Quora Answer: What Will Singapore be Like since China is Planning to Dig a New Canal across Malaysia?

The following is my answer to a Quora question: “What will Singapore be like as China is planning to dig a new canal across Malaysia?”

China is not planning to dig any canal across Malaysia.  There has been talk of a canal across the Malay Peninsula, but up north, in Thailand.  As I have answered in another post on the possible ramifications of the Kra Canal, if it even takes off, it would take decades for the effects to be felt by Singapore.

Firstly, there are strategic interests against such a canal simply because China would have a controlling stake, since Thailand does not have the sort of finances to undertake such a large infrastructure project.  There is the environmental impact study, there is the geopolitical split of Thailand between the Buddhist north and Muslim south, there is the negative consequences on Thai sovereignty.  All these need to be resolved even before the canal is dug.

Secondly, construction is going to take decades, and there will be a negative impact in the immediate vicinity of the canal construction site.  Villages need to be moved, hills need to be levelled, rivers need to be redirected.  There will be a lot of internal political opposition, and a rise in Sinophobia.

Thirdly, once built, the canal might not even be that useful.  For it to service the supertankers and the largest container vessels, it either cannot have locks, or locks that are extremely large.  There will be a cost to use the canal to pay back the cost of construction.  All those bonds issued have to be serviced.

The Suez Canal and the Panama Canal bisect entire continents, saving thousands of nautical miles in fuel cost.  The Kra Canal only shaves off 2,000 or so nautical miles.  Ships drop off and pick up cargo at Singapore.  Singapore is connected by sea and air to an extensive logistics network.  To be attractive, there needs to be ports at both ends of the canal to service vessels for other needs, as well as an air hub.

In the meantime, I do not see Singapore standing still, waiting to be surpassed.  Whilst it became a shipping hub due to its strategic position, it became a premier shipping hub and the busiest port in the world by tonnage by its value add.  It is service excellence, innovation and position that contributed to its rise.  Singapore is also one of the financial centres of the world.  And shipping needs that sort of bank support.  This sort of convenience cannot be replicated by merely building a canal.

Quora Answer: Will Apple Increase Their Quarterly Dividend to Prop the Stock Price?

The following is my answer to a Quora question: “Will Apple (APPL) start to increase their quarterly dividend to prop up the stock price as their cash balance is astounding?”

Let us consider the numbers, which are easily available to anyone online, if we know where to search.  We know, for a fact, that Apple has consistently returned capital to shareholders with seven consecutive years of dividend increases, despite stock buy backs.  In 2018, it boosted its dividend by 16%.  The last increase in dividend was May 2018, and the payout ratio was 25% of earnings.  Since 2012, the yield has been consistent, at 2%, and the payout on earnings was between 25 to 30%.  We can see, from the numbers, that the pace of dividend increase was in line with the upward trend of the stock, at around 12% on average.  The last dividend boost of 16% was because of anticipated earnings gains due to tax reforms in the US.

Understandably, there is concern in the market when Apple CEO, Timothy Donald Cook, said that revenues would fall year on year to around US$84 million.  What is not understandable is the panic in the market.  This is another case of overreaction.  The China market is slowing, but it has less to do with the trade dispute with the US, and more to do with a general market slowdown due to global and domestic factors.  Apple must also be cognisant with the fact that they are overpriced in a saturated market, with Oppo and Huawei coming up with viable alternatives at half to a third the cost.  Apple is also guilty of cannibalising their own market due to a botched roll out of models.  Finally, the smart phone market is nearing maturity, meaning that growth cannot possibly be as fast as previous years.

Despite all that, Apple did make a significant gains. It is still expected to achieve a record earning result on a per share basis.  Analysts had overstated their expectation of Apple’s projected performance and panicked over an over-optimistic guess.  Apple still outperformed the market.

Secondly, we have to remember that Apple’s stock buyback remains strong, maintaining the share value.  This relatively poor growth has not affected Apple’s cash flow and their liquidity.  Also, as seen above, their low payout ratio relative to the market gives them room to manoeuvre.  Apple can boost dividends if their revenue falls, leading to slower profit growth to maintain their value in the market.  Also, because Apple has been aggressively buying back their stock, it can definitely afford to increase its per share payout without significant impact to their balance sheet.  Much of that money flows from one end of the sheet to the other.

