Quora Answer: What Would Happen if the People’s Republic of China Seized Singapore?

The following is my answer to a Quora question: “What would happen if the People’s Republic of China seized Singapore like Vladimir Vladimirovich Putin seized Crimea, claiming to protect its majority Chinese population?”

People who ask these fantasy questions obviously do not understand maps.  The distance between Singapore and China is around 3,000 km.  The nearest military staging point is Hainan.  China does not have the lift capability to send enough troops to attack Singapore.  Considering Singapore’s military size, China needs at least 300,000 men just to effect a landing.

China does not have naval superiority here, unless she wants to leave her coast entirely undefended, especially the Taiwan Straits.  China does not have air superiority since she has no air bases in the region, and her naval wing is not operational.  China does not have the logistics capability to go around, through Indonesian waters, if she does not want to fight through the chokepoint at Horsburgh.

All this assumes that the US would happily sit by, and allow China to control the Malacca Straits, and lose a major naval refit station.  This assumes the Five Powers Defence Arrangement does not come into force, and the UK, Australia, New Zealand, and Malaysia just sit and watch.  This also assumes that the RSAF, the most powerful airforce in Southeast Asia, and the RSN, the most potent navy in the region, just sit and wait for a flotilla of PLA troops to just come by and dock.  It would take around six to ten days for the fleet to cross the South China Sea.  Once they pass Hainan airbases’ air envelope, they would be sitting ducks.  There is no rational scenario where China can seize Singapore.  They cannot even seize Taiwan, which is just across the Taiwan Straits.

Quora Answer: What Keeps China from Completely Taking Over Asia Militarily?

The following is my answer to a Quora question: “What keeps China from militarily completely taking over Asia?”

In case it never occurred to you, Asia is the largest continent on the planet.  Asia is 30% of all land area on Earth, with 60% of the population.  That is almost 45 million square kilometres.  China itself is just under 10 million square kilometres.

To the north of China, very much in Asia, is the nuclear power, Russia.  Turkey, India, Indonesia, Pakistan, Bangladesh, the Philippines and Vietnam are some of the countries with populations well in excess of 100 million, some by several magnitudes.  They all have large militaries.  India and Pakistan have nuclear weapons.  And then we have to consider East Asian nations such as Japan, South Korea, Singapore, Taiwan, which all have powerful militaries with air and naval superiority over China, which is primarily a land power.

China, for all its population, does not have enough men to take on, and pacify the countries she shares borders with, let along consider places further away.  She can barely pacify Xinjiang, and Tibet, as it is.  She does not have the lift capability to invade Taiwan, which she considers a renegade province.  She definitely does not have the capability of securing Singapore and the Malacca Straits, 4,000 km away, where 80% of her energy needs pass through.

We have not even considered the effects of international treaties and alliances that would be in force should an entire nation go crazy.  However, long before the first shots are ever fired, the monumental logistics of this endeavour would already have this campaign filed under “Pipe Dream”.

Quora Answer: What Should I Do with a $300,000 Inheritance?

The following is my answer to a Quora question: “I will inherit $250,000 to $300,000 when I reach 25 years of age, in 4 years, and my goal, by then, is to be able to live on my own.  What should I consider spending it on, not spending it on, or investing in, once I inherit the money?”

It is difficult to answer for someone based only on this.  Depending on your life goals, the answer may vary, so I will answer in general.  I would advise you to continue your studies if feasible, and find a good career.  This is not enough to retire on, but enough to make the money work for you and grow.

Pay off all debts that have a high interest rate and will affect your credit rating.  If that is not possible, refinance them at a lower rate.  Do not drain your funds paying off every single debt.  As a rule of thumb, do not pay off more than 20% of your principal sum here so that you can maintain the bulk of the money to earn, and use the earnings to pay off these debts.

