Take a break, enjoy a great movie!
Monday, October 27, 2008
Saturday, October 18, 2008
IPP House View
Commentary by IPP Investment Division
14 Oct 2008
Financial Markets
The world’s financial markets went on a wild roller-coaster ride over the past 2 weeks. With the concerted efforts displayed by G7 and European leaders, we are optimistic that this coordinated approach is likely to provide stability to the present extremely volatile market.
Deleveraging will reduce global liquidity considerably and the global economy is likely to slow. The global economy will need time to work out the excesses but will emerge stronger in the recovery process.
Asia ex-Japan & Emerging Markets
•Present valuation of Asia-ex Japan and emerging markets continues to look attractive. With the likely slowdown in global economic growth, we expect growth in Asia ex-Japan and emerging economies also to slow but still grow at a higher rate as compared to the developed economies.
•We continue to favor and over-weight Asia ex-Japan and emerging markets. We hold our views that investing into Asia Ex-Japan and emerging markets is likely to provide better potential returns when financial market recovers, as Asia ex- Japan and emerging markets remains the world’s growth engines.
US & Europe
•While the financial markets went into a tailspin over the past week, the governments around the world acted swiftly and took concerted actions to "calm" the markets. G7 has pledged "no more Lehman-type failures" in an attempt to restore confidence in the market.
•While the concerted efforts by US and European governments are likely to help stabilise the financial markets in US and Europe in the short-term, we do not see this as a quick fix to the present financial crisis. Nonetheless, it is a very encouraging start.
•Deleveraging will take some time and US/UK/Europe economies will need time to work out the excesses. Liquidity will not be as plentiful as in the past and economic growth is likely to stall during the early phase of the recovery process.
•Hence, we do not see an end to the present problems in US/UK/Europe in the short-term and will continue to underweight them.
Commodities
•Commodities will still remain volatile going forward. However, the demand for commodities will be there as long as the emerging markets continue with strong internal consumption demand. The mid- to long-term trend in commodities prices is still positive.
•We think that an allocation to commodities is important to the portfolio as commodities generally provide a hedging mechanism to inflation, which will better manage volatility in a diversified portfolio.
Australian Dollar Denominated Fund
The Australian dollar weakened suddenly and sharply over the past 2 weeks. The primary cause is the unwinding of yen-carry trade. When the RBA cut interest rate on 7 Oct, yen-carry traders had to reverse their positions, selling Australian dollar which now has a lowered yield at 6%. The selling pressure weakened the currency.
For clients who have invested in funds denominated in Australian dollar, we think staying invested is appropriate at this current juncture.
Position For Recovery
•In current market environment, we see opportunities for the medium to long term investors in these investment themes: Asia, commodities, Middle East & North Africa and BRIC that have sound fundamentals and are poised to recover quicker and stronger in the future.
•It is probable for markets to see sharp rebounds as investors cheer over the initial coordinated efforts of governments and central banks. However, the initial euphoria could dissipate as the real economy works out the impact of the initial financial markets fall out. We must expect volatility.
•For equity investments, we reckon that this is not a good time to cash out as markets have fallen drastically. For clients who have longer-term investment horizon, we believe this is good time to accumulate more units through RSP.
•For fixed income investments, focus on those with shorter duration. For clients that are jittery and are looking for absolute safety, consider switching back to cash/CPF and start a 24-month RSP programme to invest in equities.
•For clients who are losing sleep due to the volatile markets, consider shifting to safer investments such as money market funds or switch back to cash/ CPF and start a 24-month RSP programme.
•Own a diversified portfolio. This is not the time to take concentrated bets on specific investments or sectors as recovery in financial markets is unlikely to be immediate.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
14 Oct 2008
Financial Markets
The world’s financial markets went on a wild roller-coaster ride over the past 2 weeks. With the concerted efforts displayed by G7 and European leaders, we are optimistic that this coordinated approach is likely to provide stability to the present extremely volatile market.
Deleveraging will reduce global liquidity considerably and the global economy is likely to slow. The global economy will need time to work out the excesses but will emerge stronger in the recovery process.
Asia ex-Japan & Emerging Markets
•Present valuation of Asia-ex Japan and emerging markets continues to look attractive. With the likely slowdown in global economic growth, we expect growth in Asia ex-Japan and emerging economies also to slow but still grow at a higher rate as compared to the developed economies.
•We continue to favor and over-weight Asia ex-Japan and emerging markets. We hold our views that investing into Asia Ex-Japan and emerging markets is likely to provide better potential returns when financial market recovers, as Asia ex- Japan and emerging markets remains the world’s growth engines.
