Internet connection problem. More blog update coming soon.......
Wednesday, January 23, 2008
Saturday, January 12, 2008
Early Retirement Or Work Till You Die
What do you believe?
When government increases the official retirement age, do you rejoice? I like to discuss this topic whenever I have coffee session with colleagues, friends and even subordinates. In Singapore, our official retirement age moved up from 55 previously to 62 now. The big question I always ask is whether you rejoice over this move? Do you see that as a blessings? Is that what you really want? Somehow, many aunties and uncles are happy about it. They wanted to work for as long as possible. But I am certainly upset when people choose to work forever. Don’t get me wrong. I am upset not because they chose to slog, but because they do know the truth.
So do you think longer retirement age is a blessing? Do not give yourself an answer yet, not until I tell you the truth. There are many people around the world today retired early. It is not isolated cases and certainly not a miracle. There are many people with the power of retiring early and enjoy wonderful life after retirement.
Retire with financial freedom?
For a start, let’s not discuss about early retirement but just to retire with financial freedom. While the former is a great challenge and a difficult task, the latter is easy. I had said many times that the ultimate objective of successful investment is not to buy big houses and cars so that one can show off. Instant gratification has a price to pay – your future. Investment, savings, climbing corporate ladder and buying tottery have only one ultimate objective. Along the way, we set up a family and provide for our family, but ultimately, we want to retire comfortably and preferably early. How often have we seen parents retired with very little savings thus depends heavily on their children?
“But aren’t the children suppose to take care of their retired parents?”
I fully agreed. But think it over again on the term “need” and “want”. Let me give you these two scenarios and you pick one.
1) Parent has very little savings and they seriously need monthly allowance from their children. Their survival depends on it. It is not optional. And this becomes a burden to their children as they also need to provide for their families. And financial hardship compounded on both sides when someone hospitalized.
2) Parents retired financially free. Their children want to give allowance out of love and not because their parents need it for their daily necessities. Parents accepted children’s love offering not because they need it. They take it to show that they accept their children’s love. If the children for whatever reasons have greater financial needs, the parents can choose not to receive monthly allowance from their children. There is always an option.
So which scenario do you prefer? Unless you are a total idiot, the answer is obvious. Is scenario 2) above a “mission impossible”? Definitely not. In fact with proper financial planning, it is very easy to achieve scenario 2). Again, I am not talking about early retirement here but about retiring financially free.
Scenario 1) usually occurs in previous generations or during our father’s time. It happens to many families and we had came across many unfortunate stories reported on newspaper. But with better economic growth/stability and education, scenario 2) is more prominent now.
Early retirement – correct your mindset
Back to the topic on early retirement. No doubt government has been helping people to work longer age. But
let’s don’t get involved in political decision. Let’s just focus on personal well-being. To retire early, you and I only need one thing – financial freedom. One great teacher in area of financial freedom is Robert Kiyosaki. And I bet lots of aunties and uncles along the road never heard of him, and certain never heard of the term “financial freedom”. To gain financial freedom, you will need to accumulate passive income. Investment income is only one of it. If you want to know more about financial freedom and passive income, buy Robert Kiyosaki’s “Rich Dad Poor dad”. Today I want to share on the correct mindset on retirement. As to how, I leave it Robert Kiyosaki.
“You think so easy ah, early retirement!”
That is a wrong mindset. It is definitely difficult, but not impos
sible since many people around the world have made it. Besides Robert Kiyosaki, I know of people in (renowned) network marketing company earning hundreds of thousands and even millions yearly with very minimum effort – after he/she establish the foundation. Adam Khoo, at his mid-20 already earned his first million dollars. His training and books are selling good and I believe he is a potential candidate for early retirement.
“Retired early for what, waiting to die meh!”
That is a terrible mindset. It is an “older generation” mindset. Early retirement has no connection to “waiting to die (等死)”. It all depends on a person’s life style and again, mindset. During my army days, my branch head was a retired senior officer (Lt Col). He holds the appointment because the country needs his service, not because he needs the money. He owned a condo and two sport cars and his wife was then a director of a company. He was looking forward for the day. He shared with us that he hope to spend time meeting up old friends, golfing and going for holidays. His life style will remain the same and active. But he will sell his cars away since he has ample of time after retirement.
What about me? Well, my dream, should I retired early, is to spend my days at the stock exchange wearing jean, sandal and with my laptop. Alternatively I may also conduct my investment activities at the Sentosa while sipping coffee. And if possible, I would like to conduct training for people who want to know more about value investment. Not because I need the money, but I love to. And I waiting to die? Certainly not.
Conclusion
Early retirement is a blessing. Working until you are about to enter the coffin is not. The correct mindset is we should set early retirement as a personal goal and work towards it. Yes, it’s extremely difficult and not many will make it (including myself). But do not use that as an excuse not to try. Get the mindset correct.
