Bear coming in 2013..

Top 10 reasons why Singapore property market is heading to a Super Prime Mortgage Crisis induced price crash in 2013 to 2018.
No.10: Negative REAL interest rates:  bank deposit rate at negative 4% real rate  FORCE Singaporeans into buying properties to hedge for housing inflation.

No.9: No long term fixed mortgage rates: Just like those adjustable interest only loans during Subprime crisis, current low SG local interest rates are trapping the buyers of today into false sense of mortgage affordability. If interest rates go up by just 1%, it represents 100% increase over current first year rate of 1%!!!!

No.8: The genuine demand side for SG properties has no further potential to the upside:  Casinos, Resorts, Influx of FTs, QE 1 -3, Tax haven for the top 1%, all those elements have ALREADY been fully priced into the current market. If just only one element falls away, the domino effect will start.

No.7: Strong oversupply of new properties: particularly new mid range condo units at fringe areas, will be coming online with the next 5 years. All sold at record high prices, record low interests and record speculative demand. When all those TOP periods coming due, there will be not enough tenants to be found.

No.6: Falling nominal rents: In today’s rental market in SG, rents for brand new condo units are highly negotiable. Under the pressure of looming mortgage repayments, all the freshly minted landlord will have very little negotiation power to fill their new investment properties.

This is from a blog I picked up from hardwarezone. .. sounds pretty convincing don't you think? :)
http://www.100percentinvestor.com/?page_id=65
But of course, always read with a pinch of salt and whether vested interest or conflict of interest is present. Form your own conclusion. But i do agree everything in singapore (the stock market , coe and property ) all feel quite toppish.. I have been in the Australia stock market, now looking at Shanghai Stock Index ETF and other  H-shares and also the Australian property market in Syndey and Brisbane.

Olam Bonds worth buying?

Got this email from my swiss bank 2 days back. Anyway, this is their takeaway from mgmt meetup. My own gut feel is if I have $250k to spare and taking this type of risk, I would rather go and buy a $500k-$800k condo and wait it out. My risk appetite is not that big on financial instruments that is out of my control. I'd rather risked it on a property.

