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?
Sunday, May 25, 2008
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.
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