US & Europe
•While the financial markets went into a tailspin over the past week, the governments around the world acted swiftly and took concerted actions to "calm" the markets. G7 has pledged "no more Lehman-type failures" in an attempt to restore confidence in the market.
•While the concerted efforts by US and European governments are likely to help stabilise the financial markets in US and Europe in the short-term, we do not see this as a quick fix to the present financial crisis. Nonetheless, it is a very encouraging start.
•Deleveraging will take some time and US/UK/Europe economies will need time to work out the excesses. Liquidity will not be as plentiful as in the past and economic growth is likely to stall during the early phase of the recovery process.
•Hence, we do not see an end to the present problems in US/UK/Europe in the short-term and will continue to underweight them.
Commodities
•Commodities will still remain volatile going forward. However, the demand for commodities will be there as long as the emerging markets continue with strong internal consumption demand. The mid- to long-term trend in commodities prices is still positive.
•We think that an allocation to commodities is important to the portfolio as commodities generally provide a hedging mechanism to inflation, which will better manage volatility in a diversified portfolio.
Australian Dollar Denominated Fund
The Australian dollar weakened suddenly and sharply over the past 2 weeks. The primary cause is the unwinding of yen-carry trade. When the RBA cut interest rate on 7 Oct, yen-carry traders had to reverse their positions, selling Australian dollar which now has a lowered yield at 6%. The selling pressure weakened the currency.
For clients who have invested in funds denominated in Australian dollar, we think staying invested is appropriate at this current juncture.
Position For Recovery
•In current market environment, we see opportunities for the medium to long term investors in these investment themes: Asia, commodities, Middle East & North Africa and BRIC that have sound fundamentals and are poised to recover quicker and stronger in the future.
•It is probable for markets to see sharp rebounds as investors cheer over the initial coordinated efforts of governments and central banks. However, the initial euphoria could dissipate as the real economy works out the impact of the initial financial markets fall out. We must expect volatility.
•For equity investments, we reckon that this is not a good time to cash out as markets have fallen drastically. For clients who have longer-term investment horizon, we believe this is good time to accumulate more units through RSP.
•For fixed income investments, focus on those with shorter duration. For clients that are jittery and are looking for absolute safety, consider switching back to cash/CPF and start a 24-month RSP programme to invest in equities.
•For clients who are losing sleep due to the volatile markets, consider shifting to safer investments such as money market funds or switch back to cash/ CPF and start a 24-month RSP programme.
•Own a diversified portfolio. This is not the time to take concentrated bets on specific investments or sectors as recovery in financial markets is unlikely to be immediate.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
Friday, October 17, 2008
Plan for Recovery
From the Investment Desk
Eddy Tan
Head, Analytics & Asset Allocation
Bush & co. didn’t find any weapons of mass destruction ("WMD") in Iraq. Instead, they exported their own version of US-made sub-prime and credit WMD that blew up everywhere in the world. Equity markets were severely hammered last week.
US equity indices lost >20% the whole of last week. Central banks around the world appear to have coordinated desperate moves to deal with desperate times, from injecting liquidity, to resuscitating financial institutions, to guaranteeing deposits (to prevent bank runs), to slashing interest rates (100bp in Australia, 50bp in many other countries).
Consider Iceland "bankrupt" – the volcanic country of 320,000 people should have kept more gold bullion. Exporters to Iceland are asking for upfront payment, many avoiding Icelandic krona. Tempers are flaring elsewhere – in Pakistan, between Thailand and Cambodia over a temple,…
No wonder, gold is still holding up above US$800. Last Monday, US equity indices staged a powerful +11% rally, a 75-year historic jump; while ST Index rose 6.6%. US equity indices fizzled since then, and so did other markets. Equity indices could test the last low.
- Hedge funds reported redemption orders placed last month, which should pressure equities come December. I reckon outflow of US$1.6-2 trillion, from multiple of 4-5x of US$400 billion redemption. Fortunately, our recommended hedge funds could still employ short and use liquid instruments.
- Focus has shifted away from sub-prime. There are more defaults in prime mortgages. Wait for the other shoes to drop – credit cards, automotive loans and commercial property loans, as recession bites and credit remains tight. JP Morgan, Citigroup and American Express, among others, issuer credit cards. Recent equity injection by US government could ease some pressure, for now.
- UK residential house index is under tremendous stress, given the higher leverage and that prices have not fallen as rapidly compared to the US. We reckon up to 25-30% downside in UK home value.
- The size of credit derivatives, at US$60 trillion overwhelms global GDP. The size of derivatives of all sorts is even a larger US$600 trillion. Several voices call for regulation of these instruments. We look forward to that, but taming such monster will be a nightmare.