When government increases the official retirement age, do you rejoice? I like to discuss this topic whenever I have coffee session with colleagues, friends and even subordinates. In Singapore, our official retirement age moved up from 55 previously to 62 now. The big question I always ask is whether you rejoice over this move? Do you see that as a blessings? Is that what you really want? Somehow, many aunties and uncles are happy about it. They wanted to work for as long as possible. But I am certainly upset when people choose to work forever. Don’t get me wrong. I am upset not because they chose to slog, but because they do know the truth.
So do you think longer retirement age is a blessing? Do not give yourself an answer yet, not until I tell you the truth. There are many people around the world today retired early. It is not isolated cases and certainly not a miracle. There are many people with the power of retiring early and enjoy wonderful life after retirement.
Retire with financial freedom?
For a start, let’s not discuss about early retirement but just to retire with financial freedom. While the former is a great challenge and a difficult task, the latter is easy. I had said many times that the ultimate objective of successful investment is not to buy big houses and cars so that one can show off. Instant gratification has a price to pay – your future. Investment, savings, climbing corporate ladder and buying tottery have only one ultimate objective. Along the way, we set up a family and provide for our family, but ultimately, we want to retire comfortably and preferably early. How often have we seen parents retired with very little savings thus depends heavily on their children?
“But aren’t the children suppose to take care of their retired parents?”
I fully agreed. But think it over again on the term “need” and “want”. Let me give you these two scenarios and you pick one.
1) Parent has very little savings and they seriously need monthly allowance from their children. Their survival depends on it. It is not optional. And this becomes a burden to their children as they also need to provide for their families. And financial hardship compounded on both sides when someone hospitalized.
2) Parents retired financially free. Their children want to give allowance out of love and not because their parents need it for their daily necessities. Parents accepted children’s love offering not because they need it. They take it to show that they accept their children’s love. If the children for whatever reasons have greater financial needs, the parents can choose not to receive monthly allowance from their children. There is always an option.
So which scenario do you prefer? Unless you are a total idiot, the answer is obvious. Is scenario 2) above a “mission impossible”? Definitely not. In fact with proper financial planning, it is very easy to achieve scenario 2). Again, I am not talking about early retirement here but about retiring financially free.
Scenario 1) usually occurs in previous generations or during our father’s time. It happens to many families and we had came across many unfortunate stories reported on newspaper. But with better economic growth/stability and education, scenario 2) is more prominent now.
Early retirement – correct your mindset
Back to the topic on early retirement. No doubt government has been helping people to work longer age. But
let’s don’t get involved in political decision. Let’s just focus on personal well-being. To retire early, you and I only need one thing – financial freedom. One great teacher in area of financial freedom is Robert Kiyosaki. And I bet lots of aunties and uncles along the road never heard of him, and certain never heard of the term “financial freedom”. To gain financial freedom, you will need to accumulate passive income. Investment income is only one of it. If you want to know more about financial freedom and passive income, buy Robert Kiyosaki’s “Rich Dad Poor dad”. Today I want to share on the correct mindset on retirement. As to how, I leave it Robert Kiyosaki.“You think so easy ah, early retirement!”
That is a wrong mindset. It is definitely difficult, but not impos
sible since many people around the world have made it. Besides Robert Kiyosaki, I know of people in (renowned) network marketing company earning hundreds of thousands and even millions yearly with very minimum effort – after he/she establish the foundation. Adam Khoo, at his mid-20 already earned his first million dollars. His training and books are selling good and I believe he is a potential candidate for early retirement.“Retired early for what, waiting to die meh!”
That is a terrible mindset. It is an “older generation” mindset. Early retirement has no connection to “waiting to die (等死)”. It all depends on a person’s life style and again, mindset. During my army days, my branch head was a retired senior officer (Lt Col). He holds the appointment because the country needs his service, not because he needs the money. He owned a condo and two sport cars and his wife was then a director of a company. He was looking forward for the day. He shared with us that he hope to spend time meeting up old friends, golfing and going for holidays. His life style will remain the same and active. But he will sell his cars away since he has ample of time after retirement.
What about me? Well, my dream, should I retired early, is to spend my days at the stock exchange wearing jean, sandal and with my laptop. Alternatively I may also conduct my investment activities at the Sentosa while sipping coffee. And if possible, I would like to conduct training for people who want to know more about value investment. Not because I need the money, but I love to. And I waiting to die? Certainly not.
Conclusion
Early retirement is a blessing. Working until you are about to enter the coffin is not. The correct mindset is we should set early retirement as a personal goal and work towards it. Yes, it’s extremely difficult and not many will make it (including myself). But do not use that as an excuse not to try. Get the mindset correct.
Thursday, January 10, 2008
Widespread Inflation Problem
We have inflation problem in US, China and Singapore. I am sure some other countries are also experiencing this problem. For China, the government is stepping in to curb price rises of basic necessities like food and energy. According to a report in Forbes.com, China's CPI rose at an annualized rate of 6.9% in November 2007, the fastest pace in 11 years. In Singapore, we see inflationary pressure in basic necessities such as food, transport and housing. This evening, STI closed at 3,311.07 with another 33.46 points plunge. The following is an excerpt from Business Times (10 Jan 2008):
=====================================
Inflation rate could push past 6% in Q1
Upward revision of value of public housing cited
By CHEW XIANG
SINGAPORE'S inflation rate could soar past 6 per cent in the current quarter, beating previous estimates, as an upward revision of the value of public housing kicks in this month and food and oil prices continue to climb.