Comparing their quarterly reports, Apple had 5.2 billion shares outstanding when it raised its dividend per share to US$0.63 in 2017.  In its most recent quarter, it stands at around 4.6 billion shares, and by the time profit share is stated, it will likely be lesser still.  That is a 12% drop in outstanding shares.  A higher per-share dividend payment costs much less than expected.

Analysis across the market, and there are several dozen in any Google search, is that to maintain that 12% pattern since 2012, it would be reasonable to expect a payout of just under a dollar per share.  It is extremely unlikely that Apple will not payout because they need to maintain investor confidence in the stock, which helps them maintain the stock value.  This is moreso important in a challenging environment.  This is one of the reasons why they built that war chest.

Quora Answer: Does the Bank Need My Permission before Removing Funds Credited into My Account by Mistake?

The following is my answer to a Quora question: “A deposit was credited to my account by mistake.  Does the bank need my permission before removing the funds?”

No.  The account is still the banks, not yours, and all funds in the account technically still belong to the bank.  The bank is obligated to guarantee you that amount you put in, a promise of delivery.

If the bank mistakenly credits monies to your account, they can take immediate action to remove those monies.  Should you spend that, you are legally liable, and the bank can and most likely will make a police report.  This would either be considered theft or criminal misappropriation.

If someone else mistakenly credits monies to your account, it gets a bit more complicated.  Since the account is owned by the bank, not you, they have to correspond with the bank to get their monies back.  There is a verification process, and you, as the account holder will be part of it.  Otherwise, people can pay and then claim it was mistaken, leading to all sorts of shenanigans.  Again, should you spend those monies, and you have no right to it, there are legal consequences.

Quora Answer: How is Singapore Seen by Its Neighbours?

The following is my answer to a Quora question: “How is Singapore seen by its neighbours?”

Singapore actually shares borders with only two countries: Malaysia and Indonesia, making them our only immediate neighbours.

Malaysia has a love hate relationship with us. The Malaysian political leadership loves to hate Singapore. Singapore, as a multicultural, multiethnic, multireligious secular meritocracy is an affront to the lie of Malay-based apartheid that is their bumiputera policy.  In Malaysia, the Malays, and certain other races such as the Ibans, Dayaks, Eurasians and Kadazan are considered native races.  A Chinese or Indian, despite having been there for generations, is considered “pendatang”, an immigrant, and discriminated against.

Singapore was forced to leave Malaysia because its differences with this, because of socioeconomic considerations and because Lee Kuan Yew and Tunku Abdul Rahman could not come to a compromise.  After half a century, that sort of baggage is still there.  Malay nationalist hardliners expected Singapore to fail without a hinterland and come crawling back to Malaysia, and accede to their terms.  That did not go according to plan.

To date, Malaysian politicians like to remind Singapore that we are the little brother in this relationship, and should defer to them on bilateral issues.  Singapore, as a sovereign state, being wealthier and having a larger military, has not behaved as such.  We conduct diplomacy according to the letter of international law, and that means not giving in on issues ranging from the water deal to the border dispute to Pedra Branca.  It would be an understatement to say that Malaysia’s leadership likely hates us.  On the other hand, they still need us.  Corrupt UMNO politicians own property in Singapore, and launder their gains through Singapore’s financial system.

Indonesia has a complicated relationship with Singapore, which is a subtler form of that Singapore-Malaysia dynamic.  In Indonesia’s case, Singapore should defer to Indonesia in regional politics.  In the 1960s, Indonesia attempted to annex Singapore and Malaysia to form Nusantara.  The Konfrontasi did not end well for them.

A remnant of that relationship is the fact that successive Indonesian regimes have expected Singapore to bankroll them.  And when they did not get what they want, threw a tantrum.  An example would be Bacharuddin Jusuf Habibie’s remark about Singapore being a “little red dot.”.

Despite this, Singapore did have an excellent relationship with the Suharto regime, and most of their wealth was parked here.  This relationship became baggage when it came to dealing with successor regimes after Suharto was overthrown. Singapore also clandestinely supported Timor Leste’s independence, and has that sword over other restive parts of Indonesia.

