Some people invest in foreign currency deposits to enjoy a higher interest rate. They stand the risk of exposure to foreign currency loss. A foreign currency that pays a higher interest rate is likely to be a weaker currency, so this risk can be quite real.
For example, Australian and New Zealand dollars paid a high interest rate during most of the past three years. When the currency weakened in late 2008, it dropped by almost 30% within two months. Some people who invested on leverage had to close their position and lost 50% to 100% of their capital sum.
For those who are luckier, they did not earned that much. This is due to the high cost (as reflected in a large spread) of converting from Singapore dollars to the foreign currency and back. The spread can be as high as 1%.
If the difference in interest rate is 4% per annum, and you invested for 3 months to earn 1% extra, this can be totally wiped out by the spread. Why take so much risk for so little gain?
Read my FAQ on "Invest in Foreign Currency" in www.tankinlian.com (Ask Mr. Tan), to learn about this risk and the potential pitcalls.
Wednesday, August 11, 2010
Class action in USA - minibonds
There was a report in Bloomberg that a US court has decided to allow the minibond investors in Hong Kong to sue Lehman Brothers and the trustee HSBC in their court. Some minibond investors have asked me to organize a similar action on behalf of the minibond investors in Singapore.
At present, a US law firm, Kirby McInerney (KM), is acting for the Pinnacle Notes investors in Singapore in their legal action against Morgan Stanley. They decided earlier that they did not wish to act for the minibond investors as the issuer, Lehman Brothers, was already insolvent.
I have checked with KM if they are willing to review this case, in the light of the decision on the suit taken by the Hong Kong investors. KM has confirmed that their decision is still the same.
If any minibond investor is aware of other US law firm that are willing to take up their case on a "success fee" basis, you can ask the US law firm to contact me.
Tan Kin Lian
At present, a US law firm, Kirby McInerney (KM), is acting for the Pinnacle Notes investors in Singapore in their legal action against Morgan Stanley. They decided earlier that they did not wish to act for the minibond investors as the issuer, Lehman Brothers, was already insolvent.
I have checked with KM if they are willing to review this case, in the light of the decision on the suit taken by the Hong Kong investors. KM has confirmed that their decision is still the same.
If any minibond investor is aware of other US law firm that are willing to take up their case on a "success fee" basis, you can ask the US law firm to contact me.
Tan Kin Lian
Wait for market correction
I did a survey in mid July to ask investors about their preference in investing a lump sum at that time. I gave them 4 choices. 46 people respond to the survey. Here are the results:
More than 50% of respondents said that they would wait for a market correction of 10% to 20%.
Last night, there was a 3% market correction in USA. This will be followed in Singapore today. Over the next week, the market may correct by 10% or more. If that happens, it is time for long term investors to enter the market.
Tan Kin Lian
1. Invest the money for 5 years to get a guaranteed return of 2% p.a. 10.9%
2, Keep cash and wait for market to drop by 10%, i.e. ST index of 2,600 28.3%
3. Wait for the market to drop by 20%, i.e. ST index of 2,350 28.3%
4. Invest in preference shares or REITS to earn a yield of at least4% p.a. 32.6%
More than 50% of respondents said that they would wait for a market correction of 10% to 20%.
Last night, there was a 3% market correction in USA. This will be followed in Singapore today. Over the next week, the market may correct by 10% or more. If that happens, it is time for long term investors to enter the market.
Tan Kin Lian
Impartial Financial Advice
I wish to look for financial advisers who are willing to give impartial advice for a fee, that is based on time. They have to observe the following code of ethics:
1. To give advice in the best interest of the client
2. To be transparent about the fee
3. To charge the client fairly for the actual time that is spent and the value of the advice that is given
If you are willing to give advice based on this code, please send a resume to me and state your fee. I will post your details in my website, for consumers to contact you.
I urge consumers to be willing to pay a fee to a financial adviser who gives valuable, impartial advice. If you are willing to pay a fee for financial advice, I will refer you to the financial adviser.
Tan Kin Lian
1. To give advice in the best interest of the client
2. To be transparent about the fee
3. To charge the client fairly for the actual time that is spent and the value of the advice that is given
If you are willing to give advice based on this code, please send a resume to me and state your fee. I will post your details in my website, for consumers to contact you.