- The war on naked shorts evolves into a war against all kinds of equity shorts. That is blunder – equity markets tumble, nonetheless. Shorts grease the wheels of capital markets. Italian Prime Minister’s call to halt global equity trading is also another mistake; fortunately he retracted.
- Volatility Index ("VIX", tradable on CBOE), which measures investors’ fear, soared to >70. Some pundits target 90. Goldman Sachs volatility traders made a killing. Under normal circumstances, VIX hovers around 24.
- Spikes in LIBOR rates (>4% for USD, >5% for ₤) still express suspicion among banks (cash hoarding). Businesses are getting squeezed from tight credit, so expect pressure on corporate earnings. Let’s apply discounts to those projected PE multiples. Initial attempts to unfreeze credit will take time, which will invite confidence back to businesses and equities.
- Global bail out tab nears US$3 trillion. Global printing presses are cheapening currencies. Central banks have restricted (their own) gold lending, sending lease rates higher to >2%.
Plan For Recovery in 2H09 (fingers crossed)
Many of us spend hours glued to the internet and television searching for answers but only to see more bad news. Until next year, expect >10% daily fluctuation. There will be casualties. Bail out programs won’t rescue every financial humpty dumpty. Failed entities lead to job and pay cuts, and haircuts by creditors, counterparties, shareholders and tax payers.
But that should lead to a new era of prudent banking practices. Certain Asian, Middle East & BRIC economies flushed with surpluses will keep their economies humming; their equities have been unfairly sold down.
Plan now and prepare deploying cash to buy depressed but attractive assets. Monthly RSP is the way to go and would position medium to long term investors for the market recovery.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
Thursday, October 09, 2008
NEWSFLASH: UK announced bail-out plan for banks
Darling to the rescue
Alistair Darling, Chancellor of the Exchequer, announced a bail-out plan of at least £400 billion yesterday, inclusive of £25 billion committed to help banks recapitalise. The plan is designed to be comprehensive enough and large enough to tackle the core challenges facing the UK banking system. Summary of the UK Bailout Package
1. £25 billion to be used as equity injection to shore up banks’ Tier 1 capital (expected to be preference shares or Permanent Interest Bearing Shares known as PIBS), with the possibility of £25 billion more
2. £250 billion as guarantees for new bank debt
3. £200 billion offered through the Bank of England’s special liquidity scheme
The UK bank support package is applicable to banks and building societies incorporated in the UK as well as UK subsidiaries of foreign institutions, which have a substantial business in the UK. With the package, the UK government has taken steps to provide sufficient liquidity in the short-term; avail new capital to UK financial institutions to strengthen their books and through the guarantee scheme, the banking system is ensured of funds needed to keep lending going in the medium-term. What the UK government has done is effectively to part-nationalise some of the largest banks. As of yesterday, there were eight banks who have indicated they will participate – Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, RBS, Standard Chartered. Barclays, Standard Chartered and HSBC have declined the offer of government equity but will participate in the remainder of the scheme.
Challenges Ahead The government must now exercise diligent control of these financial institutions to make sure that the banks do not take undue risks or to abuse the government-backing. This will be a difficult balancing act. The banks may be too restrained in its daily operations if the government imposes too many conditions on the lending criteria, compensation scheme of banks executives or dividend policy for shareholders. Yet, if the banks become too conservative and do not resume lending, it would defeat the point of the bank support package. Financial Market Reaction The markets do not seem to be offering any signs of immediate gratification. The UK FTSE 100 fell a further 5.18% yesterday to close at 4366.69. Across Europe, markets closed down between 5-8%, amidst the flurry of rate cuts by various central banks in Europe. Regardless, what the UK government has done is a positive step towards shoring up investor confidence. UK government is signaling to investors that it is willing to take stakes in her financial institutions, and to prevent the financial crisis from spilling into the real economy.
Fundamental Difference between the US & UK Bail-out Packages In the US, the bailout plan promises to buy the toxic assets owned by financial institutions. This provides a market for the dumping of toxic assets, so that the banks can get on with their normal business. However, this does not inject liquidity or fresh capital directly into the banks – it simply provides a lifeline for banks to dump their toxic assets, which are difficult to be priced. In the UK, the government is taking equity stakes and directly injecting liquidity into financial institutions, also facilitating medium-term funding. This is to restore confidence in the banks so that over time, these banks can work out their excesses and emerge stronger and more transparent. In addition, banks could also swap the toxic assets they have with UK government bonds, thus ridding the toxic from the banks’ books.