'We were previously looking at 3.9 per cent for this year, but I think it will be much higher,' United Overseas Bank economist Ho Woei Chen said yesterday.
'The revision (of annual values) will be quite significant, and we underestimated the extent of the taxi fare increase, the food price increase, oil price increase.'
The Inland Revenue Authority of Singapore has raised its assessment of values across all flat types by 18-25 per cent from Jan 1. Housing value has a significant weight in the consumer price index (CPI).
'(Inflation for the year) can potentially exceed the Monetary Authority of Singapore's forecast of 3.5 to 4.5 per cent for 2008,' Ms Ho said.
According to her, a lot will depend on the inflation figures for January. Core inflation, which excludes accommodation and private road transport costs, could also come in above the MAS forecast made in October of 1.5 to 2.5 per cent for the year, she reckons.
But 'given some expectation of lower global growth this year I think there could be some self-correcting mechanism later this year', she said.
'We could see oil prices coming in lower this year' which could bring down inflation closer to the end of the year, especially given the high base in November 2007.
The CPI that month surged 4.2 per cent year on year - a 25-year high.
Inflation rate could push past 6% in Q1
Upward revision of value of public housing cited
By CHEW XIANG
SINGAPORE'S inflation rate could soar past 6 per cent in the current quarter, beating previous estimates, as an upward revision of the value of public housing kicks in this month and food and oil prices continue to climb.
'We were previously looking at 3.9 per cent for this year, but I think it will be much higher,' United Overseas Bank economist Ho Woei Chen said yesterday.
'The revision (of annual values) will be quite significant, and we underestimated the extent of the taxi fare increase, the food price increase, oil price increase.'
The Inland Revenue Authority of Singapore has raised its assessment of values across all flat types by 18-25 per cent from Jan 1. Housing value has a significant weight in the consumer price index (CPI).
'(Inflation for the year) can potentially exceed the Monetary Authority of Singapore's forecast of 3.5 to 4.5 per cent for 2008,' Ms Ho said.
According to her, a lot will depend on the inflation figures for January. Core inflation, which excludes accommodation and private road transport costs, could also come in above the MAS forecast made in October of 1.5 to 2.5 per cent for the year, she reckons.
But 'given some expectation of lower global growth this year I think there could be some self-correcting mechanism later this year', she said.
'We could see oil prices coming in lower this year' which could bring down inflation closer to the end of the year, especially given the high base in November 2007.
The CPI that month surged 4.2 per cent year on year - a 25-year high.
Tuesday, January 8, 2008
China Sunsine - Fund House's Recommendation
Yesterday received a daily report from GK. There is a portion on China Sunsine Chemical which the broking house shared positive outlook.
Monday, January 7, 2008
Challenges in 2008
Take Your Profit While You Can
About a week ago, a finance manager of my company called me.
Apart from generally enquiries, he asked for my opinion on the stock market. Naturally, I gave a gloomy picture. Since the exposure of US subprime problem, I have not been rosy on the stock market. He said that he is still holding to Singtel shares in his CPF and asked for my advice. Normally this is the kind of thing I don’t like to do as the situation may turn otherwise. He assured me no liability. I told him to sell and lock in the profit while he can. In fact, I had shared with some friends and colleagues to be watchful on the economy especially the US economy. And if they are sitting on some good profit, they should consider letting this profit materialize.
Your gains are only real when it becomes hot cash in your bank account. The investment account statement is still on paper.
What Are The Issues?
1) For a start, we have US subprime problems. People default on loan, and many financial companies write off tonnes of money from their accounts. And believe me, it hasn’t ended yet.
2) To battle subprime problem, Fed bring down interest rate. But unf.gif)
ortunately, they faced another set of problem – inflation. Actually many countries today are facing this problem. Singapore is not spared. To contain inflation, government needs to engage contractionary monetary policy. One way is to increase interest rate. Now you can see something is contradicting here. In Mandarin, I call it 骑虎难下. I think Fed is stuck in between.
3) Oil price at 100. Before Christmas last year, I had a dinner with two friends. One of them is currently working in a private fund house. While I was sharing the danger of rising oil price, this friend opined that rising oil price is not a concern. I totally disagree with his opinion. Although today’s rising oil price is backed by demand especially from emerging countries, high oil price will result in high business operations costs. I don’t have a PhD but I think this is really commonsense. (And my lecturer Mr. Fred Keer used to say that commonsense is the least common human attribute). This rising costs will be pass on to end consumer. The consequent is – inflation!!! Can we cope with high expenses? Can US citizens cope with high living costs especially energy and petrol? Well, since I don’t have a PhD, and that I am not working in a fund house, today I mark down my analysis. The answer should be out soon.