As for the funds, divide them into two portions, on a 60:40 ratio.  The 60%, keep it liquid, and put it in securities that you can draw on for out of budget expenses.  You can put them in any manner of investments that you feel comfortable with.  Never be tempted to put your money in higher risk securities for higher yield.  The corresponding risk is not worth it, and these securities only benefit those who have real financial muscle, and know what they are doing.  Suitable securities that you can consider include mutual funds, investment-linked plans, and REITs.  They are suitably liquid that you can draw down funds if required.  At the same time, they are not immediately available so that addresses the temptation on spending it on something stupid.  These are intermediate higher risk securities.  Whatever investments you put your money in must have a higher projected return than the near-term inflation rate.

Do not put that money in business.  Every other person has an idea and needs some investment.  Only get involved if you can stomache the loss, if you know the business well, and if you have direct and final control of the funds and expenditure.  Do not put money in the Forex market, or in complicated derivatives.  The leveraging alone will kill you in a wrong bet.

As for the 40%, put it in longer term investments that are illiquid.  They include fixed deposits, corporate bonds, and Treasury bonds.  These investments are low risk, but have a lower return.  They balance out your portfolio and ensure that in the event that the stock market crashes, you will not be left penniless.

Quora Answer: What Role did Derivatives Play in the 2008 Financial Meltdown?

The following is my answer to a Quora question: “What role did derivatives play in the 2008 financial meltdown?”

This is a brief summary of what happened.  Derivatives were the root cause of the 2008 financial meltdown.  And one derivative in particular was culpable: credit default swaps, also known as collateralised debt obligations.  This was made possible due to deregulation under the Clinton Administration when the Glass-Steagall Act was repealed in 1999.  This allowed banks to operate as brokerage houses.  The Glass-Steagall Act was enacted in 1933, after banks, operating as brokerage houses, caused the Great Depression.

By the 3^rd quarter of 2008, the sum notional value of all derivatives grew by over 600% for commercial banks and stood at US$234 trillion.  To put that in perspective, the entire GDP of the US was just over US$30 trillion in that same period.  Clearly, this was unsustainable.  What fueled this at a corporate level was the way remuneration was packaged.  Bonuses were pegged as a percentage of revenues.  This encouraged risky trades and reckless bets.  This meant that the interests of clients was not as paramount as it should have been.  The bank were betting with people’s money.

Under accounting standards for banks, assets essentially represent loans.  The deposits are categorised as a liability on the balance sheet.  Generally, a bank’s assets approximate the value of their deposits.  I will not go into the technical details here since they may be found in numerous sites online.  In summary, although on paper there seemed very little risk, the banks were hedging and the leverage was high.

The derivative of choice was the CDO.  A CDO is technically a type of structured financial product bundling assets that generate cash flow and repackaged into tranches.  In simple terms, it is essentially an entity, making a bet with another entity, that a particular group of debtors are able to pay a particular group of creditors.  The interesting thing about this is that the entities in question need not have any direct relationship with the debtors or creditors.  It is fancy way of gambling.

In theory, the debt obligations that serve as collateral vary substantially in their risk profile.  Senior tranches were considered relatively safe because they have first priority on the collateral in the event of default, and the credit rating is successively degraded for each tranche thereafter.  But due to the way they were packaged, and coupled with the asset bubble, they were all eventually worthless.  The debt securities packaged were home loans and mortgages.  The coupon rates were higher with the riskier products.  This put pressure on the small debtors.  When the market crashed, it was a domino effect of epic proportions, and the exposure of banks to riskier securities on a large scale meant that they were bankrupted.  The market did not consider the ramifications if the entire market crashed, only defaults on individual security tranches.  When the underlying asset, the houses dropped in value such that servicing the loan was not rational, this led to more defaults, and this fed a further drop on housing prices as demand dried up.  And that is what caused the 2008 financial meltdown.

Quora Answer: What Will Happen to WHO Now That the US Has Decided to Halt Funding?

The following is my answer to a Quora question: “What will happen to WHO now that the US has decided to halt the funding?”

