Six principles of life

I received this e-mail.

• No point using limited life to chase unlimited money
• No point earning so much money you cannot live to spend it.
• Money is not yours until you spend it.
• When you are young, you use your health to chase your wealth;when you are old, you use your wealth to buy back your health. Difference is that, it is too late.
• How happy a man is, is not how much he has but how little he needs.
• No point working so hard to provide for the people you have no time to spend with.

A new society (6) - sources of occupation

There are three important sources of occupation:
a) Employment
b) Contract work
c) Retail

An employee is required to work for a specified number of hours each day, perform specific duties and is paid an agreed remuneration/

A person who performs contract work is paid for the work done at the agreed fee. This usually depends on the time taken and the skill required. The contract work can be for professional services, such as medical and legal work, or involving skilled or manual labour. The contractor is not certain of the number of paid work, but can usually plan based on the average quantum of work for that trade.

A retailer runs a business and earn a profit margin on the goods sold. The retailer has to pay for the fixed cost, such as rental of the retail space. The trades include the sale of goods or cooked food.

Under the exploitative capitalist system, the cost of the rental or other fixed cost can be a burden to the contractor (e.g. hire of a taxi) or the retailer (e.g. rental of the shop). Another burden is the interest cost of capital or credit to set up a business.

Life would have been better, if the tradesmen and retailers do not have to carry a heavy fixed burden (in terms of rental or interest cost). They should earn an income based on their efforts. Perhaps that income can be shared with the providers of the capital or the retail space.

Life Settlement

Read this story.

Independent, impartial medical advice

If you have a family member who is very sick and it will cost $100,000 to treat the patient with a 1% chance of recovery, would you spend this money?

Many people will say "yes". A human life is priceless and cannot be measured in money terms.

Think again. Is the human life worth $10 million? Remember, the cost has increased 100 times due to the low chance of survival. Will the person that is saved, really enjoy life in the future? Does it matter that the patient is already elderly? Does it matter that the life that is saved will continue to suffer, due to some continuing disability?

Should the $100,000 be used to look after the future well-ebing of other members of the family? Should a family suffer from a lifetime of debt, in their vain effort to save the life?

It is difficult for the family to take this type of decision. They should not rely on the advice of the doctor who is treating the patient, as the doctor will have a serious conflict of interest. A large part of the money is paid for the doctor's fees.

There is a need for independent, impartial medical advice. The family should be told about the likely cost, the chance of survival, and the other options (including the right to die in dignity and with love from the family). They should be counselled that they are not neglecting their duty by taking a difficult decision to safeguard the financial welfare of the living.

Tan Kin Lian

Singapore now stands alone

In early 2006, when the housing bubble in the USA was slowing down, the investment banks were saddled with the mortgage loans and corporate debts that were turning bad. They had to get rid of these assets.

They looked for countries with weak protection of consumers, which were convinced about the merits of using "the light touch" to regulate the financial sector and encourage financial innovation. They found Hong Kong, Singapore and Taiwan.

The investment banks created complex financial products involving credit default swaps and collaterised debt obligations. They wrote the prospectus in legal language that even financial experts could not understand. They marketed these products with misleading advertisements, highlighted the high interest rate paid by these structured products but misrepresented and understated the nature of the risks.

Over 30,000 retail investors were enticed to invest more than USD 1 billion of their hard earned savings in these complex products. Most of these savings were previously placed in secure bank deposits.

These structured products collapsed during the global credit crisis. Looking back at the events, there was no doubt that the underlying assets would certainly fail - it was only a matter of time.

Taiwan acted early to get the financial institutions to compensate the investors.

Singapore acted next to implement a settlement for certain "vulnerable investors" - people who were elderly and uneducated. Investors of small amounts were compensated partially or in full. The total amount compensated was less than 20% of the investment, but the mainstream media gave the misleading impression that the majority had been compensated.

Many investors accepted inadequate offers as they had no other recourse, and pittance is better than nothing. Even "vulnerable investors" who had invested large sums were not compensated, as the offers were made entirely at the discretion of the financial institution.

Hong Kong took almost a year to negotiate a general settlement for investors of the Lehman Mini-bonds (but did not cover the other structured products). The views of these investors, made through their representatives, were taken into account in the final settlement.

Now, only Singapore stands alone in not getting a fair settlement for many investors. A petition signed by 777 investors was lodged with the Prime Minister, who declined to meet the investors or to delegate his officials for this task. Many Singapore investors would be delighted to get a similar Hong Kong settlement.

How can justice be seen to be done, when the people affected do not have any say to influence the outcome? Is this the pinnacle of arrogance in a democratic country?

Tan Kin Lian

Alchemy and financial innovation

Alchemy is the supposed technique of transmuting base metals, such as lead and mercury, into silver and gold by the philosopher's stone. It never happened. Many people were cheated over the centuries.

