Friday, October 17, 2008
A Nation in Gamble
The recent happenings have kept me thinking, are we a Nation in Gamble?
First, we have a million dollar man flip flop. One day claims that our financial system is very stable, we don't need 100% guarantee for bank deposits, but within 48 hours, a total U-turn and announce that MAS will provide 100% guarantee for all bank deposits after all. But wait, please notice the difference here. MAS is providing such guarantee not because it thinks that it has the obligations to local Singaporeans, but rather, it is because it is afraid that the exodus of foreign money will destabilize the whole financial system! Well, we have to settle for the fact that the PAP government will always take filthy rich foreigners' interests at first priority rather than local Singaporeans' interests. We will always be the last priority.
Some friends were making noise about this silly statements by MAS that it would not provide 100% guarantee to depositors because it believes that our financial system is very safe. Then it begs the question, if the system is so safe, it would be definitely "riskless" for MAS to give additional assurance to Singaporeans by providing that 100% guarantee, right?
And now, does it mean that since MAS finally did a total U-turn, would it imply that our financial system has suddenly become unstable? No, says MAS, its because we want to keep foreign money on our shores! Does it then mean that if all these foreign money vacate from Singapore, our financial system will become unstable?
This kind of attitude really reminds me of people gambling at the Black Jack table. They just could not think properly whether to take the card or not when they have 16 points at hand. I would expect that our people should get better judgment and performance from the million dollar ministers at such sensitive time. We are sitting right in the middle of the Crisis of Confidence (which I will write on it for my next post) and yet, they are giving out contradicting signals that may well shaken our confidence further.
This is especially true when we assess how MAS performs in this Minibonds issue. It would just push off responsibility and not act on it. It would be understandable for its "weak leadership" in such disputes because Singapore is dominated by Government Linked Companies. MAS, as a government agency, would not want to jeopardize its own money making machinery, would it? This is exactly the same problem I have mentioned in my previous post on Public Transport: how could we ever expect the government to regulate the companies that it owns? This is against human nature and totally absurd. Thus I could only advise Minibonds and other structured deposits holders to come together, stand in unity and go for class action lawsuit. They should not hold on the classic view that this PAP government will solve all these problems for them, especially so when it involves monies and interests of a stingy government. I know many of these people have not intended to gamble with their money when they first bought these Minibonds, but yet, I guess they are taking a big gamble if they think they could depend on MAS to help them out. Please remember, this government is more worried of foreigner's money than yours. It will only take less than 48hrs for them to make 180 degrees policy U turn when it involves foreign interests, but definitely not yours.
The fact that MAS actually allows Minibonds to be sold in Singapore, itself is a sign that we are fast becoming a Nation in Gamble. Minibonds is effectively a bet put on the reputation of some other bigger names. Minibonds holders effectively become the insurers of other bigger giant banks and financial institutions. It is absurd if you see it in its naked perspective but yet, these absurd instruments with many hidden risks are packaged as "medium-low risk investment" for our consumers. Even CPF allows such structured derivatives to be "invested" as "medium-low risk" instruments! And the fact that even some GLCs created their own version of structured products which is basically nothing but a financial bet, "invested" in CDS CDO with whatever names that are so complex to layman. Do all these relevant authorities, establishment and companies know exactly what they are doing? Are they pushing the whole Nation into Gambling?
Singaporeans are traditionally more conservative and risk adverse in their investment choice. How could they package such risky instruments (technically speaking, not even assets to speak of, but financial bets) to sell them to our citizens is something I could not really fully understand.
Well, talking about Gambling, no bigger and prominent Gambling is more obvious than our two Casino resorts, building in process. It seems that all hopes are pinned on these two gigantic projects that the whole Nation has taken up as their engine towards "Golden Period". But the recent news report worries me. Some foreign workers were protesting outside MOM against their employers who intend to cut their pay or even force them to be sent back to their country of origins. These foreign workers work for one of the big construction company which I believe is one of the main contractors of the Casino resort at Marina. And it was reported that when the matter has been settled, the workers return to their construction site, doing nothing more than AREA CLEANING! I mean, 100 people doing AREA CLEANING?
It worries me. I was thinking to myself, WHAT IF, a BIG BIG IF, any of these two Casino resorts failed to take off even before they are built, what will happen to us? Our schools and polytechnics has trained so many students ready to be employed for these casino resorts. Our banks have given out so much loans to finance these casino resorts construction (not only the owners, but constructors, subcontrustors...etc). What IF anyone of them or even Both of them fail? Are we staking our whole economy on these Casino resorts?
Well, maybe some may say I am really paranoid, how could these BIG casino companies go bust? This is especially so when our PAP government has claimed to conduct all due diligence in screening these casino companies.
It seems a little bit unbelievable but nowadays, when even the big 4 investment banks in USA could go bust, what else isn't possible? Anyway, with this little question in mind, I did a research. I have found that LV SANDS, the owner of Singapore Marina's Casino Resort, has filed for Chapter 11 (bankruptcy protection) in USA before! It was 1998 when Sands filed for bankruptcy, right after the 1997 financial crisis, though we all believe that USA is not affected by this financial crisis at all. Then there is another recent article I have found on the net. Its entitled "Is LV Sands headed for Bankruptcy?"
In this article, it claims that LV Sands' share price has dropped from a high of $148 to $14.05! It has lost a lawsuit without allocating the amount of money to pay for the damages. Its earnings has plunged dramatically, with Return on Equity (ROE) dropping from 67% to a mere 5.38%. All these are worrying signs, not only for LV Sands, but the whole Singapore!
I could hardly imagine what would happen to Singapore IF, a BIG IF, Sands goes under. The PAP government has put Singapore into a BIG GAMBLE that we may be ill afford to play.
On the other hand, we have the most direct impact on our pockets from absurd electricity tariff pricing. We were told that for this quarter, we will be paying our electricity bill based on future price of US$155 per barrel of oil when the oil price right now is US$71 per barrel! How absurd this could be? Well, should we feel "lucky" because there is someone who makes claim that the price of oil could well reach US$200 this year end? So is this future price of US$155 based the "discount" from US$200 per barrel? Is this another GAMBLE that went wrong and innocent Singaporeans have to paid for such losses?
These are the events that have more direct impact on our lives to be mentioned here. There are more gambles going on, taking up by GIC and Temasek Holdings all around the world. Our SWF has thrown billions of dollars into failing companies and later getting their shares diluted by injection of rescue funds by the various government agencies. My gut feeling is that our GIC and Temasek have taken up these gambles too early with too much money thrown in. We are a small country in the world with limited resources. We must be extremely prudent in investing whatever we have. Plunging ourselves at the start of this financial turmoil will definitely cost us dearly and force us to take up unnecessary risks. Could we really afford to take up all these gambles?
With the total melt down of the current financial markets, I really doubt that those investments done by GIC and Temasek would come up good. We thought we could save UBS but eventually Swiss Government has to step in to take over the bank. We thought we could save US banks, but it seems that the more merger and take overs occur, our shares in them would be totally diluted. How much more Gamble should we take as a Nation before we could shout STOP? I suspect one day, we would wake up as a Nation, just like all Minibonds holders, having a shock that we have actually lost so much in all these Gambles when in the first place, we are just a Nation of conservative and risk adverse citizens. That would be a day of reckoning, shock and devastation.
Goh Meng Seng