Despite the talk of a united ASEAN, these countries have a relationship based more on need, mutual threats than true friendship.  When it comes to the ordinary citizens, none of this matters.

Quora Answer: Why is Malaysia Lacking Compared to Singapore?

The following is my answer to a Quora question: “Why is Malaysia lacking compare to Singapore?  Can Malaysia be a developed country like Singapore if we have a Chinese prime minister?”

The ethnicity of the head of government is not a factor.  One person cannot change a people.  Singapore had Lee Kuan Yew, but it was not Lee Kuan Yew alone who built Singapore.  Lee Kuan Yew’s real skill was finding the best people to do specific things and get them to do it.  He had people like Goh Keng Swee, who was incidentally born in Malaysia.  He brought in people like Joseph Yuvaraj Pillay, who was also Malaysian.  He brought in Chengara Veetil Devan Nair, who was once the first secretary-general of the DAP, and MP for Bangsar.  He recruited Dr. Albert Winsemius, from Holland, to be our economic advisor.

Singapore was built on the values of meritocracy, and despite the scepticism now, it lived up to that.  It did not matter who you were, or where you were born.  If you had the skills needed, we took you in and gave you the job.  In a time when the nation had nothing, Lee Kuan Yew and that team gave the people a vision that they were part of something greater.  Enough people believed in that to make the sacrifices that built this country.

What Malaysia needs is a man who has that vision to share, that ability to get disparate stakeholders to believe in that vision, and a generation willing to make the difficult choices needed to succeed.  What Malaysia needs is a group of leaders who see the intrinsic value in each and every Malaysian, regardless of race, of religion, of country of origin.  This means doing away with the bumiputera policy.  The only country that gained from it is Singapore.  The best and brightest non-Malays that Malaysia discarded, we took in, and we have been better for it.  Then, and only then, will Malaysia start that climb to developed status.  A nation is not built on the tallest skyscrapers or the longest bridges, but in the values of the people.

Quora Answer: Can I Make a Claim if Someone Gave Me Investment Advice, & I Lost Everything?

The following is my answer to a Quora question: “Someone gave me investment advice, and told me it was guaranteed 100%.  I lost everything.  They are not financial advisors.  Do I have any options for getting the money back?”

I am still amazed that there are people naive enough to believe that there are investments that are 100% capital guaranteed.  There is no such thing.

In such a case, you may have the option of taking a civil suit against the other party, but that only works if they have something that you can gain in compensation.  If they are themselves broke, or financially compromised, you have thrown away money for a judgement that cannot be enforced beyond making them bankrupt.

If, however, you can prove that there was an element of fraud, then it becomes a criminal case.  Subject to the outcome of the prosecution, you may them use that judgement to take out a suit against them.  Again, it depends if they have assets to be seized.  The publicity of such a case would likely mean a long line of creditors, from state organs to banks to victims.  As a victim, you are the least in priority.

Quora Answer: What is the Point of a Living Trust?

The following is my answer to a Quora question: “What is the point of a living trust?”

A living trust, or revocable trust, functions like a living will, except that it is far more dynamic.  It allows you to put your estate in a trust, and yet benefit from it since you have a direct say on how your assets are managed, and disposed off while you live.

A revocable trust has some benefits with regards tax mitigation, but not to the extent of an irrevocable trust, since the trust is not wholly a distinct legal entity. In places where there is no estate tax, its benefits are limited.  However, it is a useful vehicle for high net worth Muslims to bypass the fara’idh laws which stipulate furudh, heirs, and their shares.

A trust bypasses the probate process, which significantly reduces the time your heirs get their share of your estate upon your death.  Obviously, it also does not incur the cost of the probate process, which may be lengthy.  Also, we must remember that in many places, wills are public documents filed with a registrar of wills.  A trust document is a private document, and is not available to the public.  It is useful for people who would like to keep their assets private.

Quora Answer: Do You Think Retirement Villages are a Necessity in Singapore?

The following is my answer to a Quora question: “Do you think retirement villages are a necessity in Singapore?”

It will eventually be a necessity.  This is because we have an aging population, and will soon reach a point where there are insufficient numbers in the younger generation to physically look after their elders.  There will be families where the adult children are not in a position to look after their elderly parents, and there will be larger numbers of these elderly with no one to look after them.