From the IPPFA Investment Division
Darling to the rescue
Alistair Darling, Chancellor of the Exchequer, announced a bail-out plan of at least £400 billion yesterday, inclusive of £25 billion committed to help banks recapitalise. The plan is designed to be comprehensive enough and large enough to tackle the core challenges facing the UK banking system. Summary of the UK Bailout Package
1. £25 billion to be used as equity injection to shore up banks’ Tier 1 capital (expected to be preference shares or Permanent Interest Bearing Shares known as PIBS), with the possibility of £25 billion more
2. £250 billion as guarantees for new bank debt
3. £200 billion offered through the Bank of England’s special liquidity scheme
The UK bank support package is applicable to banks and building societies incorporated in the UK as well as UK subsidiaries of foreign institutions, which have a substantial business in the UK. With the package, the UK government has taken steps to provide sufficient liquidity in the short-term; avail new capital to UK financial institutions to strengthen their books and through the guarantee scheme, the banking system is ensured of funds needed to keep lending going in the medium-term. What the UK government has done is effectively to part-nationalise some of the largest banks. As of yesterday, there were eight banks who have indicated they will participate – Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, RBS, Standard Chartered. Barclays, Standard Chartered and HSBC have declined the offer of government equity but will participate in the remainder of the scheme.
Challenges Ahead The government must now exercise diligent control of these financial institutions to make sure that the banks do not take undue risks or to abuse the government-backing. This will be a difficult balancing act. The banks may be too restrained in its daily operations if the government imposes too many conditions on the lending criteria, compensation scheme of banks executives or dividend policy for shareholders. Yet, if the banks become too conservative and do not resume lending, it would defeat the point of the bank support package. Financial Market Reaction The markets do not seem to be offering any signs of immediate gratification. The UK FTSE 100 fell a further 5.18% yesterday to close at 4366.69. Across Europe, markets closed down between 5-8%, amidst the flurry of rate cuts by various central banks in Europe. Regardless, what the UK government has done is a positive step towards shoring up investor confidence. UK government is signaling to investors that it is willing to take stakes in her financial institutions, and to prevent the financial crisis from spilling into the real economy.
Fundamental Difference between the US & UK Bail-out Packages In the US, the bailout plan promises to buy the toxic assets owned by financial institutions. This provides a market for the dumping of toxic assets, so that the banks can get on with their normal business. However, this does not inject liquidity or fresh capital directly into the banks – it simply provides a lifeline for banks to dump their toxic assets, which are difficult to be priced. In the UK, the government is taking equity stakes and directly injecting liquidity into financial institutions, also facilitating medium-term funding. This is to restore confidence in the banks so that over time, these banks can work out their excesses and emerge stronger and more transparent. In addition, banks could also swap the toxic assets they have with UK government bonds, thus ridding the toxic from the banks’ books.
From the IPPFA Investment Division
Tuesday, October 07, 2008
Asian Indices Heavily Sold Down ( 6 Oct 2008 )
Asian indices plunged today, anywhere from over 3% (Australia, New Zealand) to 10% (Indonesia). As of 1615h, Singapore and Hong Kong sank by over 4% each. Despite the approval of the US$700b Troubled Asset Recovery Plan package (“TARP”, which I dub “Trashed Assets Rollover Plan”), market players sense that the US (and the world for that matter) needs to do a lot more than drip-feed to the Sick Man of the World.
The Fed may consider an aggressive rate cut (50bp?), ECB is also considering rate cuts, but those may not solve the problem of the current deleveraging. You could tell the level of distrust among banks by the sharp spikes in LIBOR spreads, in any currency, you name it. Tight credit conditions also affecting borrowers – businesses and individuals. From Elm Street to Wall Street to Main Street, Halloween 2007 could continue with the next sequel this year, and across to Europe.
The US Elections, on 4-Nov-2008, is just another month away. I hear (American, of course) opinions that try to talk up the US market for a rebound circa “Super Tuesday”. The situation in the US is still serious, so that bounce could be short-lived.
Last Friday, investment legend, Bill Miller, who runs Legg Mason Value Trust that has beaten S&P 500 for 15 years straight until the fund was humbled since 2006, repeatedly said that US equities are good value. To an audience of 500, Legg Mason emphasized market recovery. During a small group lunch last Friday, I told Bill that he may be too early with his call, given the on-going deleveraging. He countered that he was “too late to go defensive”. Legg Mason expects recovery within the year, or best case within 6 months. Keep your monthly RSP rolling.
Is the Oracle of Omaha a harbinger of recovery in equities? Warren Buffet is the only non–Arab-, non–Mandarin-speaking savior of two American icons. From his war chest of US$38b, the investment guru bought preferred shares of Goldman Sachs (US$5b) and GE (US$3b). Even Anthony Bolton, a top Fidelity fund manager, also invested his own money in equities. I expect another <15% more downside.
