRE Research.
Mr Donald Han (MD of Cushman and Wakefield) attributed the vitually flat rates to the lacklustre market for private homes, as well as of residential sites, in recent months. He noted that the property market started deteriorating in December as sentiment turned cautious amid uncertainty over the extent of the fallout from the sub-prime crisis in the United States and stock market volatility.
Statistics from the Urban Redevelopment Authority showed that the number of new private homes sold in December shrunk by half from the month earlier, while January numbers were flat.
Many signs have suggested that the US economy is at the brink of recession, from falling propery prices to decline in job market. Despite that, the fallout may be coming to an end. The credit crunch had many banks and financial institutions reporting billions of dollars in losses from the crisis. All these have been taken into account, the economy has absorbed the downturn. So long as these insitutions had been truthful in their reports and not hid any other bad news, the credit crisis may have settled down a lot.
A lot of funds from other countries have been pumped into the financial institutions in US and Europe to help them overcome their shortages of funds and to contain the fallout. Singapore alone has pumped in nearly tens of billions into various financial institutions and many Middle East countries and their investors have also injected funds into the troubled institutions.
Not deniably, these investments may see good returns in the coming years but they are also concern of the impact from the fallout, in their (investors) domestic economy. Singapore has a lot of major projects being planned and developed currently, that a US recession will not do us any good. Some of the major investments includes, Formula 1, Integrated Resort, hosting of Youth Olympic, etc.
From the looks, the current dust is settling and may take up to another year or two to start coming up again.
It was also reported in "weekend Today" newspaper dated 1 March 2008, "Small development tax increase sign of property slowdown". In the article, the writer cited that the Ministry of National Development yesterday announced minimal changes in development charges for residential sites. Other extracts from the article as follows:
"It is encouraging to know that the Government has made minimal changes to the development charges for residential use, a reflection that it is mindful of the current market sentiment and the uncertainties ahead," said Mr Li Hiaw Ho, executive director of CBRE Research.
Mr Donald Han (MD of Cushman and Wakefield) attributed the vitually flat rates to the lacklustre market for private homes, as well as of residential sites, in recent months. He noted that the property market started deteriorating in December as sentiment turned cautious amid uncertainty over the extent of the fallout from the sub-prime crisis in the United States and stock market volatility.
Statistics from the Urban Redevelopment Authority showed that the number of new private homes sold in December shrunk by half from the month earlier, while January numbers were flat.
Many signs have suggested that the US economy is at the brink of recession, from falling propery prices to decline in job market. Despite that, the fallout may be coming to an end. The credit crunch had many banks and financial institutions reporting billions of dollars in losses from the crisis. All these have been taken into account, the economy has absorbed the downturn. So long as these insitutions had been truthful in their reports and not hid any other bad news, the credit crisis may have settled down a lot.
A lot of funds from other countries have been pumped into the financial institutions in US and Europe to help them overcome their shortages of funds and to contain the fallout. Singapore alone has pumped in nearly tens of billions into various financial institutions and many Middle East countries and their investors have also injected funds into the troubled institutions.
Not deniably, these investments may see good returns in the coming years but they are also concern of the impact from the fallout, in their (investors) domestic economy. Singapore has a lot of major projects being planned and developed currently, that a US recession will not do us any good. Some of the major investments includes, Formula 1, Integrated Resort, hosting of Youth Olympic, etc.
From the looks, the current dust is settling and may take up to another year or two to start coming up again.
Monday, February 18, 2008
Love Your Money. It Will Love You Back.
While America is reeling in the possibility of a recession, here in Asia, we are facing a boom. Singapore's GDP last year grown by 7.5%. Many people started spending on luxury goods even though they are not in a need to spend extravagantly to replace a still new item.
I have heard quite a handful of people asking if they should change their 3 years old car, for a new car. Exploring what a car salesman would say to his potential car buyer.
1) No Warranty
Sales talk : Your car is 3 years old, warranty has run out.
Truth : A 3 years old car is still rather new and even if you do not have a warranty, it is still cheaper to drive on than change car.
2) Lower Installment
Sales talk : You may save by changing to a new car (lesser monthly installment, but prolong 10yrs loan)
Truth : You have paid 3 years installment, how many more years do you have left? It will be cheaper to continue with this installment.
3) Why Pay Government
Sales talk : Your current COE (Certificate of Entitlement) cost $30,000 while it is $14,000 now. Why pay government the extra when you can save with lower COE.
Truth : Import tax is about 170%. How much more will you pay for a new car as compared with the savings on COE?
I read an interesting article and shall share, with the inclusion of your savings that could otherwise be wasted on something unnecessary.
If you long for a more fulfilling relationship with your money (stretch your dollar), remember this simple truth: When your money doesn't feel appreciated (waste away), it won't appreciate for you in return (you end up having lesser).