Our team met the management of OLAM yesterday. Among other things, the following issues were discussed and wish to share with you, hopefully to address some of the concerns  you may have on its recent headlines: 1.    Why did OLAM announce a bond cum right issue, instead of re-considering/cutting capex for  next year
a.    The bond issues was a short term tactical measure designed to rebuild confidence and to end all speculations that OLAM could be running out of funds or liquidity. Even thought this was not the case, the management acknowledged that these things can take its own dynamic and a loss confidence can be very damaging
b.    Board saw an immediate necessity to “bridge the confidence gap”
c.    Temasek has effectively written a ‘put’ on OLAM’s debt
d.    The capex program is under review will be discussed between now and February and changes be done. This is not something which could have been decided over the weekend- nor would such a knee jerk reaction have been either credible or a service to its shareholders and stakeholders. OLAM realizes that as a growing and FCF (free cash flow)-negative company it is vulnerable to these kind of attacks and intends to reduce its vulnerability
 2.    Why this complicated exercise to raise cash?
a.    With these 750 mio, OLAM will have no more funding needs well into 2014
b.    The  main shareholders (Family, Temasek, Verghese) didn’t want to be diluted – OLAM had committed at the last rights issue to shareholders that no new shares would be issued for 4 years. With the new warrant structure, the new shares will only be exercised in 2016 (keeping that commitment)
c.    Still: the board recognizes the need to treat all shareholders equally (as Temasek had signed its willingness to take up the whole issue), hence the rights that give all shareholders the ability but not the obligation to be on the same footing as Temasek.
d.    The cost of the new bond (IRR 8%) is to put the deal on a commercial basis for Temasek. Temasek is NOT giving free money to OLAM. Temasek will also be taking an additional cut in the underwriting fee for the issue.
e.    The new bonds are coming out at a yield of ~8%, around the current levels for Olam papers. In the short run this does provide a new reference rate for Olam papers)
 3.    Leverage
a.    OLAM is having the lowest leverage ratio since listing at the moment
b.    Short term financing is fully collateralized and consists of trade finance for merchandise which is to 80-90% already contracted
c.    OLAM has a 90 days average inventory turn. Per month the company delivers ca. 1.2 Bn SGD of goods, which then settles the lines with banks. In the last few weeks as the crisis has unfolded, lines have been repaid and redrawn with no changes to conditions
d.    No bank has pulled any line or renegotiated the conditions
 4.    Rating
a.    Rating has never been necessary, as OLAM as so far addressed pools of funds of investors which know the company well.
b.    Other companies in the same are not rated either (most prominent: Louis Dreyfus)
c.    Singaporean companies issuing  bonds seldom get a rating as they are well known within its potential investors
 5.    Acquisitions
a.    Sometimes good will is build, but sometimes assets get revalued, namely when company successfully turn around businesses it buys.
b.    MW pictures in the report are misleading and do not depict OLAM assets or operations
c.    Out of 40 acquisitions, 2 didn’t deliver the expected result and where shut down/written down. This has been clearly documented
 6.    Dealing with MW
a.    OLAM has being dealing with main stakeholders on a daily basis since the “crisis” started
b.    Main shareholder incl. Temasek and Family have fully supported the company and the rights issue
c.    OLAM will desist from reacting to each and every comment from MW, as the intent is clearly to create panic and the 133 report content very little facts
d.    OLAM is suing MW for slander/libel in Singapore High court. It has evidence that MW has been selling the report to hedge funds already in May. At the same time short positions started to increase. This raises the potential for ‘insider’ trading and market manipulation – given the current investigation into hedge fund activity in NY this is likely to run as well.
e.    MW also deliberately misled public by announcing a 80 pages report and then delivering 1 days later a 133 pages one (manipulation)
 All in all, this was a heavy crisis for OLAM according to CEO Sunny Verghese. The company realizes that as a public company, having a growing profile, complex accounting in different countries and a negative free cash flow, you make yourself vulnerable for short seller like MW. The company will work hard to reduce piece by piece this vulnerability. It will eventually also become FCF(free cash flow) positive earlier than planned (2016) and thus start creating shareholder value. The company has always been and is profitable, running an operating cash flow of 500 Mio SGD per year. Some thoughts The explanation on why the debt issue cum warrants makes sense to me. if confidence goes, the company goes (especially a leveraged one). At the same time OLAM understand that the markets started to get some issues with its strong and aggressive growth and it complexity. The commitment to reconsider its huge capex is an important step in the right direction. The fact that Temasek and Kewalram group supports bond and right issue fully significantly reduces risk for bondholders for at least well into 2014. I don’t think the bonds will trade up to the old levels so quickly, as they have to reflect a higher level of risk. The shares are another story and will move in function of how quickly OLAM intends to be profitable. As of this moment too speculative to make a proper assessment  However, I think the 6% 2018 in SGD (offered at 91 for 8% Yield)  could be a good carry for diversified portfolios for the next 12  months, looking for a high yielding bond but for clients who have the risk appetite and believe in the company.  The yield offered compensates for the (headline) risks to come Happy to discuss in greater details with you at your convenience and appreciate your thoughts you may have/share with me.  Below are the list of Olam’s outstanding bonds and price indications for your reference: CCY    Issuer                                                  Cpn     Maturity                       Bid       YTW    Offer   O YTW           SGD    OLAM INTERNATIONAL LTD          4.070   12/2/2013                    99.10   9.50     100.00 4.01SGD    OLAM INTERNATIONAL LTD          3.000   25/2/2013                    99.00   8.01     100.00 2.97SGD    OLAM INTERNATIONAL LTD          2.500   6/9/2013                      95.50   9.01     97.00   6.78SGD    OLAM INTERNATIONAL LTD          6.000   10/8/2018                    89.50   8.36     91.50   7.89SGD    OLAM INTERNATIONAL LTD          5.800   17/7/2019                    85.65   8.70     87.85   8.22SGD    OLAM INTERNATIONAL LTD          6.000   25/10/2022                  83.65   8.48     85.85   8.11SGD    OLAM INTERNATIONAL LTD          7.000   Perp                            79.15   13.68   82.85   12.35USD    OLAM INTERNATIONAL LTD          5.750   20/9/2017                    89.65   8.43     90.95   8.07USD    OLAM INTERNATIONAL LTD          7.500   12/8/2020                    92.00   8.96     93.50   8.68USD    OLAM INTERNATIONAL LTD          6.000   15/10/2016                  85.50   10.70   87.50   10.00 

The Automatic Way to a Rich Retirement.

For anyone short of time, a good summary of the book "Automatic Millionaire" By David Bach. I guess the contents will be more on illustrations on the concepts and might be repetitive like all "Retire Rich" books. But it does not take away the key concepts that is encapsulated in the pdf file.


 David Bach outlines the philosophies on becoming The Automatic Millionaire:
! You don't have to make a lot of money to be rich.
! You don't need discipline.
! You don't need to be "your own boss".
! By using The Latte Factor, you can build a fortune on a few  dollars a day.
! The rich get rich because they pay themselves first.
! Homeowners get rich; renters get poor.
! Above all, you need an "automatic system" so you can’t quit.


http://www.irgworld.in/docs/Investing/TheAutomaticMillionaire.pdf

Take a look. Of importance to me is Homeownership. Your home is not an investment, but you will be surprised how you managed to keep up with inflation and have options open to you should you be owning a 4/5 room HDB 10yrs down the road.

Would I buy the CityLife EC?

EC's are the rage of the year and especially the bigger units penthouses which I find a big value for money. You can never find sizes of penthouses in private condo going for that type of pricing. We've heard the tired old argument ECs are not Private Condos. Well, a recent report states the price differential between a resale ECs and a private condo is very minimal. This is what matters, we sell in a bull market.

The most anticipated launch next month will be the CityLife EC. The CityLife plot next to Tampines Trilliant EC was acquired by SingXpress on early May 2012 for $233mil. This works out to about $373 psf ppr. Add in the marketing and construction costs, you might be looking at a similar breakeven price of $600psf per unit in the new development (quite similar to Trilliant's breakeven psf). Add in the developer's profit margin, you might have new units selling for $700 - 800psf.

