Riding out the financial crisis

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Riding out the financial crisis - Part 2

Chia Ti Lik

I did my second surrender of another insurance policy last week. This time round the net worth was another measly S$6,000 or so. The loss in premiums paid up was probably about S$4,000 plus. I will probably keep this amount close at hand in cold hard cash.

A friend who knew about my dilemma had commented that I did not have much to show after investing in my insurance for a good nine years. This is undeniable. It is a settled fact that I had lost money on the deal.

But the silver lining in my loss, I replied to him, was that even though I lost money, I was at least losing my own money and not money that did not belong to me.

I was referring specifically to the bungled investments unraveling before us over the last few weeks: Temasek Holdings botched investment in ABC Learning – an over-hyped Australian childcare provider – and PAP-run town councils $12-million losses in investments over Lehman-linked products.

There are also other investment decisions of Temasek and GIC that have turned out horribly wrong. And these are the ones that we know about. Are there others which the mainstream media have chosen to whitewash?

These events reveal how gullible those who manage our funds are. At the very least they are not the extra bright sparks that the PAP keeps touting them to be. They are very much like us. The only difference is that are thick-skinned enough to keep portraying themselves as special and paying themselves obscene salaries.

When the error of their ways is pointed out they respond by challenging their critics to come up with alternatives without so much much as acknowledging their wrongs. "What would you have done?" or "Do you think you could have done better?"

The burden is now placed on the critic to produce an alternative direction or solution while the wrongdoer is absolved of his or her act. Such an approach is seriously wrong.

But I remember making the same mistake. I had previously challenged my friend to come up with a better and alternative way of investing his money. He remained silent and did not reply me then.

I have since found out that he had kept his spare change from each day in large glass and earthenware containers, doubling them up as visual displays of his wealth. Today, he may have lost out on a little interest but the capital of his savings remains intact – not a cent less.

I'm not advocating that we should all stash our savings in some piggy bank at home but I think you get my point. Sometimes, listening to the hype-of-the-day and rushing headlong with the masses to make more money from what we have rightfully earned only to burn when financial fires burst from the "investments" may not be such a wise thing to do.

More often than not, investments mirror a game of chess. Time should be taken to consider what is the next best move. For to make the correct decision after careful deliberation is far better than to rush to procure fools' gold.

My friend is not highly qualified but wisdom showed in his actions. The same cannot be said about the much-touted leaders in the GIC, Temasek and town councils. Given that the Government continues to boast how talented these folks are, their failure to safeguard the people's money should be investigated and their ability to govern questioned.

Unfortunately because of the authoritarian system all we can do now is to sit back, strap up and steel ourselves for more news of serious financial errors.

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Comments (30)

Sat 22 Nov 2008 10:42 AM | | Ng E-Jay - investments of GIC, temasek

GIC & Temasek investments gone horribly wrong: Merrill Lynch now trading at US$7.75, 16% of Temasek's purchase price of US$48. In other words, Temasek has lost 84% of its Merill investment.

GIC invested in UBS convertible notes when UBS stock price near to US$50. If UBS wants to exercise the option to convert the notes to stock, it must do so within 2 years (only slightly over one year remaining). Now, UBS stock price is US$9.25 per share, more than 80% down from the original "strike" of US$50 per share.

Citigroup is now US$3.87 per share. Guess where Temasek bought them? Hint: Over 8 times higher than the current price.

A portion of these paper losses have already been realized. Temasek has sold 50% of its Merill shares at a US$1.5 billion dollar loss in sept 08.

A person like CTL and his friend who keep everything in cash has outperformed GIC & Temasek by many hundreds of percentage points without drawing their incredulous salaries.

