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The Partial Myth of the "Asset Rich, Cash Poor" Singaporean

Consider this scenario.

Mr Tan Ah Kow is a Singaporean in his mid-30s. He has about $80,000 in his POSB savings account, and about $80,000 in his CPF Ordinary Account.

Every month Mr Tan needs to pay about $800 for his HDB loan. Should he pay with his POSB money, or with his CPF money?

Note that Mr Tan's CPF OA earns interest at 2.5% per annum. Meanwhile, Mr Tan's POSB money earns interest at a much lower rate of about 0.125% per annum (20 times less).

If this difference in interest rates was the only consideration, Mr Tan would surely use his POSB money to pay his mortgage. After all, his POSB money is earning so little interest.

However, in reality, most likely Mr Tan would use his CPF money to pay his mortgage.

Why? Because Mr Tan wants to reserve his POSB money for all his other financial needs and purposes. In other words, Mr Tan wants to maintain his core liquidity.

Mr Tan also knows that if he doesn't use his CPF OA money to pay his mortgage, then all that money would remain largely locked up until he reaches the age of 55 years.

Or 62 years. Or 65 years.

(Or maybe 85 years, depending how the government decides to fiddle with the rules, over the next few decades).

In other words, Mr Tan's CPF funds are subject to long-term political risk. The more money Mr Tan has in his CPF Ordinary Account, the greater the political risk he is exposed to.

Mr Tan may not know the technical terms - such as "core liquidity" or "political risk" - but Mr Tan is not stupid. The extra interest he could earn on his CPF monies (in comparison to the interest on his POSB savings) is almost certainly not going to be sufficient to entice him.

Almost instinctively, Mr Tan will seek to spend as much of his CPF money as he can, on his home loan. In fact, Mr Tan may even use his surplus CPF OA funds to prepay a large portion of his HDB loan.

Meanwhile, if Mr Tan is a prudent man, he might also save for his retirement needs, by investing some of his POSB savings in shares, bonds, ETFs, unit trusts, investment-linked policies and the like. With some care and a little luck, Mr Tan can build up a tidy sum of money over time, to meet his retirement needs. It's just that this money won't be coming from his CPF account.

* * * * * * * * * * *

If Mr Tan's case is common among Singaporeans, then what does this say about the CPF? Possibly, one could draw the the following conclusions:
(1) The CPF is a mandatory savings scheme, not so much for your retirement, but for your housing needs. Thus the success of the CPF scheme should be measured not necessarily by the number of Singaporeans who can retire comfortably with their CPF savings, but by the average age and the number of Singaporeans who own their own homes and have fully paid up their mortgages.

(2) If you actually expect your CPF money to cover your retirement needs, you could be seriously screwing your own financial health. Instead you should be actively saving and investing for your retirement, with your non-CPF funds.
In addition, due to the long-term nature of the CPF scheme and the government's power to write and rewrite the rules, one may also conclude that your CPF monies are exposed to a significant degree of political risk.

But then, just like Mr Tan, you already knew that.

Didn't you?
Gadis Bispak Imut

My Thoughts on The Online Citizen Getting Gazetted as a Political Association

I always knew that it was going to happen.

It was just a matter of time.

To me, the only surprise was that it took so long for the government to gazette The Online Citizen as a political association.

Then again, the elections are looming. So this too is the right season for the PAP to do what it did.

Years ago, I already realised that in the Singapore blogosphere, group blogs commenting on sociopolitical issues were at risk. The more well-organised, prolific and popular a group blog is, the higher the risk it would face.

That is one reason why I never joined any group blogs.

(The other main reason is that I like the freedom of having my own individual blog. Apart from yakking about sociopolitical issues, I can also yak about anything else that interests me).

In my opinion, as far as raising public awareness; promoting active citizenship and encouraging critical thinking among Singaporeans, the best form that the blogosphere can take is as follows.

(1) Lots and lots of individual bloggers.