Can you see why EC penthouses are a steal (always the first to be fully sold out) with their asking prices of $550-600psf (the developer's  breakeven psf pricing). I've explained why you need to pay for the roof in the Tampines Trilliant article and that's why the psf is as such. So , do not worry too much about buyer's unwillingness to buy a penthouse. They are the prized assets of any condos and people will usually be willing to pay a little more for the space especially those who like condo facillities but yearn for "landed spaces" in the sky.

When I looked at CityLife, I found the much hoo-haa 4300sqft penthouses not really a value buy as it has simply too much roof space to be acceptable for me. However, the 2300-3300ish-sqft 5bedrooms (not sure whether it is a penthouse but it is type G4-Gx) are EXCELLENT! To me the layout is very much like a landed in the sky. It is a SINGLE LEVEL OF AWESOME GOODNESS (not a duplex). If you can get those facing the park or unblocked, i'm sure you will sell much easier and faster and more expensive than the inner facing ones.

For selling, the prices that exceeds $2mil will have a harder time selling. Can you imagine a 4300sqft penthouse bought for $2.4mil and trying to sell for $2.8-3mil? Most singaporeans would go for a landed at this kind of pricing. As you might have read, after the CMs, a lot of units that are moving are those <$1.5mil. So, be careful of buying something that is out of the norm too much ($1.6-1.8mil is still alright I feel). Your buyer base will shrink dramatically especially since you can only sell to foreigners after year 10 and locals from year 5 onwards. Local buyers have a choice between your unit and a landed.

The layout is very suitable for multi-generation living with the parents taking one ensuite, the couple taking one ensuite and leaving 3 more rooms for children and study. The living and dining room is situated at a corner with a big roof terrace surrounding the two frontages. You can imagine the wholesome goodness of the roof terrace if you can spend some money to do up the landscaping. It will be something similar to this... a landed in the sky. Just imagine it wraps two corners. Oh.. ignore the phone number, it is not mine.

Just imaging replacing the swimming pool(Citylife is just PES) with landscaping as below. And I can imagine my kids and family enjoying the outdoor space right in the comfort of our home.

It will be shiok! If this came online in February 2012, I would definitely have bought this as I much prefer this to the current Trilliant Penthouses layout. Again, if you are doubtful of your purchase, just look at the condos/ECs around Tampines and Bedok Reservoir. Then see how it stacked up against an EC with 3 shopping malls and 2 MRT lines straight to town. Of course, the arrival of QBAY next year by FEO, Sekisui House and Frasers near Temasek Poly will bring some excitement. They bought the piece of land at $417psf ppr and expected selling price should be around $900-$1000psf guesstimate.

Bloomberg's Foreclouse Spread to Once Wealthy

Interesting article on how Spain's once booming property market forces parents to be guarantor for their children's home and the impending collapse caused everyone to suffer..

http://www.bloomberg.com/news/2012-10-08/spain-foreclosures-spread-to-once-wealthy-mortgages.html

Spanish business people, upper middle class families and their loan guarantors, typically parents of first-time buyers, now account for 60 percent of foreclosures in Madrid, according to AFES, an association that advises homeowners facing repossession. Three years ago, 80 percent of foreclosures were on the homes of immigrants, usually the first to lose jobs and fall behind on loan payments in a souring economy. They now comprise 40 percent of the total, according to AFES.

But it's an interesting read on the events running up to the crash.
Quite similar to what is happening in Singapore now.

HDB , HUDC and DBSS

80% of people are living in public housing and government have to upkeep the housing using taxpayer's money.

Slowly but surely, I think govt will start reducing the percentage of public housing to catered only to those in the need (ie, lower-middle income and below).

This will free up more capital for other expenditures.

That's why i think the DBSS will become like HUDC as the next step. Govt. wants to relinquish their role in using taxpayers money to maintance housing developments. So DBSS might have the option to be privatised and ebloc. 

Then the next step will be the HDB flats. The current way they are recycling capital is thru SERS of Prime HDB location. They sell the SERS land to developers and relocate the SERs owners to more ulu or cost-effective location. You can see 12 storeys of avg 1000sqft can become 25-35 storeys of avg size 800sqft. around 3 or 4 old development land size to exchange for 1 plot of new development land size. Those old flat in ulu location .. most govt have no choice but to do selective upgrading to keep them up till a date when they can ebloc them cost-effectively. And the way to do it now is .. you can see.. They are introducing 60yrs LH. So next time.. your 40yr old HDB .they will SERS and move you to a new 60yr LH.

So, in a way, if you are holding a 99LH condo, it is still safe. We are obviously going towards HK model. But 999/FH are obviously the GOLD Mine.

Natural hedge against Inflation and Currency Depreciation.

From the wisdom of Buffett in a meeting with MBA students from the Richard Ivey School of Business


Q:
Will the U.S. dollar continue to be the world’s safety net?

- There is no question that the US$ will lose purchasing power over time. All paper currencies depreciate. In terms of how it will fare relative to other currencies is less certain.

- Depreciation is sad because it hurts unsophisticated investors and people who trust in the government.

- Best way to hedge against the dollar is to buy a house in a growing area and take out a 30 year 4% mortgage.  You are effectively shorting the dollar.


Remember, home can buy anytime as long as you can afford it. But investment properties must think carefully. I am still looking.

Housing oversupply but sentiments overrides everything..