1. Don't squander its potential
Put your cash some place that can earn more money for you. Don't demean it by locking it up in a pitiful savings account. Let's take a look at what your $20,000, say, over 20 years, could do for you.
1.1 On average, traditional bank savings accounts pay 0.3% (currently) on deposits. Your $20,000 after 20 years will be $21,236 (only grew by $1,236).
1.2 If you had invested this money in a money-market mutual fund, giving you 3-4% yield, you will have $36,415 to $44,451 after 20 years (grew by $16,415 to $24,451)
1.3 If you had invested this money in a high return investment, giving a 15% yield, your $20,000 will be worth $394,390 in 20 years (grew by $374,390)
See how a sum of $20,000 can grow with the right investment?
2. Show your sensitive side
Abusing your money, spending unwisely and being oblivious to bad habits are surefire ways to doom your financial relationship. If you cut back your wasteful spending (eg traffic fines, credit card interest, daily lifestyle, etc).
A monthly savings (in-turn, invested) of $300 over 20 years would give you a total savings of $72,000
2.1 If it's left in the bank with 0.3% interest, the $72,000 is only worth $74,194 after 20 years.
2.2 If it had been wisely invested with a yield of 10%, this $72,000 will now be worth $227,810.
3. Plan for a future together
No doubt you dream about your future, and no doubt that future involves growing old together with your money. That means you need to invest for the long haul.
When you're in your twenties and thirties, you would have more years to invest your money to make even more long term growth.
For example, if a 20-year-old saved just $100 a month in a fund earning 10% annually, he'd have nearly $1.05 million by the time he turned 65. And if he increased his contributions as his paychecks increased, his money could grow to $1.5 million or $2 million.
(source : http://www.kiplinger.com/columns/starting/archive/2008/st0213.htm)
I have heard quite a handful of people asking if they should change their 3 years old car, for a new car. Exploring what a car salesman would say to his potential car buyer.
1) No Warranty
Sales talk : Your car is 3 years old, warranty has run out.
Truth : A 3 years old car is still rather new and even if you do not have a warranty, it is still cheaper to drive on than change car.
2) Lower Installment
Sales talk : You may save by changing to a new car (lesser monthly installment, but prolong 10yrs loan)
Truth : You have paid 3 years installment, how many more years do you have left? It will be cheaper to continue with this installment.
3) Why Pay Government
Sales talk : Your current COE (Certificate of Entitlement) cost $30,000 while it is $14,000 now. Why pay government the extra when you can save with lower COE.
Truth : Import tax is about 170%. How much more will you pay for a new car as compared with the savings on COE?
I read an interesting article and shall share, with the inclusion of your savings that could otherwise be wasted on something unnecessary.
If you long for a more fulfilling relationship with your money (stretch your dollar), remember this simple truth: When your money doesn't feel appreciated (waste away), it won't appreciate for you in return (you end up having lesser).
1. Don't squander its potential
Put your cash some place that can earn more money for you. Don't demean it by locking it up in a pitiful savings account. Let's take a look at what your $20,000, say, over 20 years, could do for you.
1.1 On average, traditional bank savings accounts pay 0.3% (currently) on deposits. Your $20,000 after 20 years will be $21,236 (only grew by $1,236).
1.2 If you had invested this money in a money-market mutual fund, giving you 3-4% yield, you will have $36,415 to $44,451 after 20 years (grew by $16,415 to $24,451)
1.3 If you had invested this money in a high return investment, giving a 15% yield, your $20,000 will be worth $394,390 in 20 years (grew by $374,390)
See how a sum of $20,000 can grow with the right investment?
2. Show your sensitive side
Abusing your money, spending unwisely and being oblivious to bad habits are surefire ways to doom your financial relationship. If you cut back your wasteful spending (eg traffic fines, credit card interest, daily lifestyle, etc).
A monthly savings (in-turn, invested) of $300 over 20 years would give you a total savings of $72,000
2.1 If it's left in the bank with 0.3% interest, the $72,000 is only worth $74,194 after 20 years.
2.2 If it had been wisely invested with a yield of 10%, this $72,000 will now be worth $227,810.
3. Plan for a future together
No doubt you dream about your future, and no doubt that future involves growing old together with your money. That means you need to invest for the long haul.
When you're in your twenties and thirties, you would have more years to invest your money to make even more long term growth.
For example, if a 20-year-old saved just $100 a month in a fund earning 10% annually, he'd have nearly $1.05 million by the time he turned 65. And if he increased his contributions as his paychecks increased, his money could grow to $1.5 million or $2 million.
(source : http://www.kiplinger.com/columns/starting/archive/2008/st0213.htm)
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