China could be one of the first equity markets to recover. Three stockbroking reports alluded to more (aggressive) rate cuts by Chinese government which could be equity-friendly. But the possible deluge of shares held under moratorium and tainted milk scandal could restrain market exuberance.
Several pundits expect up to one-third of the world’s10,000 hedge funds to collapse. Year-to-date, 350 shut down, against 563 in the whole of 2007. The stronger ones could be cannibalizing the weaker ones. Even if this is not the case, the more able ones stand to gain market share (and that goes for banks, too).
Some US$600b of the US$1.8t global fund under management sought safety in cash (US$100b in money market funds). Several private bankers have been advicing their high networth clients to switch to gold. Hedge fund strategies that continue to work well include managed futures and macro. Our hedge fund partners are still in good shape; we have been communicating with them more frequently these days. Best is to employ multi-strategy funds, with capital guaranteed notes providing peace of mind. Even in hedge funds, you should plan to invest in a diversified portfolio, if possible.
While paper redemption continues to pressure gold value (or some could be switching to physical?), ordinary folks have been gobbling the physical. The US ran out of Buffaloes, Eagles and Kruggerands. In Singapore, a local bank ran out of 1-ounce gold coins, although smaller coins/ wafers are still available. While fears of global recession pressures crude oil (US$90), the value of gold appears to be holding steady above US$800. As the US and Europe inject hundreds of billions of dollars & euros, fears of fiat money to feed the gold-buying frenzy. Buy physical gold, in tranches, for hedge against disaster, and not for making obscene returns. A bounce in equities could trounce gold value; buy another tranche.
And speaking of cash, even if you plan to overweight cash, then are your banks safe? Hong Kong almost suffered a run on one of its banks until an influential investor sang a comforting lullaby. Singapore government sang its tune, too. Diversify, diversify, diversify. Investment is not about seeing positive return in all your investment instruments each time you look at the statement. Market conditions are extreme this time, we need time to see a return of confidence in the market.
From the Investment Desk
Eddy Tan
Head, Analytics & Asset Allocation
IPP Financial Advisers Pte Ltd
The Fed may consider an aggressive rate cut (50bp?), ECB is also considering rate cuts, but those may not solve the problem of the current deleveraging. You could tell the level of distrust among banks by the sharp spikes in LIBOR spreads, in any currency, you name it. Tight credit conditions also affecting borrowers – businesses and individuals. From Elm Street to Wall Street to Main Street, Halloween 2007 could continue with the next sequel this year, and across to Europe.
The US Elections, on 4-Nov-2008, is just another month away. I hear (American, of course) opinions that try to talk up the US market for a rebound circa “Super Tuesday”. The situation in the US is still serious, so that bounce could be short-lived.
Last Friday, investment legend, Bill Miller, who runs Legg Mason Value Trust that has beaten S&P 500 for 15 years straight until the fund was humbled since 2006, repeatedly said that US equities are good value. To an audience of 500, Legg Mason emphasized market recovery. During a small group lunch last Friday, I told Bill that he may be too early with his call, given the on-going deleveraging. He countered that he was “too late to go defensive”. Legg Mason expects recovery within the year, or best case within 6 months. Keep your monthly RSP rolling.
Is the Oracle of Omaha a harbinger of recovery in equities? Warren Buffet is the only non–Arab-, non–Mandarin-speaking savior of two American icons. From his war chest of US$38b, the investment guru bought preferred shares of Goldman Sachs (US$5b) and GE (US$3b). Even Anthony Bolton, a top Fidelity fund manager, also invested his own money in equities. I expect another <15% more downside.
China could be one of the first equity markets to recover. Three stockbroking reports alluded to more (aggressive) rate cuts by Chinese government which could be equity-friendly. But the possible deluge of shares held under moratorium and tainted milk scandal could restrain market exuberance.
Several pundits expect up to one-third of the world’s10,000 hedge funds to collapse. Year-to-date, 350 shut down, against 563 in the whole of 2007. The stronger ones could be cannibalizing the weaker ones. Even if this is not the case, the more able ones stand to gain market share (and that goes for banks, too).
Some US$600b of the US$1.8t global fund under management sought safety in cash (US$100b in money market funds). Several private bankers have been advicing their high networth clients to switch to gold. Hedge fund strategies that continue to work well include managed futures and macro. Our hedge fund partners are still in good shape; we have been communicating with them more frequently these days. Best is to employ multi-strategy funds, with capital guaranteed notes providing peace of mind. Even in hedge funds, you should plan to invest in a diversified portfolio, if possible.