4) US employment. This is really something hot from the oven. Last Friday, DJIA plunged another 256.54 points to close at 12,800 due to unemployment in December rose to two-year high. Job creation in December almost came to a full stop. I remember reading somewhere that the US needs to create around 300,000 jobs every month. What will happen if unemployment rate goes up? What will happen to Singapore? With knowledge I acquired through years of reading financial news and analysing the market, this is my view:
> Singapore economy grow by non-oil domestic export.
> Singapore products mainly export to Europe and US.
> Europe and US will order if their economy is still growing.
> US economic growth largely depends on consumer spending.
> The “Ang Moh” (the Americans) will continue to spend if they got money in their pocket.
> They will only have money if they got a job. Well, if they didn’t, then work your math backward.
What To Do With Stock Now?
I am not saying that we are definitely in for a recession. Neither am I saying that you should dump all your shares at whatever losses. But in my opinion, we should really trim down the size of our portfolio at least by half. Hold more cash while we monitor the global economy. Prepare for the worst. You may start switching to bonds but may also stay sideline for a while.
On stocks, you only keep those companies that have a catalyst. For example, Koh Brothers with the potential of getting casino tower construction project, marine and oil-related companies with the potential to continue riding on high oil price etc. Certainly do not buy any tech stock. Last Friday, I dumped my last tech stock at a small loss. So now my portfolio does not have any tech stock. Take profit on companies that do not have any catalyst. Consider the possibility that you may be able to buy it back even cheaply.
This evening, STI plunged another 84.73 points to 3,353.06. The market will be very volatile this year, a good year for the speculators though. And god knows what will happen after the Olympic. So be prudent, overcome your greed and fear, use more commonsense and DON’T RETURN YOUR HARD-EARNED MONEY TO MS. MARKET. A perfect storm may be coming. And if it come, it’s going to have a deep impact.
About a week ago, a finance manager of my company called me.
Apart from generally enquiries, he asked for my opinion on the stock market. Naturally, I gave a gloomy picture. Since the exposure of US subprime problem, I have not been rosy on the stock market. He said that he is still holding to Singtel shares in his CPF and asked for my advice. Normally this is the kind of thing I don’t like to do as the situation may turn otherwise. He assured me no liability. I told him to sell and lock in the profit while he can. In fact, I had shared with some friends and colleagues to be watchful on the economy especially the US economy. And if they are sitting on some good profit, they should consider letting this profit materialize.Your gains are only real when it becomes hot cash in your bank account. The investment account statement is still on paper.
What Are The Issues?
1) For a start, we have US subprime problems. People default on loan, and many financial companies write off tonnes of money from their accounts. And believe me, it hasn’t ended yet.
2) To battle subprime problem, Fed bring down interest rate. But unf
.gif)
ortunately, they faced another set of problem – inflation. Actually many countries today are facing this problem. Singapore is not spared. To contain inflation, government needs to engage contractionary monetary policy. One way is to increase interest rate. Now you can see something is contradicting here. In Mandarin, I call it 骑虎难下. I think Fed is stuck in between.3) Oil price at 100. Before Christmas last year, I had a dinner with two friends. One of them is currently working in a private fund house. While I was sharing the danger of rising oil price, this friend opined that rising oil price is not a concern. I totally disagree with his opinion. Although today’s rising oil price is backed by demand especially from emerging countries, high oil price will result in high business operations costs. I don’t have a PhD but I think this is really commonsense. (And my lecturer Mr. Fred Keer used to say that commonsense is the least common human attribute). This rising costs will be pass on to end consumer. The consequent is – inflation!!! Can we cope with high expenses? Can US citizens cope with high living costs especially energy and petrol? Well, since I don’t have a PhD, and that I am not working in a fund house, today I mark down my analysis. The answer should be out soon.
4) US employment. This is really something hot from the oven. Last Friday, DJIA plunged another 256.54 points to close at 12,800 due to unemployment in December rose to two-year high. Job creation in December almost came to a full stop. I remember reading somewhere that the US needs to create around 300,000 jobs every month. What will happen if unemployment rate goes up? What will happen to Singapore? With knowledge I acquired through years of reading financial news and analysing the market, this is my view:
> Singapore economy grow by non-oil domestic export.
> Singapore products mainly export to Europe and US.
> Europe and US will order if their economy is still growing.
> US economic growth largely depends on consumer spending.
> The “Ang Moh” (the Americans) will continue to spend if they got money in their pocket.
> They will only have money if they got a job. Well, if they didn’t, then work your math backward.
What To Do With Stock Now?
I am not saying that we are definitely in for a recession. Neither am I saying that you should dump all your shares at whatever losses. But in my opinion, we should really trim down the size of our portfolio at least by half. Hold more cash while we monitor the global economy. Prepare for the worst. You may start switching to bonds but may also stay sideline for a while.
On stocks, you only keep those companies that have a catalyst. For example, Koh Brothers with the potential of getting casino tower construction project, marine and oil-related companies with the potential to continue riding on high oil price etc. Certainly do not buy any tech stock. Last Friday, I dumped my last tech stock at a small loss. So now my portfolio does not have any tech stock. Take profit on companies that do not have any catalyst. Consider the possibility that you may be able to buy it back even cheaply.