The modern form of alchemy is "financial innovation". It has led to massive transfer of wealth from ordinary people to the investment bankers, and to the collapse of the global economy.

Lehman Brothers set for landmark appeal

By Anousha Sakoui FT, August 4 2009

Lawyers for the Lehman Brothers US estate will appeal against a decision by English courts that retail investors from Papua New Guinea, Australia and New Zealand should be paid ahead of the failed bank in the unwinding of a complex structured vehicle, according to people familiar with the situation.

The case over the ranking of creditors to a special purpose vehicle – SPV – called Dante, to which Lehman was a swap counterparty, is being closely watched for its potential implications for the securitisation and derivatives market.

It highlights the Lehman administrators’ fight to unwind 1.2m derivative contracts worth a net $40bn (€28bn) to which the bank was a counterparty, of which Dante is one such transaction. The gross notional value of derivative assets is $39,000bn for Lehman entities in Chapter 11.

Dante is one of a string of SPVs created that issued credit-linked notes to investors and to which Lehman is a swap counterparty. Swap counterparties are normally repaid ahead of other creditors, unless the counterparty is in default.

As Lehman is in default, investors in that SPV represented by Perpetual Trustee Company as trustee believe they should be paid out ahead of Lehman, as is set out under the English law documents governing the transaction. The Lehman estate is owed $100m, according to these people.

But lawyers for Lehman Brothers Special Financing believe the subordination of Lehman’s claim is contrary to US bankruptcy laws, which do not allow forfeiture of assets on bankruptcy.

While the English courts sided with the investors, unusually the judge stayed any enforcement of the collateral until any appeals have been heard.

“In staying the effect of his ruling, the judge both permitted Lehman to pursue its appeals in the English courts and, more importantly, recognised that the application of US bankruptcy law could compel a different result,” said a person with knowledge of the case.

The case could take years to resolve and highlights the difficulties lawyers face unwinding many structured vehicles, legacies of the credit boom, which were not set up with failure or insolvency in mind.

Analysts believe the case could have important implications for the securitisation market.

“A ruling against the investors would be hugely negative for the credit markets as the concept of bankruptcy remoteness will most likely not be value for any transaction if the swap counterparty has a US connection,” said analysts at Creditsights in a report. They believed such a decision could lead to further rating downgrades for similar collateralised debt obligations and could force rating sensitive investors to sell their holdings, pushing spreads up.

Preparing for the Worst

Robert Kiyosaki, author of Rich Dad, Poor Dad, has a negative view about the future of the world economy. Read this article.

BBC: Capitalism, A Love Story

Read this article. It explains clearly why and how the world has got into this big mess, and also suggest a better way forward. I agree with the views made by Michael Moore.

Staged Accidents

A staged accident is created by a workshop to make a big claim on insurance company. It is dangerous. When will action be taken against these criminals? Read here.

Shape Quiz

The Shape Quiz helps to develop creativity among children. They learn to use their thinking to find the solution to the shapes. Here is an example of how Cheyenne (6 years old) tackle the quiz. She has an artistic talent and is able to see how the pieces fit into the bigger whole.

http://www.youtube.com/watch?v=xsnaXWmRXyM

http://www.youtube.com/watch?v=x_G6ZOUOkBM

You can buy the shape quiz book here: http:/www.easyapps.sg/ishop

MAS and PM decline request for a meeting

Dear Mr Tan

I refer to your requests to the Prime Minister and MAS to meet with yourself and a representative group of investors. The Prime Minister's office has referred the request to MAS.

MAS has responded to your petition on 31 August, where we set out our approach to handling investors' complaints on failed structured notes. This has also been explained to Parliament during its 20 July sitting and detailed in numerous MAS' public statements over the last nine months. We have released our investigation findings for the financial institutions that sold the notes as well as the regulatory actions taken.

MAS has addressed publicly, the issues raised in your petition on a number of occasions. As such, we decline your request for a meeting.

Investors who are not satisfied with the outcome of the financial institutions' resolution of their complaints can approach the Financial Industry Disputes Resolution Centre (FIDReC), or seek legal advice on the recourse that is available to them, based on their own facts and circumstances.

Yours sincerely,

Andrew Khoo
Executive Director, Capital Markets, MAS

A new society (5) - Enjoyment of work

Each person should have the opportunity to enjoy their work. They should choose a job that suits their interest and skills. They should earn a fair wage that can meet their cost of living.

They should work hard because they enjoy their work. They should not work hard just for the sake of accumulating wealth. The greed is not desirable.

The love of doing good to society, and not the accumulation of wealth, should be the key motivator to good work. This motivation can apply to doctors, teachers, religious leaders or any worker who provides service to others.

It is necessary for a person to put in additional work to set aside savings for retirement or to raise a bigger family or to give a better life for their children. But this desire should be pursued up to a reasonable limit.

If more people have the right motivation, the society can provide a happier and better life for the people.

Tan Kin Lian