Tuesday, October 6, 2009
RED Portal (17) HDB Resale Price
The RED portal now shows the median resale price of HDB flats by town and type of flats. This is taken from HDB website. Click on "Info" tab. It is easy to retreive the relevant information from this website.
Target Marketing - new restaurant
My friend started a new restaurant in Lorong Chuan. He used the target marketing service to send out mailers to the owners of landed property and 4/5 room flats within 3 km of his restaurant. He reported roaring business, with full house. It was a good start.
Singaporeans like to try a new restaurant. The target marketing is a good way to reach out to them at a low cost.
Monday, October 5, 2009
Land banking is not a Ponzi scheme
Someone posted a comment in my blog that a certain land banking scheme was a Ponzi scheme. This is not correct.
In a land banking scheme, the investors bought a plot of land at a certain price. They were usually told that if the land was rezoned, the value would go up two or three times. If the rezoning does not materialise, the investors have to hold the plot for many years or find another investor to take over the plot.
This becomes a Ponzi scheme only if the promoters use the funds from the later sales to pay off the earlier investors with a profit, creating the false impression that the land banking scheme was a profitable investment.
If there is no evidence that this was the practice, it would be wrong to call the land banking a Ponzi scheme.
In a land banking scheme, the investors bought a plot of land at a certain price. They were usually told that if the land was rezoned, the value would go up two or three times. If the rezoning does not materialise, the investors have to hold the plot for many years or find another investor to take over the plot.
This becomes a Ponzi scheme only if the promoters use the funds from the later sales to pay off the earlier investors with a profit, creating the false impression that the land banking scheme was a profitable investment.
If there is no evidence that this was the practice, it would be wrong to call the land banking a Ponzi scheme.
Ponzi scheme
A good example of a Ponzi scheme is the Madoff case. Madoff collected money from investors and invested the money on their behalf. He "earned" an attractive rate of return for the investors, better than the market return.
Actually, he took money from the subsequent investors to pay the purported returns earned by the earlier investors. This leaves a big deficit in his accounts, but he manipulated the accounts to show a false financial situation.
As word went round about the attractive return, the current investors put in more money and other investors also joined in. The Ponzi scheme become bigger and bigger, along with the deficit. When the Ponzi scheme was finally exposed, the deficit was so large, that there was very little to pay back the remaining investors.
Usually, in a Ponzi scheme, the promoters were able to siphoned out the money illegally into their personal bank accounts. This increased the deficit.
Singapore has our own share of Ponzi scheme 40 years ago. It was called the Gemini Chit Fund. The situation was similar. The fund paid an attractive return to the members, using the funds of other members. The total investment grew rapidly over a period of one or two years, before it finally collapsed.
Tan Kin Lian
Actually, he took money from the subsequent investors to pay the purported returns earned by the earlier investors. This leaves a big deficit in his accounts, but he manipulated the accounts to show a false financial situation.
As word went round about the attractive return, the current investors put in more money and other investors also joined in. The Ponzi scheme become bigger and bigger, along with the deficit. When the Ponzi scheme was finally exposed, the deficit was so large, that there was very little to pay back the remaining investors.
Usually, in a Ponzi scheme, the promoters were able to siphoned out the money illegally into their personal bank accounts. This increased the deficit.
Singapore has our own share of Ponzi scheme 40 years ago. It was called the Gemini Chit Fund. The situation was similar. The fund paid an attractive return to the members, using the funds of other members. The total investment grew rapidly over a period of one or two years, before it finally collapsed.
Tan Kin Lian
Declare medical condition for insurance
Dear Mr Tan,
Could you tell me whether it is necessary to declare flat-foot and astigmatism for medical insurance like Medishield?
REPLY
You should declare them and let the underwriter worry about it.
Could you tell me whether it is necessary to declare flat-foot and astigmatism for medical insurance like Medishield?
REPLY
You should declare them and let the underwriter worry about it.
RED Portal (16) - Alert
You can sign up under Alert to be informed by e-mail about new information that is available in the RED portal.
Visit the RED portal to search for information about any condo or housing project. Look for benchmark price (BMP), amenity index (AMX) or comparables. View the actual past transactions and a price chart.
Visit the RED portal to search for information about any condo or housing project. Look for benchmark price (BMP), amenity index (AMX) or comparables. View the actual past transactions and a price chart.
Need to investigate alleged cheating
Dear Mr. Tan,
If someone make a foolish investment without proper checking and later complained to the Police (or Commercial Affairs Department) that he has been cheated, do you expect the CAD to take action? Surely the CAD has other priorities to take care of?
REPLY
You are right. The CAD cannot investigate every complaint. It has to prioritize.
If there are several complaints made against a specific company alleging cheating, the CAD should start a preliminary enquiry. If the company is acting honestly, it will provide clarification and information to convince CAD that their activities are legitimate, and the matter can then be closed.
If the company refuse to cooperate or be transparent about its activities, there are grounds for CAD to suspect possible wrong doing. CAD can take the next step to investigate, gather evidence to frame a charge against the company for violating the law. Even if the evidence is not sufficient to be used in court, the company may be prepared to change its practices and even compensate the victims.
Recently, there were a few cases in New York State where the Attorney General was able to get financial institutions to compensate the losses suffered by their clients due to doubtful business practices. This is settled without admission of guilt, avoids a lengthy hearing in court and is a good outcome.
If CAD cannot take gather sufficient evidence to take action, they can at least warn the general public to avoid these doubtful practices, so that other people will not fall into the same trap. If CAD and the Attorney General is more active, many of the investment scams and alleged cheating can be minimized. We will have a better business climate in Singapore.
Tan Kin Lian
If someone make a foolish investment without proper checking and later complained to the Police (or Commercial Affairs Department) that he has been cheated, do you expect the CAD to take action? Surely the CAD has other priorities to take care of?
REPLY
You are right. The CAD cannot investigate every complaint. It has to prioritize.
If there are several complaints made against a specific company alleging cheating, the CAD should start a preliminary enquiry. If the company is acting honestly, it will provide clarification and information to convince CAD that their activities are legitimate, and the matter can then be closed.
If the company refuse to cooperate or be transparent about its activities, there are grounds for CAD to suspect possible wrong doing. CAD can take the next step to investigate, gather evidence to frame a charge against the company for violating the law. Even if the evidence is not sufficient to be used in court, the company may be prepared to change its practices and even compensate the victims.
Recently, there were a few cases in New York State where the Attorney General was able to get financial institutions to compensate the losses suffered by their clients due to doubtful business practices. This is settled without admission of guilt, avoids a lengthy hearing in court and is a good outcome.
If CAD cannot take gather sufficient evidence to take action, they can at least warn the general public to avoid these doubtful practices, so that other people will not fall into the same trap. If CAD and the Attorney General is more active, many of the investment scams and alleged cheating can be minimized. We will have a better business climate in Singapore.
Tan Kin Lian
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