This evening, STI plunged another 84.73 points to 3,353.06. The market will be very volatile this year, a good year for the speculators though. And god knows what will happen after the Olympic. So be prudent, overcome your greed and fear, use more commonsense and DON’T RETURN YOUR HARD-EARNED MONEY TO MS. MARKET. A perfect storm may be coming. And if it come, it’s going to have a deep impact.
Saturday, January 5, 2008
Selected Funds' Performance In 2007
The following are some of the funds I monitored in 2007. I seldom buy funds. the reason is quite obvious. if I can do it my self, why should I feed the fund managers? However, the exception is when I want to invest in certain countries or assets but not available on the SGX, then I had to go through a fund managers.
.
The global tech fund suffers massive losses since the collapse of dot.com era. Many was hoping that recent bull run could give these fund a hope of recovery. It seems that it is hopeless now. The performanace of Global Tech Fund was not impressive during recent bull run and with uncertain US economy now, there is little chance that these fund will surge. Japan fund also performed poorly in 2007. Japan funds closed lower than it started in 2007. Global property funds also plunged after the expose of US subprime problems. Asia equity funds has satisfactory performance but the best actually comes from India fund. Another outstanding fund is the resource fund. Naturally, with rising resources' price, these fund is able to sustain its performanace.
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Friday, January 4, 2008
Update on Koh Brothers
Reference to my previous blog sharing on Koh Brothers, there is an exciting article on Koh Brothers on the Business Times today. I guess I am about to hit the jackpot. Previously, I called a buy (even way before I wrote a blog on it) on Koh Brothers because of it reasonable, if not cheap valuation.With its existing projects on hand, I strongly believe that $0.38 a share is undervalued. This is without taking into account my expectation/believe that Koh Brother has the potential to tender for the casino tower construction project. So any further good news is just a bonus. It seems that now I am one step closer to the bonus.
Today, Business Times reported that Koh Brother and Lian Beng’s JV is likely to get the casino deal. To any friends and colleagues who followed my advise, hold on to Koh Brothers to the very last minute.
What else?
On 2 Jan 2008, Koh Brothers announced that its prime freehold hotel site along Changi road is up for sale by public tender. According to a report on Business Times, the asking price for the site is $55 million.
"Show me my money!!!"
================================
January 3, 2008, 10.30 am (Singapore time)
Construction firms up on casino hopes
SINGAPORE - Shares of construction firms soared as expectations that Koh Brothers Group and Lian Beng Group would win a lucrative contract lifted sentiment for the whole sector, bucking the downward trend of the market.
A consortium of Koh Brothers and Lian Beng Group are running for contract worth around $500 million (US$348 million) for works related to one of the two casinos under construction in the city-state.
'The market expects that they will win the bid, it's quite a firm deal already,' said a local dealer.
Lian Beng rose as much as 5.1 per cent to an eight and a half year high of $0.82 and was the third most actively traded counter on the Singapore bourse with 18.8 million shares traded.
Koh Brothers jumped 6.5 per cent to $0.49 with 8.5 million shares changing hands.
Other construction plays such as Yongnam Holdings rose as much as 3.3 per cent to $0.31 with seven million shares traded. CSC Holdings was up 1.5 per cent to $0.33 with six million traded.
================================
January 3, 2008, 10.30 am (Singapore time)
Construction firms up on casino hopes
SINGAPORE - Shares of construction firms soared as expectations that Koh Brothers Group and Lian Beng Group would win a lucrative contract lifted sentiment for the whole sector, bucking the downward trend of the market.
A consortium of Koh Brothers and Lian Beng Group are running for contract worth around $500 million (US$348 million) for works related to one of the two casinos under construction in the city-state.
'The market expects that they will win the bid, it's quite a firm deal already,' said a local dealer.
Lian Beng rose as much as 5.1 per cent to an eight and a half year high of $0.82 and was the third most actively traded counter on the Singapore bourse with 18.8 million shares traded.
Koh Brothers jumped 6.5 per cent to $0.49 with 8.5 million shares changing hands.
Other construction plays such as Yongnam Holdings rose as much as 3.3 per cent to $0.31 with seven million shares traded. CSC Holdings was up 1.5 per cent to $0.33 with six million traded.
Economic data released on Wednesday showed Singapore's construction sector growing a healthy 24.4 per cent in the fourth-quarter. -- REUTERS
Thursday, January 3, 2008
Oil Price Testing $100 Mark
What a fantastic way to start the year with more bad news and poor sentiment. The oil future was threatening the $100 mark again causing DJIA to plunge 220.86 point on Wednesday (while Singaporeans were sleeping) to 13,043.96.
.
US crude oil prices rose more than US$4 to US$100 a barrel due to violence in Opec members Nigeria and Algeria. On other hand, spot gold surged to US$859.30 an ounce - its highest since January 1980 when gold prices were fixed at a record US$850.
.
STI close at 3,397.06 this evening, down by 64.16.
.
==========================
Forbes Market Briefing
Oil Supplies In Focus
Evelyn M. Rusli, 01.03.08, 9:18 AM ET
After briefly touching the $100 mark, the price of oil remained near triple-digit territory on Thursday.