There are already people who are developing such retirement villages in Malaysia, Indonesia, and as far away as Australia.  For disclosure, I am a director of a company that is in the process of acquiring land to develop retirement villages.  What makes these retirement villages attractive business propositions is that these elderly have the disposal able income to pay for the amenities of such a place, and they would want it to be luxurious.

Quora Answer: Do Financial Advisory Companies Like Edward Jones Charge Customers Hidden Fees & Commissions?

The following is my answer to a Quora question: “Do financial advisory companies like Edward Jones charge customers a lot of hidden fees and commissions?”

No.  In any financial product, the distribution cost is clearly shown in the benefit illustration, and a copy of that benefit illustration is given to the client.  There are no hidden charges beyond this.  If the product is an insurance plan, the premiums may be level or non-level.  If it is a level premium, then the premium stays the same for the duration of the policy.  If it not level, then the increase in premium is detailed in that benefit illustration.

What is hidden is how that distribution cost is parcelled out between the agent, the insurer or product provider and the regulatory authority, if any.  Whilst the client has access to the overall cost, he does not have access to the details of that cost for practical reasons.  How an advisory company compensates their staff is their own prerogative, and it varies according to their seniority, product promotion and other external costs.  With so many variables, the cost of producing such a detailed and onerous document would be passed on to the client, and they would pay more for the same service.

Quora Answer: How Do Commission-Based Financial Consultants Help Customers without Conflict of Interest?

The following is my answer to a Quora question: “How do commission-based financial consultants help customers without conflict of interest?” 

Within the context of Singapore, there is the balanced scorecard (BSC) framework.  A financial consultant must conduct a thorough fact find, and justify any recommendation.  There is an annual ethics assessment, market surveys post-transaction checks and mystery shopping.  The penalties for running afoul of the BSC are severe, with the very least penalty for an E grade is termination and loss of license. 

The Financial Health Review document that is used as a basis for recommendation of a financial product is a comprehensive document, and includes a section on client needs, budget, financial health and existing coverage and investments.  This makes it difficult to engage in pure product pushing without doctoring the findings. 

Within the conduct of the fact find, the financial consultant is legally compelled to remind the client of their rights, of the risks of certain products, and the limitations of any product.  They also sign off on the relevant sections of the document.  Since there is a comprehensive mystery shopping exercise, particularly at roadshows, financial consultants have to very diligent about this fact find. 

The regulatory framework aside, financial consultants make only one mistake before losing their license.  The recruitment and training process is vigorous, and there is a serious effort to ensure that ethics and compliance is a business culture.

Quora Answer: Do You Agree with David Lawrence Ramsey III That Bonds are Not a Good Investment?

The following is my answer to a Quora question: “Do you agree with David Lawrence Ramsey III (Dave Ramsey) that bonds are not a good investment?”

I do not listen to David Lawrence Ramsey III, so I cannot say I agree or disagree since I have no context.  However, in principle, bonds are not a good investment in and of themselves.  There are two major kinds of bonds: treasury or sovereign bonds, and other bonds.  Treasury bonds are issued by central banks.  They tend to be investment-grade, although there are those that are not.  Non-treasury bonds include corporate papers, municipal bonds and other forms of repackaged debt.  Again, they may or may not be investment grade.

Bonds are used in a portfolio to lower the risk profile, as a wrapper, or to balance out a portfolio that is equity heavy.  Particularly investment grade bonds, they are low risk, guaranteed and predictable.  The downside is that the safer the bond, the lower the yield.  In most cases, that yield is far below the projected inflation over the period of investment.  This means a portfolio of only bonds loses money in real terms.

Higher yield bonds tend to be of greater risk, and their default chances are exponentially higher.  This is more akin to gambling than investment, and have almost no real worth to conventional investment strategies.  These bonds are termed “junk bonds” for a reason.

This does not mean that bonds are not a good investment.  But an investment portfolio of only bonds is unbalanced, and the risk is not commensurate with the potential gain.

Quora Answer: Why Does Singapore Look Much Cleaner Than Hong Kong?

The following is my answer to a Quora question: “Why does Singapore look so much cleaner and well-kept than Hong Kong?”

