Wednesday, December 30, 2009
Investment return, adjusted for inflation
It is important to take account of inflation in looking at investment return. This is explained in this article. You should aim to get a real return of 2%, after deducting inflation, tax and expenses. Many investors get a negative return due to investing in the wrong asset class, e.g. safe investments with guaranteed return, and high expenses.
Financial institutions bet against their clients
This article suggests that financial institutions made profits where their clients suffered large losses.
Y2K scam
I decided to do some research to see if other people pointed out the Y2K scam. I found this website. Enjoy reading.
Don't worry. The next decade will bring new scams. Life will continue to be exciting and creative. You can also count on some talented people being able to create scams, which is easier than creating real wealth and happiness,
Don't worry. The next decade will bring new scams. Life will continue to be exciting and creative. You can also count on some talented people being able to create scams, which is easier than creating real wealth and happiness,
Approaching a new decade
In two days time, we will enter a new decade. Many people have forgotten what was the big issue at the end of the last decade. It was the so called Y2K bug that never occurred. During the last two years of that decade, management consultants went round to spread the panic that if the Y2K bug was not fixed, computer systems around the world would collapse. This would happen not only to commercial systems but to military systems as well.
Several hundred millions, perhaps more, were paid in consultancy fees to fix the perceived Y2K problem. It frightened top management of big organisations, financial regulators and political leaders. It was a boom time for management and I.T. consultants who had the expertise to fix this imaginary problem. It reminded me of the fairy tale by Hans Christian Anderson told to children, about the emperor's imaginary new clothes.
I was one of very few who dared to argued that nothing would possibly happen and that the Y2K panic was exaggerated. I reasoned with I.T. experts and top accountants, but they argued back more strongly about the potential disasters that could happen. I concluded that they were extremely stupid or dishonest. As they were talented people, I concluded that it must be dishonesty, as they had pocketed large profits from providing the consultancy to fix the problem.
There were hundreds of millions of computers, big or small, around the world that needed to be fixed. Not all of them could be fixed in time and to the specification required by the consultants. It would be reasonable to expect several millions of them, which were not properly fixed, to fail with disastrous consequences. None of the failures occurred. All the computers continued to work fine on the turn of the century.
Companies that spent tens of millions to fix the Y2K problem gave a collective sigh of relief and congratulated their people for averting the disaster. Those who realised that they were conned by the scam of the century were too embarrassed to bring up the issue. This matter was best forgotten, which was what happened quickly.
The following decade brought about its own scams, in the form of the technology bubble, corporate scandals, housing bubble, financial innovation, derivatives, CDOs, CDS and the like. They made super wealth to the "talented" people but the rest of the world that much poorer.
What scams will the next decade bring?
Tan Kin Lian
Several hundred millions, perhaps more, were paid in consultancy fees to fix the perceived Y2K problem. It frightened top management of big organisations, financial regulators and political leaders. It was a boom time for management and I.T. consultants who had the expertise to fix this imaginary problem. It reminded me of the fairy tale by Hans Christian Anderson told to children, about the emperor's imaginary new clothes.
I was one of very few who dared to argued that nothing would possibly happen and that the Y2K panic was exaggerated. I reasoned with I.T. experts and top accountants, but they argued back more strongly about the potential disasters that could happen. I concluded that they were extremely stupid or dishonest. As they were talented people, I concluded that it must be dishonesty, as they had pocketed large profits from providing the consultancy to fix the problem.
There were hundreds of millions of computers, big or small, around the world that needed to be fixed. Not all of them could be fixed in time and to the specification required by the consultants. It would be reasonable to expect several millions of them, which were not properly fixed, to fail with disastrous consequences. None of the failures occurred. All the computers continued to work fine on the turn of the century.
Companies that spent tens of millions to fix the Y2K problem gave a collective sigh of relief and congratulated their people for averting the disaster. Those who realised that they were conned by the scam of the century were too embarrassed to bring up the issue. This matter was best forgotten, which was what happened quickly.
The following decade brought about its own scams, in the form of the technology bubble, corporate scandals, housing bubble, financial innovation, derivatives, CDOs, CDS and the like. They made super wealth to the "talented" people but the rest of the world that much poorer.
What scams will the next decade bring?
Tan Kin Lian
Tuesday, December 29, 2009
Affordable HDB flats
The Minister for National Development said that HDB flats can be sold at a lower, more affordable price if the buyer accept that they have to be sold back to the Government at cost. He asked if Singaporeans would prefer to have this system.
I suggest the following approach:
a) Offer both choices to the citizens. Some prefer to pay more and have market values for their HDB flats. Others prefer to pay less and forego the capital gain. It depends on the personal circumstances. The PM once said that we cannot have "one size fits all".
b) The resale price to the HDB should be adjusted for inflation and for the shorter lease.
c) There should be a sufficient margin (say 30% to 40%) between the sale price of the "affordable" flat and the "marketable" flat.
We should also consider the Swiss system, where most people rent their flats. They can invest in property REITS, but they do not need to own their property. The properties can be owned by the REIT. This will give them the flexibilty to move closer to their place of work, following a change of job. They are not tied to their own purchased property.
Tan Kin Lian
I suggest the following approach:
a) Offer both choices to the citizens. Some prefer to pay more and have market values for their HDB flats. Others prefer to pay less and forego the capital gain. It depends on the personal circumstances. The PM once said that we cannot have "one size fits all".
b) The resale price to the HDB should be adjusted for inflation and for the shorter lease.
c) There should be a sufficient margin (say 30% to 40%) between the sale price of the "affordable" flat and the "marketable" flat.
We should also consider the Swiss system, where most people rent their flats. They can invest in property REITS, but they do not need to own their property. The properties can be owned by the REIT. This will give them the flexibilty to move closer to their place of work, following a change of job. They are not tied to their own purchased property.
Tan Kin Lian
Over production
The world is producing more goods than is really needed. The over production has lead to the wasteful use of energy and resources and damage to the environment. Through competition, more people are working harder to produce goods that are not really needed. We have too much clothes, electronic equipments and gadgets and too little time (due to long working hours) to enjoy them.
We work longer hours to keep our job, but in the process cause other people to lose their jobs, because they work in "less efficient" businesses or countries.
Is this called "prosperity and affluence" ?
Tan Kin Lian
We work longer hours to keep our job, but in the process cause other people to lose their jobs, because they work in "less efficient" businesses or countries.
Is this called "prosperity and affluence" ?
Tan Kin Lian
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