(2) Many, many intelligent voices providing reasoned, constructive views.

(3) But no individual voice should be so compelling and outstanding that it becomes an obvious nail for the PAP to hammer down on (whether by defamation suits, political gazetting, public ministerial attacks, police investigations or the like).

(4) An amorphous, informal network among the active bloggers, so that they interconnect themselves with plenty of hyperlinks, "Friends", "Likes", blog comments etc.

The gist of the idea is that the Singapore sociopolitical blogosphere should be as big as possible, so that its collective influence is far and wide, and yet sufficiently diffuse, so that the PAP lacks obvious targets to attack.

Anyway, I'm reading the Internet commentary out there, and I see that many posters commented about the "foreign funding" aspect of the Online Citizen issue. (Gazetted political associations are not allowed to receive funding from foreigners).

This is a red herring. Or a non-issue. It just isn't the point.

Seriously, it costs peanuts to run a website. (And that is what The Online Citizen mainly is - a website).

Using Blogger, Wordpress and the like, you can set up free blogs and web pages within a few minutes.

If you pay for your own server space, that costs a bit more money. You get to pick your own domain name; you have more space to upload files etc. But seriously, it just costs a bit more money.

One doesn't need "foreign funding" to achieve that.

Personally, I don't see what's the big deal about foreign funding.

This is not the US, where political campaigns can be expensive. In Singapore, even if an opposition candidate has billions of bucks, the government will allow him only x minutes to appear on TV and talk to the people of Singapore.

It's not as if he's able to buy more airtime with his money. He's already constricted and tied down by a host of government laws, regulations and rules, on his campaigning activities.

Got money, also cannot spend.

Anyway, every other Tom, Dick and Harry on this island is a foreigner. The government adores them, talented or not.

So what's the big deal? About foreign funding?

Oh, remind me to write about something else in my next post. About my favourite poem. Or my daughter's IQ test. Or my new furniture.

Something non-political. Otherwise, who knows? Maybe the government would change the law again and say that even an individual blogger can be a "political association". LOL.
Gadis Bispak Imut

Singapore's Official Retirement Age To Be Extended

The Straits Times makes me cringe. The subtlety of their propagandising is so lacking that it makes the hairs on my arms stand. I mean, really. The hairs literally stood up, as I read the article below.
ST Jan 15, 2011
Singaporeans welcome new retirement age of 65

EVERYONE looks forward to retirement, but many Singaporeans still feel capable of working beyond the age of 62, so many rejoiced at the government's recent announcement of lifting the retirement age to 65.
Singaporeans "welcome" the new retirement age? They "rejoiced" at this?

Where are the parties? Where are the celebrations? Where are the big balloons and waving flags and smiling happy faces? Where, at least, are the survey results to show that Singaporeans are happy with their retirement age being stretched to 65?

They don't exist. All the Straits Times did was scurry around for to find a few people to interview. The journalist managed to find a grand total of two Singaporeans, who would say something moderately nice about working in your old age.

Based on that, the Straits Times boldly declares that "Singaporeans Welcome New Retirement Age at 65"! And that we are "rejoicing". Owwww. Down, my hairs, down.
Ramesh Prakash Sharma, 66, is so good at his job that when he turned 62, he was given a promotion instead of being asked to retire. His company Qioptiq, an optics manufacturing company, made him a Technical Mentor to show younger employees the ropes. He says: 'I love my job. Optic is in my blood.'

Under the new Retirement and Re-employment Act passed in Parliament on Tuesday, employees who turn 62 will now be given the option to work for another three years. The new re-employment law will be in place from January 2012 and will affect some 20,000 workers.

Another gainfully employed sexagenarian is Elizabeth Hendriks, a 63-year-old steward with Fairmont Singapore who has never missed a day of work in her 13 years with the organisation.

She says she is happy with her job as it keeps her active, and she has only taken 2 days of medical leave in the last 5 years.
Come to think of it, neither Ramesh nor Elizabeth (as quoted above) actually said that they welcomed the government's new policy. Instead both just said that they love their own jobs.