While paper redemption continues to pressure gold value (or some could be switching to physical?), ordinary folks have been gobbling the physical. The US ran out of Buffaloes, Eagles and Kruggerands. In Singapore, a local bank ran out of 1-ounce gold coins, although smaller coins/ wafers are still available. While fears of global recession pressures crude oil (US$90), the value of gold appears to be holding steady above US$800. As the US and Europe inject hundreds of billions of dollars & euros, fears of fiat money to feed the gold-buying frenzy. Buy physical gold, in tranches, for hedge against disaster, and not for making obscene returns. A bounce in equities could trounce gold value; buy another tranche.
And speaking of cash, even if you plan to overweight cash, then are your banks safe? Hong Kong almost suffered a run on one of its banks until an influential investor sang a comforting lullaby. Singapore government sang its tune, too. Diversify, diversify, diversify. Investment is not about seeing positive return in all your investment instruments each time you look at the statement. Market conditions are extreme this time, we need time to see a return of confidence in the market.
From the Investment Desk
Eddy Tan
Head, Analytics & Asset Allocation
IPP Financial Advisers Pte Ltd
Friday, September 26, 2008
Watt You Can Do To Save $$$ on your Electric Bill
First of all, let's ask ourselves why.
Why should you do it when you can 'easily' afford paying the bill?
1) Did you know that some families in Singapore could not pay their Power Supply bills and are living in darkness at night while depending on the light shining in from the HDB corridor ceiling lights?
3) Did you know that electricity comes from burning fuel in Singapore?
The more we consume electricity, the more fuel is burnt to meet that demand. Burning produces carbon dioxide and other piosonous gases too. Global warming is real and causing many weather related disasters.
3) Did you know that the millions of people are living without electricity?
South Asia 706 million
Sub-Saharan Africa 547 million
East Asia 224 million
Other 101 million ( source:www.globalissues.org )
First we need to identify the appliances in our homes that consumes more electricity and reduce it. Looking at the chart below, we should tackle the airconditioner, refrigerator, TV & video equipment, water heater and lighting ( total 76% of our total electric bill )
Why should you do it when you can 'easily' afford paying the bill?
1) Did you know that some families in Singapore could not pay their Power Supply bills and are living in darkness at night while depending on the light shining in from the HDB corridor ceiling lights?
3) Did you know that electricity comes from burning fuel in Singapore?
The more we consume electricity, the more fuel is burnt to meet that demand. Burning produces carbon dioxide and other piosonous gases too. Global warming is real and causing many weather related disasters.
3) Did you know that the millions of people are living without electricity?
South Asia 706 million
Sub-Saharan Africa 547 million
East Asia 224 million
Other 101 million ( source:www.globalissues.org )
First we need to identify the appliances in our homes that consumes more electricity and reduce it. Looking at the chart below, we should tackle the airconditioner, refrigerator, TV & video equipment, water heater and lighting ( total 76% of our total electric bill )
Monday, September 22, 2008
Should I Surrender My AIA Insurance Policy?
Last week, when news of the possible collapse of AIG reached Singapore, many AIA policy holders were fearful of losing their hard earned money. Despite the announcement that the US government was providing a US$85 billion (S$121.3 billion) lifeline loan to AIG in exchange for a 79.9% equity stake, many policyholders queued up to surrender their policies last week.
Now, after many assurances from AIA and MAS, many of these policyholders are re-instating their policies without penalty or cost to themselves, courtesy of AIA.
Last week, a few clients of mine called me if they should terminate their AIA life insurance policies. I advised them that they should not terminate their policies.
Why?
5 Reasons Why You Should Not Terminate Your AIA Policies
1) What was your objective of buying the policy in the first place? Has your objective been met? Is your insurance coverage still applicable to your present and future needs? If yes, keep it.
2) Are you still healthy now? Yes? Are you sure? All existing illnesses whether you know it or not will be excluded upon a claim, subject to the actual terms and condition of the new insurance policy. If you are not sure and have not done a full body medical check up, keep it.
3) Are you willing to pay higher premiums? The policy that you bought 15 years ago when you were a young adult will be a lot cheaper than if you were to buy one now at the same amount of insurance coverage. If you are not willing, keep it.
4) If you are using this "crisis" as an excuse to get rid of your policy, please reconsider as you may regret it if something unfortunate were to happen to you after you surrender your policy. If you are still the responsible adult, keep it.