Wall Street will be looking out for the government’s oil inventory report, due out later today, which could show another drop in U.S. crude supplies. Tightening supplies, a weak dollar and political unrest in oil-rich Nigeria could lift oil to new highs. Black gold was at $99.85 in early trading.
Jobs will be in focus today: payroll firm ADP said the U.S. gained 40,000 jobs in December, versus a gain of 173,000 in November, while the government said jobless claims fell 21,000 to 336,000 last week, which was far better than expectations. But the holiday report may not accurately reflect the jobs picture, because many unemployment offices were closed for two days for Christmas.
With oil at all-time highs and the U.S. economy slowing down, global stocks tumbled.
Oil Supplies In Focus
Evelyn M. Rusli, 01.03.08, 9:18 AM ET
After briefly touching the $100 mark, the price of oil remained near triple-digit territory on Thursday.
Wall Street will be looking out for the government’s oil inventory report, due out later today, which could show another drop in U.S. crude supplies. Tightening supplies, a weak dollar and political unrest in oil-rich Nigeria could lift oil to new highs. Black gold was at $99.85 in early trading.
Jobs will be in focus today: payroll firm ADP said the U.S. gained 40,000 jobs in December, versus a gain of 173,000 in November, while the government said jobless claims fell 21,000 to 336,000 last week, which was far better than expectations. But the holiday report may not accurately reflect the jobs picture, because many unemployment offices were closed for two days for Christmas.
With oil at all-time highs and the U.S. economy slowing down, global stocks tumbled.
CPF Updates - Floating Rate For Special Account
CPF Special Account As Part Of Retirement Planning
I kept telling friends and colleagues to make full use of the CPF
Special Account (SA) for retirement planning. The special account gives 4% fixed rate which when compounded annually, it can snowball to a very big sum by the time you retire. With effect from 1 Jan 2008, there are some changes to the CPF rates.
1) The Special Account, Medisave Account and Retirement Account (SMRA) will be pegged to the 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1%. Singapore Government Security is the Singapore Government issued bonds which I had covered quite a fair bit last year. The average yield of the 10YSGS over one year, from 1 December 2006 to 30 November 2007, plus 1% works out to be 3.9%.
To help CPF members adjust to the floating SMRA rate, the Government will maintain the 4% floor rate for two years if the 10YSGS yield plus 1% is below 4%. After two years, the 2.5% floor rate will apply for all CPF accounts. Computation illustration:
SMRA interest rates for January to March 2008
Average yield of 10-Year SGS from Dec 06 to Nov 07 --- 2.90%
Plus 1% ------------------------------------------------------------------- 1.00%
Computed SMRA Interest Rate for Jan 08 to Mar 08 ----- 3.90%
SMRA Interest Rate (Jan 08 to Mar 08) - floor -------------- 4.00%
2) An additional 1% interest will be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member’s Special or Retirement Account to enhance his retirement savings.
Therefore, we stand to gain on our OA (3.5%) but only up to $20,000. Not much of an impact but “no fish prawns also good”. As for the SMRA, you get to enjoy 5% rate for maximum of $60,000 (if you have $0 in your OA) since government maintained 4% floor rate for two years.
“So what happen two years later?”
This is really hard to quantify and predict. Even though government giving out 1% extra for OA and SMRA, it is only limited to $60,000 combine balances. While there is a very small gain on the OA, SMRA will be hard to forecast. It all depends on the 12-month average yield of 10YSGS. The actual result very much depends on the economic performance. It is difficult to use a financial calculator to project our retirement amount now because it is no longer fixed. Take a look on the following annual yield of 10YSGS since 1998.
1998 - 4.48%
1999 - 4.56%
2000 - 4.09%
2001 - 3.97%
2002 - 2.55%
2003 - 3.75%
2004 - 2.58%
2005 - 3.21%
2006 - 3.05%
2007 - 2.68%
From the above data, the yield fluctuates, of course. However, the yield has been quite good for most of the years except for 2002, 2004 and 2007. If we get this kind of yields again, we are actually better off 70% of the time (when you add another 1% to the yield) compare to what we are getting currently. Of course, history is not a guarantee of future performance.
I kept telling friends and colleagues to make full use of the CPF
Special Account (SA) for retirement planning. The special account gives 4% fixed rate which when compounded annually, it can snowball to a very big sum by the time you retire. With effect from 1 Jan 2008, there are some changes to the CPF rates.1) The Special Account, Medisave Account and Retirement Account (SMRA) will be pegged to the 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1%. Singapore Government Security is the Singapore Government issued bonds which I had covered quite a fair bit last year. The average yield of the 10YSGS over one year, from 1 December 2006 to 30 November 2007, plus 1% works out to be 3.9%.