E-Jay

Sat 22 Nov 2008 11:07 AM | ??

so, does mr chia now wishes to be an investment consultant for the GIC, temasek etc.? i mean, how about filling in the spot if the supposed brightest in temasek/GIC cant help spore? mr chia should think about what can be done to sharpen our competitive edge in terms of hiring and retaining more of such "brightest" sparks. do note, however, that spore has a small talent pool. and if u are gonna propose employing foreign talent, do realize you are a politician and need to pander to populist pressures of locals first. and in any case, in the financial world, hiring the "brightest" does require high salaries. does mr chia know which other companies are GIC/Temasek are competing with for such people? and has he researched on the relative salaries between what GIV/Temasek pays their staff and those of other investment houses?

and in any case, lets not ride on this fashionable wave and slam everything and anything. if mr chia is honest enough, he'll concede that we are dealing with a vastly different monster and environment altogether. just months back, even financial heavyweights like alan greenspan couldn't have predicted this swift and drastic change of events. is mr chia saying that not just spore's GIC/Temasek - but that the whole world of financial advisers are really "just like you and me"? that is certainly an exaggerated sense of self importance and hypothetical competence.

mr chia seems to suggest that because temasek/GIC hasnt been able to weather this storm, they ought to be lampooned. again, if mr chia is honest enough, he will point out the relative level of damage temasek/gic has endured against other investment houses like say, the spectacular lehman brothers or even AIG. but alas, such a discussion point was completely "whitewashed", a crime mr chia very happily charge on the mainstream media.

and above all, i think mr chia is also selective in his presentation and memory. perhaps reviewing GIC/temasek's recently disclosed annual net earnings/turnover will help mr chia understand the aggregate reality of the matter: GIC/Temasek have been growing the national reserves of singapore steadily, substantially and prudently over the years in net terms. and really, in financial reporting, it is the net results that matter for investment houses which are not in it for the short term gains but for the long term viability of an investment. perhaps, mr chia should check some of such records and have some semblance of honesty and integrity to report and discuss as it really is.

furthermore, he should compare GIC/Temasek's transparency record with that of comparable SWFs. does he not concede that GIC/Temasek has a good standing with the international financial markets, as evidenced by the fact that the US congress and committee on the issue of SWFs actually roped in Singapore during the deliberations period to come up with the guidelines for SWFs' disclosure procedures? alas, these are meritorious points which mr chia has conveniently "whitewashed".

moving forward, i suggest mr chia write directly to the management of both GIC and Temasek and suggest the investment philosophy in the future. spore will do well with an astute and learned financial commentator helping us steer the economy through such choppy waters.

on the issue of the town councils, i again urge mr chia to suggest a comprehensive new philosophy of investment strategies for the town councils, both pap and the opposition. just take it as a hypothetical exercise of IF SDP WINS A GRC, HOW WILL IT MANAGE ITS FUNDS? what portion of its sinking funds will go into what sort of investments? pls present to us a "model" system of investment, spore will do well with such a "model" system.

and again, for the town council issues, mr chia conveniently glosses over - indeed ignore - the real returns the town councils have over the years. and he also misses the point that this recent round of losses are but a minute 3-6% of the total investment portfolio of the respective town councils involved. does he not concede that the remaining bulk of investment funds by the town councils are sound? instead, as usual, he picks on the minute, enlarges it to a magnitude that is really a stretch of logic, and conclude, fallaciously, that "oh, look, a spot of incompetence equates to a chain of incompetence".

this is politics, after all. and we recognize the need for sdp to portray its opposition in bad light. but, in the midst of doing that, may i urge the sdp to retain some semblance of integrity and put aside personal partisan grievances and really work for the common good? present objective views and discussions with meat, not some fluffy blog-like entries not grounded in sound research or honest appraisals. this will only cast sdp in an even unfavorable light - digging in depths unheard of and unreached of by any other political party in spore's history indeed.

mr chia, the ball is in your court. i do hope your complaints and sense of public service are translated into concrete actions of help and suggestions. indeed, i can afford to be an armchair critic for i am an ordinary voter. but, in your capacity as a member of political party which has the thinly veiled agenda of winning power and toppling the ruling regime, you cannot simply complain. you have to translate that into a possible course of action and convince me, us - the electorate - that yours is the better way forward.

thats how obama did it, so please, no cheap potshots at pap, but concrete and meaty suggestions please.