Quote:

Originally Posted by XXXX Taking 1million divided by 4 per family. Housing required is 250K from 2006 onwards. From 2006 to 2011, a total of 34K of private residential was added. So where do this so called 216K families are living in? IF you look from 2006 to now, rental has jumped like crazy !!!!

You need to figure out how many are white collar, blue collar, construction related.

Souce :- http://www.mom.gov.sg/statistics-pub...ceNumbers.aspx

Pass Type As at Dec 2011
Employment Pass (EP) 176,000
S Pass 113,000
Work Permit (Total) 908,000
- Work Permit (Foreign Domestic Worker) 206,000
- Work Permit (Construction) 264,000

Total Foreign Workforce Around 1.19 million

So, let's work on these figures.
So, Work Permit holders account for almost 76% of the 1.2mil foreign workforce. These people do not need homes as they are housed within dormitories or employers' residence.

So we are left with the S-Pass (usually the service industry and lower wage office workers) and the EPs(the higher wages office workers).

The S-Pass holders usually congregates with each other(most without bringing family over) with min. of 4 pax per unit (but it is 8pax usually for those waitresses and cooks and drivers etc). So, let's divide, 113k S-pass with 4 pax which will give you the max units needed to house them of 113/4 = 28k units.

The EP holders will have some families and some singles, so let's assumed half of them are families and half are singles, so the amount of units needed to be 176k/2 = 88k units.

Adding all up, you need a supply of around 28k + 88k = 116k units.

Do not, this is the demand needed. Not the SUPPLY created during the boom years like you mentioned.

So now matching supply with demand.. we should use the SUPPLY of ALL outstanding units in singapore up for rental (HDB + condos, we'l ignore landed).

Again, googling for some info , turns up .. http://www.ura.gov.sg/pr/graphics/2012/pr12-44e1.pdf

Condos completed units
- available 270.9k
- occupied 254.7k
- vacant 16.1k
- Vacancy rate 6%

Condos supply pipeline
- under construction 49.5k
- planned (ignored this since planned can be deferred but under construtions mean supply will be created definitely).

This is only the condos hor.. i haven't counted the hdbs.

Assumed, one third of condos(33.33%) are rented out while the rest are actually owner-occupied. So there is an availability for rental of 270.9k/3 = 90.3k units available for rent.

Ok, let's assumed only EP holders rent private.. you will see from te previous research, we need 88K units. Now, we have 90.3k units COMPLETED(not counting the under construction ones), so the demand and supply is matched. Surprising... if you look at 88k/90.3k = 97.5% of all rental units available.

The Vacancy rate was indicated as 6%. So, I can only assumed I might have over-estimated the demand while the real figure(the vacancy rate) reflects an oversupply of 6%.

Now, the S-Pass holders.. I am lazy to do research laready... so i just hantam.. 80% of households are living in HDB.. we know roughly it's 5% landed, 15% condos, 80% public..

So, there's 1.44mil HDB available. But let's be conservative and take the 2010 numbers from Mah Bow Tan .
http://www.mnd.gov.sg/reflections_housing/article2.htm
It is 800k HDB households.

So S-pass needs 28k HDB units.. so it's 28/800 = 3.5%. 
Only 3.5% of HDB households need to rent out their flat to meet the demand.


Ok.. so now... I am wondering.. do you thiink there is really an under-supply of housing if govt restricts the no. of EP and WP and SP into singapore for the next few years.. (if they do).

Food for Thought...

What can I say...
China had a stimulus of $800 BILLION in transport infrastructure....
ECB had annouced an unlimited spending on secondary market bonds ..MOT... ...
US will be doing something next week? ..QE

So what do we do now...

Time to ponder..  if governments around the world keep on doing stimulus until the global economy recovers, then the stock market will keep on trading in a big sideway trend of up 10%, down 10% evident since 2010 till the economy recovers.

This is much like the scenario I pointed about a sideway market till the bull market starts.

Now... If stock market ever gets back on its footing and start a new bull market.. Is the property market bull further away?

Interesting chart of the Australia Stock Market from Philo Capital.
If you can read the article, this is the link from an advisor in Philo Capital about his views of Investment as a matter of timing the market, not time in the market.
http://www.theaustralian.com.au/business/opinion/all-still-a-matter-of-timing-the-fatal-flaw-that-disproves-the-time-in-the-market-theory/story-e6frg9r6-1226459312278

Anyway, from the chart, the duration of the big falls to the previous peak last on avg about 7yrs. Since we are into the 5th year of the current one in Australia, I would think australia market represents could give a better relative return as compared to the STI.

That said, timing in the market is still important. I still don't believe the rally and recovery.

Luxury at its best. SC Global really have bested Wheelock this time round.

There is an investment clock ! Believe it!

To those who still doubt investment clocks or timing is everything. Hear from the horse's mouth.

'Chairman of Wing Tai Holdings, Cheng Wai Keung, said: "A number of you have been asking why have we not been tendering for URA projects and we have not been active in the market for quite some time.
"I would still maintain that the correction will be coming and the way I look at it, is that if there is a cycle, if you take away that 2008 temporary drop, you smooth out the curve, it is actually the eighth or ninth year of the rise in this cycle."

So making purchasing decision especially for properties, it is better to time the market.