To help CPF members adjust to the floating SMRA rate, the Government will maintain the 4% floor rate for two years if the 10YSGS yield plus 1% is below 4%. After two years, the 2.5% floor rate will apply for all CPF accounts. Computation illustration:
SMRA interest rates for January to March 2008
Average yield of 10-Year SGS from Dec 06 to Nov 07 --- 2.90%
Plus 1% ------------------------------------------------------------------- 1.00%
Computed SMRA Interest Rate for Jan 08 to Mar 08 ----- 3.90%
SMRA Interest Rate (Jan 08 to Mar 08) - floor -------------- 4.00%
2) An additional 1% interest will be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member’s Special or Retirement Account to enhance his retirement savings.
Therefore, we stand to gain on our OA (3.5%) but only up to $20,000. Not much of an impact but “no fish prawns also good”. As for the SMRA, you get to enjoy 5% rate for maximum of $60,000 (if you have $0 in your OA) since government maintained 4% floor rate for two years.
“So what happen two years later?”
This is really hard to quantify and predict. Even though government giving out 1% extra for OA and SMRA, it is only limited to $60,000 combine balances. While there is a very small gain on the OA, SMRA will be hard to forecast. It all depends on the 12-month average yield of 10YSGS. The actual result very much depends on the economic performance. It is difficult to use a financial calculator to project our retirement amount now because it is no longer fixed. Take a look on the following annual yield of 10YSGS since 1998.
1998 - 4.48%
1999 - 4.56%
2000 - 4.09%
2001 - 3.97%
2002 - 2.55%
2003 - 3.75%
2004 - 2.58%
2005 - 3.21%
2006 - 3.05%
2007 - 2.68%
From the above data, the yield fluctuates, of course. However, the yield has been quite good for most of the years except for 2002, 2004 and 2007. If we get this kind of yields again, we are actually better off 70% of the time (when you add another 1% to the yield) compare to what we are getting currently. Of course, history is not a guarantee of future performance.
Wednesday, January 2, 2008
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Tuesday, January 1, 2008
US Home Loan and Default
According to an article on the Associated Press, mortgage insurers reported higher defaults in November 2007. As a result, the mortgage insurance companies are reporting hefty losses and share prices plunged.
The article gave a light on what we meant by “default” in US home mortgage. A default take place when a borrower failed to pay the loan for more than 60 days.
The home buyers are required to pay 20% of the house value. Otherwise, they need to take up an insurance. If a buyer missed a payment, the insurance payout will be triggered. A way get around it is to obtain another mortgage to pay for that 20%. It’s a mortgage over mortgage. With higher default risk, the financial companies are less willing to provide this second mortgage and therefore, more business for the insurance companies. With more default, these insurance companies will suffer.
The article gave a light on what we meant by “default” in US home mortgage. A default take place when a borrower failed to pay the loan for more than 60 days.
The home buyers are required to pay 20% of the house value. Otherwise, they need to take up an insurance. If a buyer missed a payment, the insurance payout will be triggered. A way get around it is to obtain another mortgage to pay for that 20%. It’s a mortgage over mortgage. With higher default risk, the financial companies are less willing to provide this second mortgage and therefore, more business for the insurance companies. With more default, these insurance companies will suffer.
Recap on 2007
Forbes Market Briefing
Happy New Year ... We Hope
Steve Schaefer, 12.31.07, 5:05 PM ET
With the calendar set to turn the page on 2007, Wall Street closes the book on a tumultuous year.
The year started off on the right foot: private equity was still booming, financial firms were raking in cash from advisory fees and other operations, and investors were expecting a record-setting performance on the Street. Then the subprime mortgage meltdown hit and the stock market, and the U.S. economy, did an about-face. What looked like a record-setting year early on turned sour, limping to the finish, and the dreaded "R" word was on economists' tongues by the time fall turned to winter.
Three whacks at interest rates by the Federal Reserve was not enough to stem the tide of the credit crunch, as the collapse of the mortgage and housing markets pressured investors and consumers alike. To make matters worse, most recent inflation indicators have come in higher than expected, suggesting the Fed may have put itself between a rock and a hard place, having run out of room to take interest rates lower, and pushed the country to the brink of recession. (See: "Fed Trims Rates")
Despite the pressures on the economy and the bloodletting in the financial sector over the past two quarters, many remain optimistic. The Dow Jones industrial average still managed to post a 6.4% gain for the year, despite a 4.6% drop in the fourth quarter, and the tech-fueled Nasdaq finished with a strong 7.9% increase.
One of the Nasdaq's most high-profile success stories in 2007 was Apple (nasdaq: AAPL - news - people ). The consumer tech company rode the success of the iPhone and incredible demand for all its products to a 133% gain for the year, and shares finished the year just below the $200 threshold, at $198.08.
On the Dow, Citigroup (nyse: C - news - people ) may have been the biggest story of the year, as the financial giant was brought to its knees by massive writedowns related to subprime mortgages, resulting in the exit of former CEO Chuck Prince. Shares of the bank plunged 47% in 2007. (See: "Another Wall Street Chief Falls")
In the mortgage sector, the largest U.S. home lender, Countrywide Financial (nyse: CFC - news - people ), was hammered by the subprime meltdown, losing nearly 80% of its market value.
Meanwhile, big caps outpaced small caps, as the Standard & Poor's 500 posted a 3.5% gain to beat out the Russell 2000 index, which fell 2.8% for the year.