5) If your policy matures next year, and you think that you have made some profit and feels that it is OK to get out now. STOP! You will lose all the "Maturity Bonus" which will kick in at the end of the policy term!!! This amount can be quite substantial, so do not be rash. If you want to reap a good return on your savings for the past 20 years, keep it.
If you are still not convinced, call me for a FREE review of your insurance policies so that I can give you a better picture of your insurance planning.
Now, after many assurances from AIA and MAS, many of these policyholders are re-instating their policies without penalty or cost to themselves, courtesy of AIA.
Last week, a few clients of mine called me if they should terminate their AIA life insurance policies. I advised them that they should not terminate their policies.
Why?
5 Reasons Why You Should Not Terminate Your AIA Policies
1) What was your objective of buying the policy in the first place? Has your objective been met? Is your insurance coverage still applicable to your present and future needs? If yes, keep it.
2) Are you still healthy now? Yes? Are you sure? All existing illnesses whether you know it or not will be excluded upon a claim, subject to the actual terms and condition of the new insurance policy. If you are not sure and have not done a full body medical check up, keep it.
3) Are you willing to pay higher premiums? The policy that you bought 15 years ago when you were a young adult will be a lot cheaper than if you were to buy one now at the same amount of insurance coverage. If you are not willing, keep it.
4) If you are using this "crisis" as an excuse to get rid of your policy, please reconsider as you may regret it if something unfortunate were to happen to you after you surrender your policy. If you are still the responsible adult, keep it.
5) If your policy matures next year, and you think that you have made some profit and feels that it is OK to get out now. STOP! You will lose all the "Maturity Bonus" which will kick in at the end of the policy term!!! This amount can be quite substantial, so do not be rash. If you want to reap a good return on your savings for the past 20 years, keep it.
If you are still not convinced, call me for a FREE review of your insurance policies so that I can give you a better picture of your insurance planning.
Thursday, September 11, 2008
Spending On Health Care 'Bound To Go Up'
According to our Health Minister Khaw Boon Wan, he said that it was unrealistic to expect national spending on health care not to increase in the future.
He noted that Singapore has managed to cap national health-care spending at 4% of Gross Domestic Product (GDP) and still achieve high standards of health care compared with the United States, which spends 16% of its GDP on health care.
But he said that spending MUST go up, with medical advances making treatments and drugs costlier together with plans by the Health Ministry to recruit more doctors, nurses and other health-care professionals to improve standards of care.
If spending on health care reached 8 to 9% of GDP, it would mean an individual would need to use some 15% of his income on medical expenses, including health insurance premiums and co-payments.
For more info read the Straits Times Thursday 11 Sep 2008 HOME page B2...
Are you adequately insured for your own health care? Not sure, let me take a look at your health insurance policies. Your needs come first when it comes to financial planning. I separate the best from the rest for you!
He noted that Singapore has managed to cap national health-care spending at 4% of Gross Domestic Product (GDP) and still achieve high standards of health care compared with the United States, which spends 16% of its GDP on health care.
But he said that spending MUST go up, with medical advances making treatments and drugs costlier together with plans by the Health Ministry to recruit more doctors, nurses and other health-care professionals to improve standards of care.
If spending on health care reached 8 to 9% of GDP, it would mean an individual would need to use some 15% of his income on medical expenses, including health insurance premiums and co-payments.
For more info read the Straits Times Thursday 11 Sep 2008 HOME page B2...
Are you adequately insured for your own health care? Not sure, let me take a look at your health insurance policies. Your needs come first when it comes to financial planning. I separate the best from the rest for you!
Saturday, September 06, 2008
Why Couples Must Be Financially Literate
In every family, many married couples divide their household chores and other family matters. The husband might prefer to do the laundry and the wife always buys the family groceries. The husband might be in control of all things car related, but the wife always do the children cloths shopping.
Handling a family's financial affairs is another one of those tasks that usually falls to husband or the wife. Sometimes there are couples who are both engaged in the family's budgeting, bill-payment, savings and investing. But in most families, these "jobs" usually fall to the husband.
If you're reading my blog, there's a good chance that you're that person in your household. Maybe you have been educated in finances, or maybe you have no choice but to be in charge of your family finances.
The key danger you run in single-handedly managing your family's financial affairs is that you could leave your spouse out of the loop. If you left the world yesterday, would he or she know how to manage the family nest egg? Even if you expect that your spouse will look for a financial adviser for help when you're gone, would he or she even know where to look for advice?
Even if you're super fit, make sure that your spouse know how to handle the following issues if something unfortunate were to happen to you.
1. Where to Find Everything
Your first step is to list what assets you have and where to find them. Even if you're not an investment junkie, you are most likely having a number of different accounts scattered across several different financial-service providers. You may have it all straight in your head, but it could seem like a confusing mess to your spouse.