Sat 22 Nov 2008 3:26 PM | HORSE - we hate papee

SINGAPOOR IS IN A RECESSION, YET THE PAPEE STILL ENJOY THE OBSENCE PAY,,,,NO COST CUTTING MEASURE IMPLEMENTATION,NO PAY CUT,NO ACOUNTABILITY FOR ALL THE LOSSES OF OF FUNDS..YET STILL TELLING PEOPLE TO BE THANKFUL ......

Sat 22 Nov 2008 5:11 PM | anon - How much?

How much did the government invest in UBS, Merrill, and Citigroup?

Sat 22 Nov 2008 5:30 PM | maxChew - Keep up the postings.......well said

Besides being a good lawyer (I've seen u in action in court), u r also an excellent writer Ti Lik!
Keep up the good work. Your great sacrifice for freedom, democracy and the truth (unlike most of your peers) will be well rewarded in the near future.
Mark my words...although I may not be around when it happens, this PAP dictatorship will crumble as sure as happened to other autocratic countries. No cruel dictatorship lasts forever. The wave of democratisation is now upon us.....be patient.
Regds and best wishes!

Sat 22 Nov 2008 5:48 PM | anon - GIC/Temasek

Didn't GIC/Temasek gain much of their profitability thru the listing of the former government assets?

I think their investment on foreign companies has always performed poorly.

Can anyone shed some light?

Sat 22 Nov 2008 5:59 PM | Meeko - 30,000 jobs gone

Last night on BBC radio, about 30,000 banking jobs here would be wiped out by this financial crisis. So much about developing a financial hub and long term investment.

Sat 22 Nov 2008 8:46 PM | | Heector chee - all the king's men

Dynasty politics all the same from North Korea to Surharto Indonesia.Until the ruling party or dynasty goes they look after their own kind.It is like Ali Baba and the 40 thieves story.The king take the big share but u also take a small share of the loot.Therefore mutual protection.No debate from the slaves who ar ruled as the "KING" can do no wrong.

Sat 22 Nov 2008 9:16 PM | Bernard Chan - Cold Feet

From your investment philosophy, you are like a small fish swimming in a small pond. Any slightest change of pond water, you are the first one to jump out. No wonder your political activites are confined only to TBT group and nothing spectacular to show to the electorate. We need outstanding leadership and performer and not mediocre to lead Singapore out of this global recession. Can you do it?

Sat 22 Nov 2008 11:42 PM | tewniaseng

For Japanese company, if it loses money, the CEO will commit suicide, how about Lau Lee ?? Will he hang himself ??

Sun 23 Nov 2008 12:23 AM | anon - to Bernard Chan

Chia may be a small fish in a small pond, at least he can afford to lose what he owns.

PAP thinks that they can play with the big boys ... and constantly got burnt (or may be they purposely got burnt). What they are good at is to abuse the citizens and fixing oppositions.

PAP should just focus on creating the environment to attract the really talented, those talents will then make the $.

I can't imagine any talented individual who can make big bucks anywhere and be willing to be subjected to the PAP's protocols.

Certainly, if I am really good, I don't want to work for idiots and I don't want to be slapped by idiots.

Sun 23 Nov 2008 1:20 AM | Well said - Keep it up SDP

[b]Chia Ti Lik- Keep it up![/b]

[color=red][b]Very well said indeed:[/b][/color]

[quote]These events reveal how gullible those who manage our funds are. At the very least they are not the extra bright sparks that the PAP keeps touting them to be. They are very much like us. The only difference is that are thick-skinned enough to keep portraying themselves as special and paying themselves obscene salaries.[/quote]

Sun 23 Nov 2008 1:50 AM | Smaller fish

Bernard Chan - Cold Feet Sat, 22 Nov 2008 9:16 pm

"From your investment philosophy, you are like a small fish swimming in a small pond. Any slightest change of pond water, you are the first one to jump out. No wonder your political activites are confined only to TBT group and nothing spectacular to show to the electorate."