Anyway, here is an investment clock for commercial properties by an Aussie property guy(might be a bit biased since he's an australian).

Preparing for the Euro Collapse

http://www.spiegel.de/international/business/investors-preparing-for-collapse-of-the-euro-a-849747.html

Banks, companies and investors are preparing themselves for a collapse of the euro. Cross-border bank lending is falling, asset managers are shunning Europe and money is flowing into German real estate and bonds. The euro remains stable against the dollar because America has debt problems too. But unlike the euro, the dollar's structure isn't in doubt.

Good article and worth reading.

Property Prices :- Can this come true?

The last leg has already been performed and now waiting for the drop below it goes up again.. can ? I am not chartist.. anyhow draw one. So if you look at it, the retracement to the 61.8% level will equate to roughly a 20% Drop in prices from current level.

Please ignore the prices in the graph below. I was doing some simple up down to see upside versus downside. But from graph, I found there is a pyschological barrier in humans on the downside after a big upside move. The fall seems to be tagged around half of the previous Rise. Just my own guesstimate. Witchery and heresy!

So, if I assumed this is the top, then we have around 20-27.5% fall before it goes flat for a few years and go up parabolic again.

Here is how much Bishan 8 would be if we adhere to my model.

So , to buy or not to buy? Just cover your backside and the upside will take care of itself. If you can find someone selling Bishan 8 at $900 and below, it is a good buy. Though highly unlikely since those who bought in 1997 would have seen all the wind and tides, this type of 25% fall is sup sup water. And they could have break even with all the rentals collected thru the years. See! Property is such a good investment if you have holding power and will have a higher probability of a positive outcome. If you bought a Bishan condo at $1600psf, a drop of 25% will bring you to $1200psf. And then you will have to compete for buyers searching for value and $900psf versus $1200psf, new vs old 99LH. And for own stay, if you can stomach the downside, what's stopping you? :)

Property wins the crown again.

http://www.bloomberg.com/news/2012-07-31/asian-millionaires-firing-bankers-take-control-of-wealth.html Read the article from bloomberg. I don't know how much clearer the path to riches for NORMAL people is thru' property investment over the long term. I have to emphasize normal people. People who do not possess insider knowledge of an industry, a company or adept at picking stocks. Another relevant article is the number of property billionaires/millionaires in the singapore forbes rich list this year again. For your first million, I think the probability will be higher from your property investment. But of course.. like stocks, you need to search for the one that is undervalued with respect to the others. It must be in a good growth region, etc etc.

SGD Appreciation

I read this guy's thoughts from forum and I find it's very enlightening and just got to put it down here for future references.

Big problem for Singapore : Stronger Sing Dollar and Higher inflation...

Happily I go to Malaysia change my S$1 to $2.52+ ringgit every few weeks to spend...however, some Singaporean ya-ya-papaya think that strong S$ means Singapore economy more powerful or gaining strength on Malaysia and so on. This is the view of IGNORANT people.

1. Why did MAS allow Sing$ to go up so much despite negative GDP growth last quarter?

There is very high inflation in Singapore and raising the S$ makes the imported component of the CPI lower thus lowering the overall inflation figure to 5.3% which is already quite bad. Imagine at 6% our inflation will be higher than 3-month spanish bonds!!!

This is a sign the Singapore govt is losing control of domestic price inflation and using the S$ to make imports cheap to hide inflation pressures.

2. Our export sector is hurting and property bubble is prop up to keep us out of recession? 

Why you think MAS allow 50 year home loan. If property sector shrink immediately Singapore will be in recession because export sector is weak. The govt is just playing the number to prevent a recession by artificially propping up property sector.

3. As for some people think S$ strong almighty against the ringgit means Singapore BETTER

http://www.tradingeconomics.com/malaysia/inflation-cpi

Actually Malaysian inflation rate is 1.7% vs 5% in Singapore. Malaysian economic growth is 5% vs negative for Singapore last quarter.

The way Singaporeans can gain from this is stronger Sing$ is to go to Malaysia to spend their money. But you cannot spend every S$1 in Malaysia no matter what most of your money has to be spent n Singapore unless you MOVE TO MALAYSIA. That means you're exposed to high inflation while Malaysians are not despite their weaker ringgit. The weaker ringgit means Malaysian exports are stronger.

4. Strong S$ despite strong outward remittance flow=high dependency on capital inflows of hot money, tax evaders and money launderers

Half the workforce is foreign. They feed their families back home in Philipines, India and China. This means there is high remittance flow as these workers convert their salary to foreign currencies putting downward pressure on S$. Our trade deficit is very large.

To balance our accounts we depend on rich people from India, China, USA to shift money here to avoid tax in their home countries. Some of the money (like Ma Chi's) are of unclear origin. This means Singapore is forced to keep taxes on wealth artificially low even as income gap balloons. If billionaires stop parking their money here, the merry-go-round stops and things can sink FAST.

Singapore economy is propped up artificially. It is not healthy. We have no Samsung, Acer or HTC. We are flushing the economy with all sorts of money avoiding taxes, running from their own govt. This means we try to makan the highly corrupt western banking pie as western banks fail - this is likely done by deregulation and allowing more shadow activities in Singapore. If Obama wins again, he is likely to shut down this type of parasitic business growing like cancer and breeding the most foul type of financial businesses and humans.