Try to summarise your investment accounts as much as you possibly can. Your partner will have a far easier time managing the family nest egg when you are not aound.
It also makes sense to develop a filing system that both of you understand. Start by creating a folder for each separate account, and be very picky about what papers you keep. (Keep: Shares and unit trust statements, with trade confirmations. Throw: Annual reports, prospectuses, and marketing brochures.)
Once you've done that, list all your accounts and account numbers (remember your life-insurance policies too), the names and telephone numbers of the people you deal with at various financial institutions, and any website addresses and passwords you need to gain access to your accounts. Store this information in an safe place and let your spouse know where it is.
2. Who To Contact
Your next step in leaving your spouse well prepared is to write down a list of your important financial contacts: financial advisers, insurance agents, accountants, and lawyers. Include their names, phone numbers, and email addresses, and also write a brief description of what they have done for you, especially me.
3. Which Assets To Access First
Some of your assets can be tapped at any time, while others may carry penalties and tax implications if your spouse withdraws the money prematurely. To prevent your spouse from making a serious and costly mistake, it pays to clearly list out which of your assets are liquid and which are not. As a general rule of thumb, you'll want to keep at least six months' worth of living expenses in highly liquid financial instruments, such as money market funds and your fixed deposit accounts.
4. Where to Go for Help
If you've been an financial do-it-yourself guru but you expect your spouse to seek outside help in managing your financial affairs after you've gone, it is better to look for financial advisers who share your investing philosophy and have served clients with needs like yours. Keep in touch with me.
5. How to Learn More
Even if you expect that your spouse will consult a financial adviser after you're gone, he or she will still need a basic understanding in financial planning. A few simple investment books will impart a lot of information for your spouse. Reading my blog will also impart some knowledge about financial planning.
Handling a family's financial affairs is another one of those tasks that usually falls to husband or the wife. Sometimes there are couples who are both engaged in the family's budgeting, bill-payment, savings and investing. But in most families, these "jobs" usually fall to the husband.
If you're reading my blog, there's a good chance that you're that person in your household. Maybe you have been educated in finances, or maybe you have no choice but to be in charge of your family finances.
The key danger you run in single-handedly managing your family's financial affairs is that you could leave your spouse out of the loop. If you left the world yesterday, would he or she know how to manage the family nest egg? Even if you expect that your spouse will look for a financial adviser for help when you're gone, would he or she even know where to look for advice?
Even if you're super fit, make sure that your spouse know how to handle the following issues if something unfortunate were to happen to you.
1. Where to Find Everything
Your first step is to list what assets you have and where to find them. Even if you're not an investment junkie, you are most likely having a number of different accounts scattered across several different financial-service providers. You may have it all straight in your head, but it could seem like a confusing mess to your spouse.
Try to summarise your investment accounts as much as you possibly can. Your partner will have a far easier time managing the family nest egg when you are not aound.
It also makes sense to develop a filing system that both of you understand. Start by creating a folder for each separate account, and be very picky about what papers you keep. (Keep: Shares and unit trust statements, with trade confirmations. Throw: Annual reports, prospectuses, and marketing brochures.)
Once you've done that, list all your accounts and account numbers (remember your life-insurance policies too), the names and telephone numbers of the people you deal with at various financial institutions, and any website addresses and passwords you need to gain access to your accounts. Store this information in an safe place and let your spouse know where it is.
2. Who To Contact
Your next step in leaving your spouse well prepared is to write down a list of your important financial contacts: financial advisers, insurance agents, accountants, and lawyers. Include their names, phone numbers, and email addresses, and also write a brief description of what they have done for you, especially me.
3. Which Assets To Access First
Some of your assets can be tapped at any time, while others may carry penalties and tax implications if your spouse withdraws the money prematurely. To prevent your spouse from making a serious and costly mistake, it pays to clearly list out which of your assets are liquid and which are not. As a general rule of thumb, you'll want to keep at least six months' worth of living expenses in highly liquid financial instruments, such as money market funds and your fixed deposit accounts.
4. Where to Go for Help
If you've been an financial do-it-yourself guru but you expect your spouse to seek outside help in managing your financial affairs after you've gone, it is better to look for financial advisers who share your investing philosophy and have served clients with needs like yours. Keep in touch with me.
5. How to Learn More
Even if you expect that your spouse will consult a financial adviser after you're gone, he or she will still need a basic understanding in financial planning. A few simple investment books will impart a lot of information for your spouse. Reading my blog will also impart some knowledge about financial planning.
Subscribe to:
Posts (Atom)