At least there is a small pond for CTL to swim. How do you expect him to move to the bigger pond (Singapore is too small for a lake or ocean) when there is no avenue for him to. In his small way, he can only confined to TBT campaign and share his financial planning experience. Please take note that for a small fish like him to go to the bigger pond, it needs people like you and me to give him the opportunity to - All the smaller fish moved together to the bigger pond....

Sun 23 Nov 2008 5:55 AM | Henry Windgates - Hear, hear...

Chia Ti Lik himself speaks the truth. It's really saddening to see how most of the Singaporeans, who got so caught up and enticed by the Singaporean government's propaganda, don't stop awhile and question the handling of investments by PAP's state-owned GIC and Temasek. not to mention the validity of their leadership.

Sun 23 Nov 2008 5:58 AM | Roland Soh - Mr.

The people in Temasek and GIC are just a bunch of IDIOTS FIRST CLASS. Who in the world would invest close to 500 Million in a high living milkman. To the best of my knowledge, no Australian institutional investor put money in this Company. If ABC Learning is such a goldmine, would they offer it on a silver platter for Temasek? Would the people heading the GIC and Temasek invested their own money in this way?

Sun 23 Nov 2008 6:05 AM | Roland Soh - Mr.

I challenge Mdm. Ho Ching and everybody in Temasek and GIC to go out and get a similar paying job in the banking world at large. With their track record, I do not think anybody would employ them. These IDIOTS are only good at throwing away my Ah Kong money!

Sun 23 Nov 2008 7:52 AM | SDP Mirror (infer the worst) - Chia Ti Lik

We can certainly infer Tik is a frustrated man. Come on, there is no hope of him becoming SDP chief anytime. He has quit the WP when he realized he wasn't getting anywhere. And so long as there is Chee, Tik will never satisfy his ambitions. I say, Tik, wait for old Gopal to get released from jail. Gopal has been jailed for 3 months - much more than Chee ever has been in a single sentence. Form a new party (you can also include Ravi - doesn't hurt to have another crazy lawyer) and forget this rotten party. Why be in someone else's lousy party when you can have your own lousy party?

Sun 23 Nov 2008 8:02 AM | Clear eyed

Ti Lik

Thanks for sharing your investment experiences with us so frankly. You have indeed outperformed the teams of self-proclaimed super talents in GIC and Temasek. At least you made a modest profit. They have lost billions and billions of our blood, sweat and toil money and yet are thick-skinned enough to still demand their astronomical salaries.

Sun 23 Nov 2008 11:03 PM | CST #1

Dun talk about transparency when SDP cannot even do that themselves. If SDP is so transparent, they should:

1)Publish all IP addresses from these comments to verify which country they come from. Since we have so many Australians, Canadians and Americans so concerned about our pathetic plight.

2)Make public all the donations made to SDP from all the foreigners and locals alike.

3)Specify how many, hotcake book, "A Nation Cheated" have been sold and where the proceeds go to.

Transparency yeah.. else you are as authoritarian as the PAPs..

Mon 24 Nov 2008 12:35 AM | CST #1 - to Roland Soh another clown

Your best knowledge is very ill informed to say the least. Honest mistake, no problem. Typo error maybe like what CSJ said? haha. A simple search will reveal information like this: 'Commonwealth Bank has the biggest exposure to ABC Learning among the major banks, with about $650 million, Westpac is the second most exposed with $200 million at risk, ANZ has $182 million on the line while NAB is owed $140 million'. Need me to give you the link?

No wonder you and SDP never fail to give misleading information time and again. No Credibility. sigh

Mon 24 Nov 2008 4:33 AM | Anonymous

PAP Temasek can lose lots of taxpayers money and then god knows, some of their GIC workers come here and post contrary opinions to that of Chia TL.

Anyway its expected. They can continue to spin a web of lies but the facts pretty much killed it. LOL.