Ok...next week I happily go spend my S$ in Malaysia...but I not so gong kia to think it is because things are so steady poon pi pi in Singapore.

Last edited by TopSageTemp; Today at 08:42 AM.

As for the investment type, I would still prefer properties.

Market pricing in QE of Europe and US

The market price action is leading me to believe the market is pricing in the prospect of QE by both US and Europe.

So, anything less will be a correction :)

Which brings me to the VXX again. I have observed VXX seem to have reached a bottom as yesterday was a positive session but VXX went up instead.

Just my guess.. so as long as the QE do not materialised, it's time to put on VXX.

Doug Kass : A delicate Balance

Great summation by Doug Kass on the intricacies of managing money. Think for yourself what if you are wrong. Don't be brainwashed by advertisment telling you to invest 80% of your money into equities and what nots, if you are young and you can afford to make mistakes. It's not the way to run your money management.

http://www.thestreet.com/story/11597019/1/kass-a-delicate-balance.html

We should aim for more balance and consistency in our portfolios. This means if, in a normal market environment a 60%/40% stock/bond fix is in line with your investment objectives and risk appetite, then a more uncertain investment backdrop (such as we face today) should have a stock/bond guideline of some lesser amount with a cushion of cash -- perhaps 45% stocks, 30% bonds and 25% cash.

Thinking about the safety of your money

MF Global Trustee Can Transfer $520 Million to Customers
Some of MF Global Inc.’s commodity customers can get an immediate distribution of $520 million, or about 60 percent of their cash collateral, a judge ruled.
U.S. Bankruptcy Judge Martin Glenn yesterday approved a request to transfer the funds from James Giddens, the trustee overseeing the liquidation of the brokerage. The distributions may begin by Nov. 24, said Kent Jarrell, a spokesman for Giddens. The parent, MF Global Holdings Inc., filed for bankruptcy to apportion returns to creditors. Nov. 24 is Thanksgiving Day in the U.S.

At least 22,000 customers who only had cash in their MF Global accounts as of the time of its bankruptcy on Oct. 31 will get 60 percent of their $869 million on deposit. The transfers will now include investments considered ‘‘cash equivalents,’’ such as Treasury bills. Glenn urged the trustee to seek a similar solution for customers who have a mix of cash and open positions in their accounts.

The cash distribution approved yesterday follows a first transfer of around $1.5 billion in 14,500 customer accounts to other commodities futures merchants, and the total number of commodity customer accounts is around 38,000, according to Jarrell.
About $593 million of MF Global customer funds, or 11 percent, are unaccounted for, according to a person with knowledge of probes of the firm’s collapse. Some customers had objected to yesterday’s motion, saying they should get closer to 80 percent distributions given the alleged 11 percent shortfall.

Separately, Scott D. O’Malia, a CFTC commissioner, said MF Global’s frozen funds have affected confidence in the markets and customers in Australia, Canada, Germany,Singapore, the U.K. and other countries. Although the trustee has been working to return funds faster, it still hasn’t happened quickly enough, he said.
‘‘The livelihood of market participants has been dangling by a thread for over two weeks,” O’Malia said, according to a speech posted on the CFTC’s website.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
For more, click here. http://www.bloomberg.com/news/2011-11-18/fdic-nominee-investor-fraud-mf-global-sandoz-compliance.html

This was the news that has set me thinking about the safety of your money in nominee accounts or trustee accounts in global banks. If there is a crisis, you never know which one of the banks did something stupid. If not supported by the government, the financial institution will declare bankrupt and returned you a pro-rated amount of your CASH. Strange... but you are individuals helpless against the might of the financial regulators and institutions. 

The current europe crisis has made me even more jittery about the safety of my money in the wealth managers like UBS and CS. They are very close to the epicenter of europe and although I am "re-assured" of their strong credit ratings. When it comes to the crunch, I think I can only bail myself out to the safety of the Singapore banks. Though, it is just transferring the counterparty risk from a foreign bank to a local one. 

It's no wonder people are buying properties. You get the title deed(if fully paid), if not, a caveat is lodged against your deed. But it's alright, you still control the property. Maybe it's time to rethink the strategy of placing so much faith in the financial system and move more towards the real assets. Unfortunately, the timing might not be the best now.. lol.. 

Thinking ..thinking... thinking...

Greece Exits the Euro

http://www.bbc.co.uk/news/business-18074674

Very nice summary of the impact. Just click on the different icons.

Now think for a moment.. Put yourself in the same situation.

If you are a Greek with money in the bank, when you hear talks about Greece exiting Euro, what would you do?

This is a death spiral..  Talks like this will just forced more people with the means to draw money from the bank and moved it somewhere else. The 1st stage of panic is already set... Mayhem cometh... sooner or later..

If you are one of the banks in Euro supporting the Greeks and other european nations' debt.. what do you think.. your shareholders and others might start dumping the shares in anticipation of the mayhem.. this is the 2nd stage..

If you are one of the other countries with similar debt problem as greece, what will your stakeholders think when they see 1st and 2nd stage happening... They will stop lending too..