Crude oil is poised to finish off 2007 with its greatest yearly gain in nearly a decade. Down two cents Monday to settle at $95.98 a barrel, crude still posted its biggest jump since 1999 in what has been an extremely volatile year for energy prices.
Exxon Mobil (nyse: XOM - news - people ) posted a 22% gain for the year, following oil and gasoline prices on their wild ride higher. With crude near $96 a barrel and gasoline over $3 a gallon, oil companies are likely to continue reaping the benefits in 2008. (See: "Sneak Peak 2008: Energy")
After 2007 came in with a roar and went out with a whimper, investors will be hoping for a rebound in 2008, while monitoring several trends.
Chief among those trends will be the continuing flow of foreign capital into pillars of the U.S. financial community. Citigroup, Bear Stearns (nyse: BSC - news - people ), Morgan Stanley (nyse: MS - news - people ) and Merrill Lynch (nyse: MER - news - people ), among many others, have all sold stakes to sovereign wealth funds in the Middle East or Asia. (See: "Merrill Still Shopping")
Look for some semblance of a bottom for the financial sector to emerge early in 2008, as the major Wall Street players utilize their newfound foreign capital to rebound from the ill effects of the subprime crisis.
Many analysts are predicting continued growth in the stock market for 2008 despite a prolonged housing slump and overall economic slowdown. The Fed bears watching as it attempts to boost liquidity in financial markets while limiting inflation, particularly if credit continues to be tight.
Happy New Year ... We Hope
Steve Schaefer, 12.31.07, 5:05 PM ET
With the calendar set to turn the page on 2007, Wall Street closes the book on a tumultuous year.
The year started off on the right foot: private equity was still booming, financial firms were raking in cash from advisory fees and other operations, and investors were expecting a record-setting performance on the Street. Then the subprime mortgage meltdown hit and the stock market, and the U.S. economy, did an about-face. What looked like a record-setting year early on turned sour, limping to the finish, and the dreaded "R" word was on economists' tongues by the time fall turned to winter.
Three whacks at interest rates by the Federal Reserve was not enough to stem the tide of the credit crunch, as the collapse of the mortgage and housing markets pressured investors and consumers alike. To make matters worse, most recent inflation indicators have come in higher than expected, suggesting the Fed may have put itself between a rock and a hard place, having run out of room to take interest rates lower, and pushed the country to the brink of recession. (See: "Fed Trims Rates")
Despite the pressures on the economy and the bloodletting in the financial sector over the past two quarters, many remain optimistic. The Dow Jones industrial average still managed to post a 6.4% gain for the year, despite a 4.6% drop in the fourth quarter, and the tech-fueled Nasdaq finished with a strong 7.9% increase.
One of the Nasdaq's most high-profile success stories in 2007 was Apple (nasdaq: AAPL - news - people ). The consumer tech company rode the success of the iPhone and incredible demand for all its products to a 133% gain for the year, and shares finished the year just below the $200 threshold, at $198.08.
On the Dow, Citigroup (nyse: C - news - people ) may have been the biggest story of the year, as the financial giant was brought to its knees by massive writedowns related to subprime mortgages, resulting in the exit of former CEO Chuck Prince. Shares of the bank plunged 47% in 2007. (See: "Another Wall Street Chief Falls")
In the mortgage sector, the largest U.S. home lender, Countrywide Financial (nyse: CFC - news - people ), was hammered by the subprime meltdown, losing nearly 80% of its market value.
Meanwhile, big caps outpaced small caps, as the Standard & Poor's 500 posted a 3.5% gain to beat out the Russell 2000 index, which fell 2.8% for the year.
Crude oil is poised to finish off 2007 with its greatest yearly gain in nearly a decade. Down two cents Monday to settle at $95.98 a barrel, crude still posted its biggest jump since 1999 in what has been an extremely volatile year for energy prices.
Exxon Mobil (nyse: XOM - news - people ) posted a 22% gain for the year, following oil and gasoline prices on their wild ride higher. With crude near $96 a barrel and gasoline over $3 a gallon, oil companies are likely to continue reaping the benefits in 2008. (See: "Sneak Peak 2008: Energy")
After 2007 came in with a roar and went out with a whimper, investors will be hoping for a rebound in 2008, while monitoring several trends.
Chief among those trends will be the continuing flow of foreign capital into pillars of the U.S. financial community. Citigroup, Bear Stearns (nyse: BSC - news - people ), Morgan Stanley (nyse: MS - news - people ) and Merrill Lynch (nyse: MER - news - people ), among many others, have all sold stakes to sovereign wealth funds in the Middle East or Asia. (See: "Merrill Still Shopping")
Look for some semblance of a bottom for the financial sector to emerge early in 2008, as the major Wall Street players utilize their newfound foreign capital to rebound from the ill effects of the subprime crisis.
Many analysts are predicting continued growth in the stock market for 2008 despite a prolonged housing slump and overall economic slowdown. The Fed bears watching as it attempts to boost liquidity in financial markets while limiting inflation, particularly if credit continues to be tight.
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