Mon 24 Nov 2008 4:45 AM | Brendan - re: Cold Feet

[quote=Bernard Chan] We need outstanding leadership and performer and not mediocre to lead Singapore out of this global recession. Can you do it?[/quote]

Well show us proof the incumbent can do it or do it with their current salaries!

Mon 24 Nov 2008 4:46 AM | LIM TUNG HEE - Citizens taken for a Ride?

I believe many citizens share Mr.Chia Ti Lik's views about GIC and Temasek investments abroad.
The so-called "bright sparks" hand-picked by our leaders are only truly "sparks"that can easily ignite a forest fire of disaster!
Judging by their mega losses due to impulsive buying at high prices,it is not difficult to conclude that due diligence is not done.Maybe the losses are mostly due to their "due negligience" instead.That begs the question of justification for their huge pay and bonuses.
What's the point of our leaders insistence that our foreign reserves must be kept for "rainy days" when the "big umbrella" is punctured with gaping holes every now and then?
Are citizens able to "ride out" this devastating storm or are they unwittingly "taken for a ride"?

Mon 24 Nov 2008 7:18 AM | anon - CST #1

So what did you get all these info?

SDP does not have lots of info because they are poor, give them a break.

GIC and Temasek is well known to be fools in the finance industry. There is a statement in Hong Kong saying that whatever Ho Ching touches, the stock will drop.

Mon 24 Nov 2008 9:01 AM | G Chen - re: to Roland Soh another clown

[quote=CST #1]Your best knowledge is very ill informed to say the least. Honest mistake, no problem. Typo error maybe like what CSJ said? haha. A simple search will reveal information like this: 'Commonwealth Bank has the biggest exposure to ABC Learning among the major banks, with about $650 million, Westpac is the second most exposed with $200 million at risk, ANZ has $182 million on the line while NAB is owed $140 million'. Need me to give you the link?

No wonder you and SDP never fail to give misleading information time and again. No Credibility. sigh[/quote]

Guess you are the fool who thinks he is smart. It is also widely reported that Temasek invested A$402 million in ABC Learning which is going bad..so please name what is wrong in the statement "Temasek Holdings botched investment in ABC Learning" that you call it misleading? You must really be dumb with a big D..Please do respond CST #1 instead of avoiding as usual otherwise you loose your credibility (which actually have long been LOST).

Mon 24 Nov 2008 9:24 AM | G Chen - re:

[quote=CST #1]
1)...so many Australians, Canadians and Americans so concerned about our pathetic plight.

2)Make public all the donations made...

3)Specify how many...have been sold and where the proceeds go to.
[/quote]

So you are saying that Singaporean's plight are "pathetic", and furthermore implied that Singapore's Official Assignees and IRAS are so dumb and inefficient so as to let any of the details you mentioned in 2 and 3 to slip pass?

Mon 24 Nov 2008 7:45 PM | cy

If you can't even manage your own finances well, maybe you should rethink about involving yourself in politics,cause it is not a game for paupers. Back Tan Kin Lian instead, at least his is financially savvy and financially comfortable.

Mon 24 Nov 2008 7:55 PM | CST#1 - to G Chen

Roland said: 'To the best of my knowledge, no Australian institutional investor put money in this Company'. Not misleading? Enuff said.

Mon 24 Nov 2008 9:34 PM | CST #1 - to G Chen

'Temasek reported a doubling of net profits to a record S$18.2bn in 2007'. $402 million is really peanuts. Dun miss the forest for the trees.

Tue 25 Nov 2008 5:20 AM | G Chen - re: to G Chen

[quote=CST#1]Roland said: 'To the best of my knowledge, no Australian institutional investor put money in this Company'. Not misleading? Enuff said.[/quote]

Well as you have said, it was mentioned by Roland, so I do not see how SDP comes into the picture of misleading in this article.

While the net profit of $18.2b in financial 2007 may not make this $402 mil sounds significant, but the fact that this losses is from a single investment makes it considerable and not peanuts. Also the net profit you mentioned is partly helped by sale of Tuas Power for S$4.2bn and capital injection of S$10bn by Ministry of Finance, as reported.