Onlookers from around the world.. comes next.. they will start examining any linkages to the Europeans (good or bad) and may do the same.. Dump first..question later. Remember Lehman & Bear Sterns? Local banks were reported to have some linkage to them in 2008 and almost immediately, you can feel the fear in the market even though alot of companies are not directly related to the loans.

Battle Station!

http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/?smid=tw-NytimesKrugman&seid=auto

Some of us have been talking it over, and here’s what we think the end game looks like:
1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.
3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.
4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:
4b. End of the euro.

Food for thought. Sentiments supersedes all fundamentals. Reduce equity weightage if you are fully allocated. I'm 12% in equities and am not reducing my weightage. Probably will increase my VXX position (avg cost of $17) if the scenario played out.

Risk/Reward for the VXX trade is around 1:18. If it ever goes to august 2011 low and theorectically , VXX can go to $55, this will be a 300% return. If nothing happens and VXX slumps back to $15, it will be a -12% drop(and I may get rid of it).

Asia property investment

Disclaimer : My rambling thoughts in my mind on what I should be doing in the current market environment. There is no research done for this rambling and it is just what i perceived to be happening and might be incorrectly construed. But I am basing my investment decision on this.

1930s Great Depression - govt has limited ability to stimulate economy with fiat currency as it is tied to gold. Period of Deleveraging and deflation.
1970s Bretton woods, gold peg is removed. Fiat currency is unlimited in quantity and is only limited by the willingness of govt to stimulate and investors to accept. Leverage makes sense because inflation is here to stay.
2009 Bubble burst. What changed? No gold peg, No alternatives for global investors and have to accept global govts willingness to print money and inflate their way out of the debt. Will deleveraging happens? Yes, western corporates are deleveraging, western homeowners are deleveraging. And western govts are deleveraging  thru' Inflating their way out of debt. What to do now? Inflation is here to stay. Property is the way to go in Asia.
Why ? A global rebalancing of funds has been taking place. High networth investors are deleveraging portion of their western portfolio and diversifying and leveraging into asian portfolio. Look for the countries making huge gains with good infrastructure and governance similar to western models namely HK, Singapore and Australia.

Why properties? Why not equities?
Equities will be good. However, properties will be even better because of the leverage effect and we are leveraging up again after the 1997 asian financial crisis. Crisis will never be forgotten by the ones who were affected. Clob shares ..deep mistrust of malaysian equities by those affected investors. Property investors who have leveraged up in the 1997 crisis will never again performed such aggressive leverage. However, History have a tendency to be forgotten by those who have never experienced it. The 20yrs old who were not involved in the crisis have becomes 30s and have investment power and are the new crop of investors leveraging up. Check around and you will see alot of 30ish property investors(and gurus) in Australia, Singapore and HK. If the leverage is increasing in Asia, property will be the game in town for the next decade until it burst. Why not US or Europe? They have experienced the property crash in their home country this crisis(much like 1997 asian crisis, asia property remain in a lull till 2006), the current batch of western investors have learnt their lessons and the new batch won't be coming online till 2019. So, thereotically, asia have another 7yrs before it reached its peak and crashed.

What about Japan? They crashed and never got up. So USA and Europe took over and went up instead. History has shown while one side deleveraged , the other side will take up the slack and leveraged up. Added to the fact that fiat currency is unlimited in supply. Take a look at the Nominal GDP(PPP) of the world based on US Dollars since 1980s.

You can see it is a straight line up even if some countries were deleveraging and others were leveraging. This time is no different. The system cannot deleveraged. Once money gets out into the system , it will stay there in the form of inflation as we see it. GDP as we see it is money supplied into investment and public spending and etc etc. So, it will always be a straight line up , with occasional downturn owing to temporary curb of investment and spending.  However, even then, it will not be deflationary because inflation have meant your $1mil investment in 2007 might now need $2mil to fulfil. We do not need to look at Real GDP as everyone is spending money in NOMINAL Terms. Can you tell your property seller that the real value of the property is actually $1mil , so I am going to give you $1mil. Nope. They take nominal value of $2MIL.

Have you noticed that since 2006, property experienced a surge and since then, property have essentially doubled in value. This is because of the QE by most major economies. Would it doubled again? Depends on how much more QE there is. Looking at it, USA ,Europe, UK and Japan still cannot escape the fate of more QE. There was an article by Krugman that shows the failure of austerity on contracting economies. It is a vicious cycle down. To solve your debt problem, the only way is to inflate your way out of debt. The monetary supply will also find its way into other parts of the economy. Now, the new form of QE might not be to the financial institutions as they might be adequately capitalised. Governments might start QE to infrastructure and public spending to re-invigorate economies. Something similar to what Singapore is doing now. We have public infrastructure projects lined up all the way till 2020.. it's a lot of money going into the economy.

This is the chart I found of how much money there is in the world and you can try overlaying singapore property prices into the graph and see whether it is more or less co-related. Look closely at the figures at the start of 2006 and then fast forward to around 2010. Did you see the figure doubled? It has been continuing on an uptrend ever since. Our market has stagnated abit because of all the property Counter-measures. However, it seems beginning in April, I see more people are going back to the showrooms.

