14
September
2009
Something about the recent statement about the fact that HDB is affordable for the singles in their 30’s irked me. Link here http://singaporeenquirer.sg/?p=4619. Of course his idea of “affordable” is that the person in question spends 29% of his income on housing.
But even his calculations are misguided. In order to be eligible to buy a flat, and get the subsidy of $11k that Mr Yap mentioned, the person in question need to be over the age of 35. But when a person is over the age of 35, the amount of his CPF contribution that goes into his ordinary account ( and as such can be used to finance his HDB mortage) goes down. For the example given, the in the ordinary account to be used monthly is $525.41, not the $575 that our Deputy CEO mentioned.
Of course the difference is only $50, andf it doesn’t make a difference to the calculation of 29% arrived at. But either our HDB head is not familiar with his own policy with regards to singles, or more likely, he is not familiar with the fact that contributions to the ordinary account goes down with age.
And who can blame him, such small variations to his own cpf account, would hardly matter to him. For someone of his pay scale, he is likely to have hit the CPF contribution ceiling anyways, and the amounts in his CPF accounts are inconsequential to him. Reminds me of a certain minister of state who once claimed that he receives his CPF statement monthly
Only someone like the person used in the example making a measly $2500 a month, would notice that his disposable income is smaller by $50 and would fall futher that as he grows older.
Notice also that in the example used, the 3 room flat in question is $200k, a simple search on the HDB site would tell you that the median 3 room flat cost $240k ( average of about $246k). Even if we take the benchmark of affordability to be 30% ( and 30% is highly debatable), that would definately blow it.
What we have then is that, someone of average income, would need to take the maximum of loan of the maximum tenor, and still not be able to afford ( assuming 30% benchmark) an average 3 room flat.
Posted: Local Politics, Money
18
March
2009
Seems like after after 5 sessions of the stock market rally, the bulls are back to play, and you can’t turn anywhere without someone telling you that if you don’t buy now, you’ll miss the boat.
Just 2weeks back, all major news sources were still busy tripping over themselves trying to come up with a more dramatic comparison for what this recession is equivalent to. Consensus then seem to be that this one is worse than all previous recessions with the exception of the great depression.
So what has changed in the last 2 weeks for everyone to be so compulsively optimistic? Nothing.
As far as the I can see, banks are not suddenly opening their vaults, what’s left of it, to borrowers. No one as yet has implemented a way to take toxic assets off the banks books with further pain. Property prices are still 50%-100% higher than at the start of the last bull cycle. And manufacturers are still firing.
I have no doubt that we’re a lot closer to the end of the bear market now than we were 6 months ago, and people now are more focused on solving the issues now than they were then, when everyone was running around in a daze.
But really this rally looks to me like it’s driven more from greed than any sort of excessive optimism in the world.
Posted: Money
7
November
2008
“Senior Minister Goh Chok Tong, urging those with the means to continue spending, or the economy ‘will really go into a recession’ ” - Straits Times 07 Nov 08
So what do you call contraction for 9 out of the last 12 months?
Talk about shifting the blame, so if we ” really go into a recession” . It’ll be our fault because we do not spend enough, ok? It’s nothing to do with a government induced housing bubble or the global financial crisis, that we’re not sheltered from.
Posted: Local Politics, Money
1
November
2008
As words like global financial crisis, credit squeeze, bank rescues get thrown around more and more often. There is no dooubt now that we’re in a global recession scenario. The only question left is just how bad it’ll get.
It’s interesting that on the same day, while the PM tells us not to over react, SM Lee was saying that the optimistic scenario was a recovery in 3 - 5 years, if the financial markets do not malfunction. That is a very very big if at this point in time.
I don’t know about you, but I’ll rather believe the father than the son.
Now they’re all sorts of reports out there on the cause of the recession, and what needs to be done to prevent it. The people are blaming the poilticians for the lack of regulation, the politicians are all blaming the greedy bankers, and the bankers are all too busy trying to not lose another more money.
The blame game is never ending, so I think it’ll be interesting to just step back and look at the macro situation from a global and slightly more academic stand point.
The cause of the crisis is an asset bubble burst, most notably a property market collapse. First rule in any market, if it can go up it can go down too. A lot of asians learnt that the hard way during the 97 Asian crisis. The Americans are learning that lesson now, and the Chinese are only starting to figure out that they’re not immune too. Fact is most people need to learn the lesson themselves, learning from other people’s mistakes just doesn’t happen.
Sure credit derivatives plays a part in the whole crisis, it allowed banks to carry on their lending to far more people and for longer than they otherwise would have, by allowing lending banks to sell the risk away to other banks and investors. Make no mistakes about it, the buyers of these credit linked products know what they’re getting into, as they’re professionals with their own systems and models to value them. Of course retail clients are another matter all together.Credit derivatives was a tool, and it played it’s part exactly as it’s creators intended it to. It diversified the risk of those lendings, far and wide, so much so that swiss and chinese banks are paying the price for an american mortgage default. And ultimately by spreading the cost of the collapse, it made sure that the world shared in paying the bill for a lot of the excesses in the US markets. But the rest of the world is not a victim here, the world cheered and poured money in to the US markets when it was hitting new highs, sharing in the massive wealth effect of the bouyant market.