I guess the Straits Times could not actually find any Singaporean who would say, 'Yes, I welcome the official extension of the retirement age to 65, and I rejoice in this!".

Most Singaporeans probably do understand the real significance of the retirement age extension. Later it will just become a political excuse to further delay the full withdrawal of your own CPF savings.
Gadis Bispak Imut

The Community Care Endowment Fund and Income Inequality in Singapore

An email from a reader:
    Hi Mr Wang,

    I’m a student who have been reading your blog for the past two years. Recently, I've been reading online blog entries on income inequality in sg and it’s true that there are many elderly cleaners and tissue paper sellers around today especially when I’m dining at Bedok Hawker Centre.

    But with existing schemes like Comcare, Workfare and Public Assistance Scheme to help the needy, I really don’t understand why it’s not helping this bad situation that has been ongoing for years. Why are these cleaners not going for workfare? Are they not informed or are they not eligible? I thought the govt has been pumping in $ for workfare all this while?

    ("The Community Care Endowment Fund, or ComCare for short, represents the Government’s commitment to do more for needy Singaporeans. Since the launch in 2005 by the Prime Minister, it has disbursed more than $200 million to help 160,000 needy Singaporeans, and the government has been progressively topping up the Endowment Fund which now stands at $800 million." taken from MCYS News Dec 3 2010)

    I dunno much about this but is 800 million too little to provide safety net for the society? So what's the solution to the unequal income distribution in Singapore?
Firstly, I should say that I have not looked closely at Comcare, and do not know the details of its schemes. But we can do some quick back-of-the-envelope calculations, based on this paragraph:
"The Community Care Endowment Fund, or ComCare for short, represents the Government’s commitment to do more for needy Singaporeans. Since the launch in 2005 by the Prime Minister, it has disbursed more than $200 million to help 160,000 needy Singaporeans, and the government has been progressively topping up the Endowment Fund which now stands at $800 million."
Firstly, $800 million is the amount set aside to help needy Singaporeans. But this is not money that has actually been disbursed yet. When will this money be disbursed, and under what circumstances, and in what amounts, and over what period of time? Your guess is as good as mine.

The amount that has actually been disbursed is $200,000,000. This amount was disbursed over five years. That money went to a total of 160,000 needy Singaporeans.

We don't know how long, on average, each Singaporean stayed on the ComCare scheme. For example, some may have received ComCare assistance for a year, while others may have received it for the past five years. Let's say that on average, ComCare recipents received help for 2.5 years.

Then, according to this reader's calculations (thank you), each person received an average amount of $1,250 per year, or about $104 per month.

This will be roughly enough to buy one packet of chicken rice ($3) per day, with a few coins left over for spare change. It does not sound like much of a safety net to me. But form your own opinion .......
Gadis Bispak Imut

Food Price Inflation - The Next New Global Theme

Suddenly, food price inflation has become the new global issue. From the New York Times, 5th January:

      U.N. Data Notes Sharp Rise in World Food Prices
      By WILLIAM NEUMAN

      World food prices continued to rise sharply in December, bringing them close to the crisis levels that provoked shortages and riots in poor countries three years ago, according to newly released United Nations data.

      Prices are expected to remain high this year, prompting concern that the world may be approaching another crisis, although economists cautioned that many factors, like adequate stockpiles of key grains, could prevent a serious problem.

      The United Nations data measures commodity prices on the world export market. Those are generally far removed from supermarket prices in wealthy countries like the United States. In this country, food price inflation has been relatively tame, and prices are forecast to rise only 2 to 3 percent this year.

      But the situation is often different in poor countries that rely more heavily on imports. The food price index of the United Nations Food and Agriculture Organization rose 32 percent from June to December, according to the report published Wednesday. In December, the index was slightly higher than it was in June 2008, its previous peak. The index is not adjusted for inflation, however, making an exact comparison over time difficult.