Just yesterday, government have announced it's inevitable we need more PRs and indirectly means more foreign workers(on EP and such). Because if you need 25k PRs, you will have to hope and select from the pool of 250K  100k EPs and foreign wokers(a ratio of 1:10 1:4). Their intention is yearly right? So, 4 yrs, you will have 1 million 400k  more foreign workers(talents/professionals/blue-collar) and out of this, 25k hopefully will convert to PRs and then to citizens.

What does this mean? Barring any global crisis, More demand for housing. The massive supply coming in 2014 will not be a problem anymore. PRs who are carefully selected to be citizens and have more purchasing power will choose private properties and I'm sure condos is good, but LANDED is even better! :) You go drive around Wilkinson Road and you will find a humongous Roman Architecture(some say looked like Indian Taj Maha). You drive around Meyer Road and Goodman Road , you will find new landed spruing up. From what I heard from grassroot chairman, most are bought by PRs turned citizens.

Huat ah!

Singapore Perpetual Bonds Comparison

This list is not exhaustive but merely a summary of the key things you need to look out for in Perpetual Bonds. By the way, Ascendas (not the reit, it's the parent company) is launching another perpetual bond with whisper rate 5% now. Also, do note that when going into perpetual, try to get those that have step-up after 5 yrs or 10yrs and not fixed forever like Cheung Kong (CK Bond) even though it has an earlier call date at 2016.

Loans & Liabilities

How I make use of assets to buy more assets.

There is possibility to loan at Sibor + %spread (commonly around 1%).

All you need is for the bank to recognise your assets(cash, property, etc) under the bank management.

For private banks(eg, UBS, CreditSuisse, DBS Pte bank, SCB Pte Bank), it is called a credit facility and they charged sibor+%spread. Currently, it is around 1.3-1.5% pa. What we do is we pay only the interest, not the principal and the term of the facility can be renewable weekly, monthly, yearly etc. For the retail investors, I believed anyone with access to priority banking, my friend is using CIMB  offers that.  

So for a sgd bond, you can borrow 1.5% sgd loan and buy 5.5% corporate bond to yield 4% spread. The risk therefore would be the rising interest rate and a perpetual would actually be a bad investment. This strategy would be better using short duration bonds like 3-5yrs.

If you are buying USD bond, it will be the same. Borrow USD fund at 1+% and buy the 5+% usd bond. No exchange risk as far as I know. Apart from when you take the income in USD and you need to convert to SGD, but that is income that is earned from the spread and you could always continue holding onto the USD or use the USD to buy US stocks or usd gold/silver .

Of course, you are not restricted to buying bonds. You can also buy blue-chip dividend paying stock paying >5% and paying the 1.5% interest cost.

Have you ever wondered why some property agents will tell you a buyer paid a million dollar property in full CASH. One possibility would be he was using a credit facility as he is expecting to FLIP the property(during the flippant days). He can hold for 1-3yrs for the TOP too and nett off the proceeds. No need to apply for bank mortgage loan. Or have you seen the buyer who paid cash again for that ferrari or the mercedes.. One possiblity is again using the credit facility. But in most cases, they will pay back very soon (within the year) since their passive income can generate that much cashflow to fund the purchase, but they want the car NOW instead of 12mths later. Possibilities are endless, but whether you dare to do it. I am not too daring..hehe.. 


Disclaimer : Not much leverage here as I still feel more comfortable leveraging for tangible assets. Prudent use of leverage is recommended. For most HNWs, they have at least $1 in asset to back up their $1 in loan. So they can pay back and take a lost(if any). So if you are retail and intends to do this, I think it's also better to be this "safe' and not depend on the value-at-risk model to determine your leverage.

For liabilities like cars, holidays, I will use the cashflow generated from my portfolio to fund the loans (as long as it make sense in terms of interest rate spread). My motto for liabilities , "Never touch the capital, always use the cashflow".

For cash-generating properties, I am very comfortable leveraging 80% as they are essentially self-paying assets. Make good use of the debt option available to you.

Tampines Trilliant Feng Shui

Update from another fengshui site.. Seems like those not ranked are undesirable within the development.

Credit to : http://www.geomancy.net/phpforum/article.php?bid=2&fid=43&mid=31750&s=2

Extract from Feng Shui Case Study

Using the Tampines Trilliant as an illustration, this development site is well-positioned with respect to the Serangoon Harbour in the Northeast, which could serve as the Main Water Mouth (水口).
With the Main Entrance entering the site in the Southeast direction, this ushers theGrowth “Water” (长生水) or prosperous Qi into the site and residents would benefit from this formation which conforms to one of the 4 Major Water structures in San He Water Assessment Theory (三合水法). With reference to this formation, it denotes nobleman help, good recognition, status and reputation. In addition, it would also foster good people luck (旺人丁), especially will prosper the eldest Child or Grandchild.
With the Tampines Bike Park and the Sun Plaza Park in the North and East of this site respectively, this could conform to the Direct and Indirect Spirit (大零正) Feng Shui Principle. The site is timely (当旺) and enjoy good Feng Shui for the next 30 years.

http://knowyourlifestory.blogspot.com/p/case-studies-on-selecting-good-property.html

HUAT AH!

Why I bought the Trilliant?
http://thewealthjourney.blogspot.com/2012/02/why-i-bought-tampines-trilliant.html


P/S : Just to cater to the folks who got directed here because they googled for "Tampines Trilliant Feng Shui". I saw the search stats. :p