Sure bankers were greedy, but that’s the nature of finance, and a time and again, even the smartest brains in the world, with the most sophisticated models, will not take into account the effects of contagion. It has been proven time and again, that models are not infallible. A lot of banks and funds got burnt when their models blew up.
But blaming the recession on bankers or credit derivatives is like blaming the tree, when someone drives into a tree. It’s not the cause of the problem. The tree was involved in the accident, but the cause of the accident is the driver.
The cause of the problem in this case is leverage. Not just bank leverage, when banks lend out 40 times what they have in liquidy cash, but also consumer borrowing. It takes 2 hands to clap. And while banks were reckless lending, consumers were recklessly borrowing as well. It has been a known fact that US consumer household debt has been at an all time high since the start of 07. The consumer was addicted to debt, more precisely it was addiction to buying.
Not just in the US but everywhere in the world, economic growth has been fuelled by debt. Debt like any medicine is nto a bad thing when it’s used judiciously. But when all economies and companies are racing for higher and higer growth rates, you have to keep adding debt to achieve the ever higher targets. After all stock prices will only go up when your growth and profits go up, the market does not reward a flat profit, even if it is a good one.
In the end it’s the nature of capitalism, it’s prone to booms and burst. It will overshoot both on the upside and the down side. Capitalism certainly has it’s flaws, and it has no moral and social compass, so it rewards and punishes indiscriminately, but it is the most efficient system known to us so far. The alternatives ofsocialism, or in the extreme communsim, have over time proven to be less successful. Over the last hundred years, this capitalistic system has shown that it does create wealth and better the lives of the people in it, of course it has also recorded some spectacular crashes and in the process destroyed and disrupted a lot of lives but over time more people benefited from it.
And that is why it was heart breaking to watch Alan Greenspan apologise for his free market view. Sure he had his faults, and was at times deemed too market friendly, but no one can say he did not give fair warning on the troubles as far back as on 2004. Sincehis famous ” irrational exuberance” speech in the 90s, years before the dotcom bubble burst, he had always maintained that he could warn of market excesses, but that he could not stop them, and that personal judgements as to when and how to interfere will always be flawed. He did warn that when an bubble deflates, like is going on now, governments will have to step in to provide social support, because that is the role of the government. Purely from a logical stand point, I can’t fault him on any of those arguments.
So who is to blamed for this particular recession? I don’t think anyone really is to blame. The political witch hunt that is going on globally, and particularly in the US, is a propaganda exercise, to be seen as doing something for the people. Afterall giving the masses a villain to crucify, is always more crowd pleasing than actually doing something constructive, but it completely misses the point.
It is the job of the governments now to provide social support to it’s citizen and tax payers to ensure that they can ride out this storm as best as possible. Because these citizens were the ones who voted them into power, and paid their taxes into the coffers of the government, precisely for a scenario like this.
Posted: Money
20
October
2008
“The global financial crisis came without warning, like a tsunami” SM Goh 19 Oct 08, Straits Times
This from the head of the MAS. If Singapore is supposed to be a financial hub, how could the central bank not be aware that the banks operating on it’s shores have been struggling for the last year?
Posted: Money
2
August
2008
I can usually brush off most of what is in the local news as silly, irrelevant or just another piece of government self advertisement. But occasionally I’ll come across something that is outright dumb.
http://business.asiaone.com/Business/Story/A1Story20080731-79925.html
The whole world is currently dealing with inflation, and everyone knows that it’s caused by oil and food price spikes. Yet our esteemed government is somehow implying that the pay rise of workers is somehow causing or will contribute to the problem. This is the same guy that said previously that it’s alright for rice price to spike by 30% or more, since we only spend a small portion of our income on rice….. hmmm… yes.. I can see the raionale.
Even if we believe that inflation is only 7.5%, that still means that all else being equal, everyone just got poorer by 7.5%. When SMRT and Comfort Delgro can go about hiking fares, citing higher oil price, to keep their profitability inline, and thereby compounding the inflationary issues, the average worker is supposed to such it in and take the wage cut for the sake of keeping headline inflation down?
Do we have this backwards?
Inflation is supposed to be a measure of price rise for the common person, so that he can measure his real income. Not just another government statistic. Like how GDP is supposed to be a measure of welfare of the people and growth in quality of life, not a measure for how much civil servants’ pay hike should be.
This country must be the only place on earth where the head of the workers “union” tells the workers to live with a lower real income and a lower quality to hold down a statistic. In which other country do we see the government’s answer to fighting against inflation to be hold down wages and “moderate” job growth. That’s like stabbing your right leg to take away the pain you’ll feeling in your left leg.