I urge consumers to be willing to pay a fee to a financial adviser who gives valuable, impartial advice. If you are willing to pay a fee for financial advice, I will refer you to the financial adviser.
Tan Kin Lian
Existing Life Insurance Policy [2]
I have received many requests from consumers asking my advice if they should continue their existing life insurance policies. They gave me a lot of details of the various policies that they now hold.
I am not able to give individual advice of this type, as it requires me to spend a lot of time. I will refer them to a financial adviser, who is willing to give the advice for a fee that is based on time, similar to seeing a doctor or lawyer. I advice consumers to be willing to pay for impartial advice.
If you wish to avoid paying this fee, you can learn to make decisions for yourself. You can follow the guide explained in my FAQ on "existing life policies" available from www.tankinlian.com/ask.aspx.
Tan Kin Lian
I am not able to give individual advice of this type, as it requires me to spend a lot of time. I will refer them to a financial adviser, who is willing to give the advice for a fee that is based on time, similar to seeing a doctor or lawyer. I advice consumers to be willing to pay for impartial advice.
If you wish to avoid paying this fee, you can learn to make decisions for yourself. You can follow the guide explained in my FAQ on "existing life policies" available from www.tankinlian.com/ask.aspx.
Tan Kin Lian
Bad customer service
I found it troublesome to make an Internet transfer from my DBS bank account to a payee's bank account. DBS required me to register the payee and authenticate it using my mobile phone. Their webpage did not respond to the creation of the payee details, so I had to go through the tedious process a second time. I have to enter my 2FA token a few times and respond to a few SMS messages. It took me 20 minutes to complete the process. As this is a once-off payment, I had to delete the payee record.
I sent an e-mail to DBS to tell them about my experience. I received an e-mail reply from the service quality manager by e-mail. It is a standard reply stating the importance of the 2FA token for authentication. The reply did not address my actual issue.
I sent another e-mail to the service quality manager to ask if DBS Bank is really interested to understand why it was so troublesome for me. I gave them my telephone number to call. The service quality manager did not reply or telephone me. She just ignore my second e-mail.
This is the poor standard of service of DBS Bank. But it is typical behavior of many people in Singapore, i.e. ignore the complaint. But this should not be the behavior of a person holding the position of a service quality manager.
It will be very troublesome for me to move my account to another bank, as I had a lot of GIRO payments to transfer, but I will do it. I need to find another bank that has better customer service.
Tan Kin Lian
I sent an e-mail to DBS to tell them about my experience. I received an e-mail reply from the service quality manager by e-mail. It is a standard reply stating the importance of the 2FA token for authentication. The reply did not address my actual issue.
I sent another e-mail to the service quality manager to ask if DBS Bank is really interested to understand why it was so troublesome for me. I gave them my telephone number to call. The service quality manager did not reply or telephone me. She just ignore my second e-mail.
This is the poor standard of service of DBS Bank. But it is typical behavior of many people in Singapore, i.e. ignore the complaint. But this should not be the behavior of a person holding the position of a service quality manager.
It will be very troublesome for me to move my account to another bank, as I had a lot of GIRO payments to transfer, but I will do it. I need to find another bank that has better customer service.
Tan Kin Lian
Bike sharing
This writer argues that it should be done on a large scale, supported by corporate sponsors.
LKY Water Prize and National Day Award
Dear Mr. Tan,
Please highlight this link in your blog
http://de-leviathan.blogspot.com/2010/08/most-ironic-awards-lee-kuan-yew-water.html
CH Yak
Please highlight this link in your blog
http://de-leviathan.blogspot.com/2010/08/most-ironic-awards-lee-kuan-yew-water.html
CH Yak
High price of HDB flats
Do the residents benefit when there is appreciation in the value of HDB flats? This person thinks that they do not.
My view
It is better for the flat prices to be kept at a reasonable proportion of the average income, e.g. 5 years. Currently, most people are paying more than they can really afford. It caused them to cut down on other expenses.
My view
It is better for the flat prices to be kept at a reasonable proportion of the average income, e.g. 5 years. Currently, most people are paying more than they can really afford. It caused them to cut down on other expenses.
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