Because it is. The laws against littering are stricter in Singapore, and being a compact city state, more rigorously enforced. This is not a criticism of Hong Kong.  We must understand that Hong Kong is larger than Singapore, spread over a wider area of diverse geographic features in a more challenging sociopolitical environment.  They do well enough as it is.

Singapore is far more compact, with an authoritarian government in a strong political position which allows for greater scope in planning with regards urban development.  There is a Land Acquisition Act, which allows the government to get rid of buildings that are deemed against the public good.  Development works have a strict timeline, and should a contractor run out of money, that land is either taken back to be retendered out, or another contractor is brought in.

Quora Answer: What Do You Think about Investing in Stablecoins?

The following is my answer to a Quora question: “What do you think about investing in stablecoins?”

I think very poorly of them.  In theory, stablecoins are cryptocurrencies that are pegged to a currency, most often the US Dollar, or the Swiss Franc, or pegged to an exchange traded commodity, mostly gold.  This peg is supposed to make stablecoins less volatile, and more attractive to mainstream finance.  Since it is pegged to a known currency or commodity, it is supposed to facilitate a secondary market by making them liquid by being more easily exchangeable.

Here is the main problem: how do we trust this peg, when the backing reserves cannot be independently audited?  Also, there is still some underlying volatility inherent with currencies and commodities.  This is more so for commodities.  When the market undergoes upheaval, how will they maintain the peg?  To date, I am very sceptical that any “stablecoin” has lived up to the criteria of actually being stable.

Another point of consideration is regulatory concerns, which means this peg is either impossible to maintain, or lacks credibility.  For example, Basis, the most high profile and well-funded stablecoin, shut down in December 2018.  Their official reason was an unfavourable regulatory landscape.  We could argue that the regulatory landscape is unfavourable because they cannot convince anyone that they have the financial strength to maintain a viable peg over an extended period of time.  They raised US$130 million in funding.  That is not enough to do what they want to do.

Quora Answer: If a Couple's Income is $36,000 per Year, What Can They can They Invest from $50 to $100 Monthly?

The following is my answer to a Quora question: “If a couple’s income is only about $36,000 per annum, what can they can invest between $50 to $100 monthly, in in order to increase their income?”

One option, if that is available to you where you are, is to consider investing in a financial product that allows you to put aside $100 per month into buying funds.  These plans allow you to choose from a range of funds, with a percentage allocation to these.  Since you are putting money into funds, and not specific counters, you spread the risk because you are immediately diversified.

There are certain investment plans linked to insurance, but if your goal is solely investment, you have no need for the mortality charges.  Also, if you are above a certain age, the mortality charges eat into your earnings.  These plans have a distribution cost, but managed over time, with wisely chosen funds, they give good, steady returns over an extended financial horizon.

Quora Answer: Is It Worth Putting Money in an Ally Bank 14-month CD for 2.85%?

The following is my answer to a Quora question: “Is it worth putting money in an Ally Bank 14-month CD, for 2.85%?”

When you put money in any investment, you should consider the inflation rate in relation to the return on the investment.  In this case, US inflation in 2018 was 1.8% to 2.0%.  Inflation in 2019 and 2020 is not expected to ease much due to inflationary pressures, but hold steady at 2.0%.  In that light, if you can afford to put money in an illiquid investment, meaning that you see no immediate need for the funds in that period of time, it is a worthwhile option.

Quora Answer: What are the Differences Expatriates Face between Staying & Visiting Singapore?

The following is my answer to a Quora question: “What do you think are the differences expatriates face, between staying and visiting Singapore?”

Just like anywhere in the world, the situation is the same.  When you are a tourist, you are a source of revenue, and people tend to welcome you.  When you stay, you are viewed as competition for jobs, and there will be resentment.  The latter is despite the myriad realities of the situation.

Within the Singapore context, this is mitigated somewhat because we have a large expatriate community, and many Singaporeans are themselves the descendants of immigrants, some very recent.  As such, the populace is generally welcoming of expatriates, because they are uncommon, not rare.

The nature of the economy and the success of national education is such that the average Singaporean understands that we need expatriates.  This is because there may be a skills shortage, or an outright labour shortage in certain industries.  Where resentment arises, it is due to differences in cultural sensitivities, internal pressures due to the short-term consequences of long-term government policy, and a challenging market that some are unable to navigate due to their own constraints.