      The global index was pushed up last year by rising prices for cooking oils, grains, sugar and meat, all of which could continue to remain high or rise.

      “We are at a very high level,” said Abdolreza Abbassian, an economist for the organization, which is based in Rome. “These levels in the previous episode led to problems and riots across the world.”
Here's a more Asian perspective, on the same matter.

      SINGAPORE - RECORD high food prices are moving to the top of the agenda for many Asian policymakers as the prospect of higher inflation in 2011 poses a major threat to the region's strong revival from the global financial crisis.

      The United Nations' food agency (FAO) said on Wednesday that food prices hit a record high last month, moving beyond the levels that prompted riots in 2008 in countries as far afield as Egypt, Cameroon and Haiti.

      Food inflation in many Asian countries, including China and India, is already in double digits, raising fears that the price pressures could spread more broadly to other sectors and pose a threat to both economic and social stability as millions of Asians live in poverty.

      Surging food prices have proved a trigger for social protests in the past, forcing governments to cave in to demands for action. They were a factor in the fall from power of Indonesia's long-term autocrat Suharto in 1998.

      'Food price inflation could really go into double digits across the region and rise to such an extent that it undermines the purchasing power of households and as a result then slows consumer demand and overall economic growth,' said Frederic Neumann, regional economist at HSBC in Hong Kong.

      'And that's a problem for Asian economic growth. But really it's also a problem for the rest of the world because as the Asian consumer increasingly is helping to stabilise world demand, it's actually a challenge of wider global significance.' Indeed, South Korean authorities sounded the alarm on Thursday over rising commodity prices. -- REUTERS


I just have a sneaky suspicion that one cause of the current food price inflation is increased activity by financial investors and speculators. It was just last month that my financial adviser was talking to me about investing in agricultural commodities.

Also, in the past few years, investment banks worldwide have been growing increasingly interested in the commodities business. As far as I'm aware, the bulk of their interest has been in metals such as copper, gold and steel. But really, if there's money to be made, they would just as well move into sugar, rice or corn.

In the end, it's all just money to the bank. Doesn't matter whether it's sugar or gold; rice or steel or widgets .... as long as it makes money.
Gadis Bispak Imut

The Inexact Science of Property Valuation

Saw this in the Today newspaper:

These sellers are not serious
Flat owners re-valuing flats for profits
Letter from Gurmit Singh Kullar

THE latest cooling measures have admittedly had some effect in curbing the cash over valuation (COV) for resale HDB flats but we are still unlikely to see any decrease in valuations.

I have come across some sellers who have had their flats re-valued even before their current valuations expired so as to lock in a further gain.

A flat owner who rejected my offer did exactly that because he was convinced by property agents that his flat was "too cheap".

In another case, a property agent tried to convince me to buy a particular flat because the valuation had increased by $10,000 since the last assessment two months earlier.

Is this practice of multiple valuations for a HDB flat across such a short period condoned? Can the value of a flat really increase so rapidly?

Since valuation prices are based partly on previous assessments, frivolous seller behaviour causes unjustified increases in baseline prices.

In addition to focusing on buyers, I feel that the HDB also should introduce steps to weed out non-serious sellers ....
Gurmit is wrong. In the current market, sellers who constantly seek revaluations are not only serious, but savvy.

Property valuation is not a science. We should think of it more as an art. Or even better, just as an opinion. Supposedly an independent, educated and informed opinion - but in any event, still just an opinion.

So for instance, let's say that we simultaneously ask for three property valuations of the same HDB flat. Even though all valuations are done at the same time, the first valuer might say "$500,000"; the second valuer might say "$520,000"; and the third valuer might say "$540,000".

In all three cases, the respective valuer will support his opinion by citing a list of relevant factors in his report. For example, he would look at the recent sale prices of similar properties in the same neighbourhood. He would consider the nearby amenities (is there an MRT station nearby? Or any top school? Or a good shopping area?). He would also take note of the physical state of the apartment itself (for example, whether it has a good view, or has been renovated nicely).