This particular inflation has 2 sources, oil and food. As mentioned in a previous post, Singapore had the third most expensive petrol in the world, before this recent spike. Again why so, and could something not be done about it. (Let’s not forget that Exxon just reported record profits yet again)
It seems to me that over here, the government seem to value profitability a lot higher than the welfare and quality of life of it’s people
Posted: Money
12
July
2008
I’ve always mantained that the fuel surcharge by the airlines was a scam, it’s just like any other price hike, but somehow by calling it a fuel surcharge, the company is pushing the blame on something else, as if it’s not their intention to raise prices, and painting picture as if they are somehow victims too.
I guess profit maximisation by any means is fair game.
Now it seems the taxi companies have caught on as well, and are in on the act.
“ComfortDelGro said yesterday the surcharge is to help cabbies mitigate the unrelenting rise in fuel prices.” - AsiaOne 12 July 08
They almost try to pass it off as charititable donation to help the taxi drivers cope.
So the price hikes 6 months ago was not enough? Who wants to bet that ComfortDelGro will report another profit growth this year?
I have nothing against the taxi drivers personally ( other than how some of them drive!!!) But a monopoly operator, squeezing out yet even more profits, while providing what is supposedly a public good is truely disgusting.
Yet another reason to keep boycotting taxis.
Next up, hikes in bus and train fares.
Somehow I don’t see a pay hike coming up to help cope with the runaway inflation.
Posted: Money
14
April
2008
According to the department of statistics in Singapore, average household income in 2007 was SGD 6,280 and that was a 9.7% increase from the year before. Given that headline inflation is at 6.7%, it looks like the average household was better off.
The median income from work per household was SGD4,870, up 8.2%, so the most households should be better off as well.
Now the number of members in a household is of course variable from year to year. So whether the household is actually better of or not, after taking inflation is subjective.
In the top 10 decile household, the income per member is SGD 7940, assuming a typical dual income family, that would make the household income close to SGD16k, up 13.5% from the year before.
Is that the reason why orchard road is so packed on weekends? Or the cause for there being so many more flashy cars on the road these days?
Makes you wonder what everyone everyone was winching about.
Sure the Gini coefficient (income inequality) is at an all time high, but hey, real income, according to the government, is still rising, ok? Especially after the GST offset ( read free money) from the government to help the poorer households.
Somehow I get the feeling the statistics makes better reading if you’re a foreigner than if you’re local.
Posted: Money
9
April
2008
Yes we know that the price of petrol is rocketing globally. We hear the americans screaming about not being able to get to work, american politicians are complaining about all manner of hardships and inventory levels are watched so closely that small changes results in huge moves markets. You would think that US has the highest oil price in the world, and that the spike in price is only an american phenomenon.
But did you know that it is in fact Singapore that is close to the top of the list when it comes to petrol price?
A quick check online reveals that Singapore’s tax on petrol at 29% is not much higher than that of other countries. Although unlike in the US and Japan, there is no stated specific use for the tax revenue from petrol.
We can make exceptions for most of the other asian countries because a lot of them have outright fuel subsidies.
So why is the price in Singapore double of that in the US? Removing taxes and subsidies as price distorting factors, we are left only with market mechanisms.
Given that Singapore is one of the major refinaries in the world and along a major shipping route, distribution cost cannot be a factor. Price of the input, crude oil, is a global commodity, and thus uniform.
The only factor left is the profit margin, and for the profit margin to be that much higher here can only mean that the suppliers have extreme pricing power. The only way the big suppliers can achieve that is by collusion.
The fact that large suppliers would come together to price fix is not really a suprising one, what is suprising to me is that our government does not seem to be concerned about it.
Despite Case having made a complain against the rate of price adjustment,http://www.straitstimes.com/Free/Story/STIStory_206282.html, no official action seem to have been taken to look in the pricing policies of the suppliers. Although arguments that Case is putting forward are valid, strength of singapore dollar and fall in crude prices, it is understandable that prices are sticky downwards.
Case, in it’s rush to confront the oil suppliers, seemed to have missed the point, and that is, why do oil suppliers have so much power to determine price in the first place.
It is a clear sign of monopoly power. Maybe in Singapore where monopolies are common place, people have stopped noticing that it is wrong and exploiltative, and thus have stopped reacting strongly against them. Maybe the ideas of free markets and competition are so alien that, people neither expect nor demand for them.
Taking the argument one step further, monopoly power on such a scale is extremely difficult to achieve, and in most cases can only be granted by the government. In this case, I cannot see any other way that oil companies in Singapore could have gotten it without the blessing of our all powerful bureaucracy.
Why then would the government allow foreign companies to knowingly exploit it’s own citizens? Do ministers not drive cars? Here, I see only two possible answers, excluding complete incompetence, both of which are not too appealing.
First, we only have to look to Jurong Island, to know that the government is at the mercy of the large oil companies. The revenues from the refinary operations, the government would weigh, is far more important to the GDP of the country than the wallets of it’s citizens. Thus in order to apease the oil producers, they would turn a blind eye to it’s pricing policies domestically.
Second, the bureaucracy is somehow benefitting from by granting the companies the pricing power. And that is an even uglier conclusion.
Posted: Money