The expatriate community, by and large, suffers in that there is this tendency to live in their own bubble, separate from the wider Singapore community, and that is to their loss.  Living in another country also means trying to experience their culture, their cuisine and their festivals; instead of trying to import and recreate “home”.

Quora Answer: Do You Make More Money, in the Long Term, from Property Investments or Shares?

The following is my answer to a Quora question: “Do you make more money in the long term from property investments or shares?”

This really depends on many factors, from the type of property and shares, to the regulatory and tax regime, to the holding vehicle if any, and your behaviour as an investor.  For example, index fund investing in a mature market will eventually make money because the market trend is always up over an extended investment horizon.  There is higher growth in an emerging market, but there is also greater volatility, and there is that chance that the country might devolve to failed state, or near failed state.

Within the Singapore context, where I am, I see no future in most retail spaces because there is a severe glut in a shrinking population, there is a consistent trend of buying online, and buyer’s habits are changing.  This means extracting a consistent yield from such a portfolio is a great challenge.  However, if that property portfolio is warehouses, cold stores, and certain kinds of commercial spaces, there will be growth in the long term because there is already a shortage, and the growing regional economies will continue to put pressure there.

As you can see, there are so many points of consideration.  There is no either or dichotomy.  As such, it is a viable strategy to diversify and have a mix of both, which many investors already do.

Quora Answer: How Has Your Experience Been with Financial Advisors?

The following is my answer to a Quora question: “How has your experience been with financial advisors?  I fired mine after years of little growth?”

It is interesting that there was a request to answer from me since I am a financial services advisor myself.  However, I do have my own financial advisor to manage my own investments and insurance.  It is important to have an external, professional perspective when it comes to finances.  My experience with financial advisors has generally been good, but perhaps it is because I am also in the same industry, and this helps me weed out the less savoury ones.  There is very little product recommendation since I know what I need, and I simply instruct them to prepare the paperwork, and I sign.

However, in the initial process of vetting a financial advisor, I do not begin by telling them that I am from the industry.  I simply state that I am a director of my own consultancy business, which is true.  I consider whether they do a proper fact find, whether they engage in product peddling, and I look closely at their product knowledge.  When it comes to investments, I need to satisfy myself that they understand the market and its movements, and have a basic knowledge of how economic policy has a long-term effect on investments.  Within Singapore’s context, financial advisors are competent when it comes to selling insurance.  But they lack real knowledge of investments and fund movements.  Those who can are few and far in between, and they are very much sought after.

Finally, I consider how diligent they are when it comes to client communication and fund updates.  Finding a financial advisor to sell you a product is easy.  Finding one that keeps abreast of developments that affect your investment and coverage, and then communicates that to the client is not.  This last bit separates a good financial advisor from the rest.

Quora Answer: What is Your Opinion on the New Political Party in Singapore, People’s Voice?

The following is my answer to a Quora question: “What is your opinion on the new political party in Singapore, People’s Voice?”

It is far too early to make a measured, credible judgement of the People’s Voice.  What we have had are vague policy positions such as the proposal to review the hike in water prices, to slash ministerial salaries, and impose a minimum wage.  These are figures drawn in the sand; easily changed when the wind blows.

Another point of consideration, is that a political party with the stated intent of forming a government must convince the electorate that it has the numbers in terms of credible candidates to run, let alone, win the number of GRCs required in a first-past-the-post election.  Of these many potential Members of Parliament, they will need at least twenty or thirty of sufficient calibre to be Parliamentary Secretaries and the various gradations of ministers.  We have seen no such people yet.

Whilst we can applaud the grandiose intent, this party, like the 10 other registered political parties, does not have the capability of coming up with an alternative cogent argument against unpopular and contentious policies, let alone produce alternative policy papers.  In fact, it further splits the Opposition, and dilutes their potential vote share.

I do not see these squabbling political parties coming together as a grand coalition, this Opposition Front.  There are political leaders in that coterie who hate each other more than they oppose the PAP.  They have conflicting policy positions from everything from NS to taxation to military position.  Too many of them want to lead such a motley crew of discounted politicians, and not enough want to subsume their personal ambition for a greater cause.  I remain very sceptical.