But all these factors have subjective elements. For example, what is a "good" view? Which schools are "top"? How faraway can an MRT station be, and still be considered "near"? Since the answers to these questions are merely opinions, it should be obvious that the valuation figure itself is also merely an opinion.

Particularly in a rising market, a savvy seller may seek revaluations. Why? Because, as I mentioned earlier, property valuers will consider the recent actual sale prices of similar properties in the same neighbourhood. If market prices are generally on an uptrend, the valuation you get in January is likely to rise by April. That's because the April valuation would have taken into consideration data on sale prices that had become available only in February and March.

Although property valuations are merely opinions, they have a lot of practical significance. Among other things, they determine the maximum amount that a bank would be willing to lend to the buyer. In turn, this influences the price that the buyer is willing to offer to the seller.

So Gurmit is both wrong and right. He is wrong to say that the sellers are not serious. He is right to say that they are out to make money. The sellers are serious. They are serious about making money.
Gadis Bispak Imut

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Snakes and Other Creatures

A letter to the ST Forum:
ST Dec 30, 2010
Passing the buck on snake menace

MY DAD came across a 1m snake in the grass area about 10 steps away from the bus stop in Upper Thomson Road on Dec 17.

He told me to call the relevant authorities before the snake slithered to the bus stop, or to the nearby terrace house.

When I contacted the Agri-Food and Veterinary Authority (AVA), the operator transferred me to the unit which she claimed could help in this matter. However, the woman who picked up the call did not even give me three minutes to speak. When she heard 'snake', she said 'Call the police please'.

Meanwhile, a commuter at the bus stop called the police.

I called AVA again and asked the operator if it is indeed the police's job to be catching snakes. She immediately said she will transfer me to corporate affairs but the call was transferred to a mail box instead.

In the next 15 minutes, neither the police nor AVA staff turned up. My dad and I looked on helplessly as the snake slithered back to the bushes and disappeared.

Angela Tang (Ms)
All I can say is that I feel glad for the snake.

Most likely it was a reticulated python (quite common in Singapore). The police are indeed the right people to catch them, but not all police officers are trained to handle snakes.

Captured snakes are passed on to the Singapore Zoo. The zoo receives so many snakes per year that it cannot possibly keep all of them. The zoo simply releases healthy snakes back into forested areas of Singapore. The less-healthy ones are euthanised.

More rarely, cobras are also found in Singapore. These are pretty nasty fellas and are best avoided. Fortunately they will also tend to avoid human beings. I had a close encounter with a black cobra once (near Kent Ridge Park), and it was spectacularly unforgettable. Big black hood, the head rearing up well above ground level, and all of that - very intimidating. A cobra's hiss sounds nothing like what you might expect a snake's hiss to be like. The sound of a cobra hissing is more like a big dog growling. It's pretty scary.

I don't like venomous snakes, but I'm okay with non-venomous ones. I've handled them and petted them on many occasions.

Other animals which I have fed, handled and petted include stingrays, elephants, lions, koalas, wombats, kangaroos, deer, goats, horses, mynahs, dolphins, alpacas, orang utans, giant tortoises, macaws and pigs. In case you're wondering, I do not go on jungle expeditions or wilderness trips. Many of my encounters have been at places such as the Singapore Zoo, Underwater World and similar places in other countries.

I would like to pet a tiger one day. That would be fun. There's a place in Thailand where you can do that. Click here to see the pictures.

But one of my most beautiful wildlife experiences was to hold a hummingbird in my two hands. The little bird had gotten itself lost and trapped inside a building and had grown exhausted, after hours of fluttering around vainly, beating its head against glass doors trying to get out. I gently picked it up, took it outside and set it free.

A hummingbird is so small, and so delicately and carefully designed by Mother Nature. Its fine, subtly luminous colours remind me of a precious jewel.



Gadis Bispak Imut

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