On the WHO website, there is a statement of accounts of the invoiced contributions of individual nations, assessed according to the size of their economy and other factors: Assessed contributions overview for all member states as of 31st March 2020.  You would note that the United States is in arrears, and the WHO is still functioning.  In fact, the US has been in arrears in a number of its international commitments, and none of these organisations have collapsed.  They have been constrained, but they have continued to function.

In the aftermath of World War II, and the establishment of a new world order with the United States as a global superpower, the US initiated or supported efforts to set up various supranational organisations, including the United Nations, the International Monetary Fund, the World Bank and many others.  It also undertook the responsibility of being the largest funder of these organisations.  None of this was done out of altruism.

When you are the largest single donor or funder of anything, you dictate the agenda, and shape policy in nations all over the world.  In effect, the United States enforced a sort of global hegemony that even the Soviet Union and the Eastern Bloc were constrained by.  This meant that it was always inevitable that a stalemate in the Cold War would have resulted in an American victory.

Donald John Trump does not understand history, and how the world functions.  An increasingly isolationist America, stepping back from its international commitments creates a vacuum.  Into that vacuum, other players will step forth.  China is the strongest candidate at the moment, but Russia and the European Union are not far behind.  Once the international order is weaned off American largesse, the US will gradually lose its ability to influence policy outside its immediate regions.  Contrary to “Making America Great Again”, this will ensure the US becomes increasingly irrelevant.  We are witnessing, in real time, the fall of an empire.

Quora Answer: What Would be the Best Way to Reinvest up to $15,000 Monthly, excluding Property, for Higher Returns?

The following is my answer to a Quora question: “I have a property management company which creates £15,000 per month profit.  What would be the best way to reinvest this money, outside of property, for higher returns?”

It is a sound strategy to put that money in a different industry, market or field.  That means you have diversified your risk.  Wherever you put your funds you must have several considerations.  The first of which is liquidity.  Because these are funds from your profit, they must be liquid enough that should there be an adverse move in the market, you have sufficient leeway to withdraw some of all of your funds without incurring a major loss.  This excludes any form of fixed deposit, for example. The second consideration is the investment horizon.  You are obviously looking at something variable, and this ties in with your liquidity.  And this is also related to your risk profile.  This essentially narrows it down to funds or collective investment schemes.

In such a case, I would suggest dividing your £15,000 into two portions along the lines of 60/40.  The larger portion should be put aside, perhaps in the money market or something immediately accessible for the cash flow of the business.  If that has already been done, ignore this.  Rather put the 40% into bonds or something safe.  This is to ensure that you have what is close to a capital guaranteed portion of your investment.  If there is a major crash in the market, the bonds will rise, and you have some measure of safety.

Of the remainder, put them into equity securities to generate yield.  You must ensure that whatever you generate must be higher than the inflation rate.  Remember to spread the risk across markets and sectors, but do not indulge in wrappers or derivatives.  This is only for people who do this for a living, and know what they are doing.  Your main business is property, and that is supposed to take up most of your time.  You should not be putting your money in securities that will take up much of your time.

With regards to funds and markets, I would suggest a pivot to East Asia.  That is the growth region of the world with stable economies, and steady growth projected for the next two decades at least.  What you can do also, considering your business expertise, is consider REITS.

Quora Answer: What Would Happen to Singapore if the PAP Loses the 2020 General Election?

The following is my answer to a Quora question: “What would happen to Singapore if the PAP loses the 2020 General Election?”

The PAP is not going to lose the 2020 general Election.  They may lose a few seats in Parliament, although that is quite unlikely.  We have to consider that although the new slate of PAP candidates is not particularly impressive, the quality of Opposition candidates is a whole level lower.  Opposition candidates such as Paul Anantharajah Tambyah, Tan Cheng Bok, Jamus Jerome Lim Chee Wui, or Pritam Singh are easily as good or better than some PAP candidates.  However, they are not the norm.

If we were to consider the unlikely scenario that the PAP loses, it would not be a landslide, but a loss of Parliamentary majority, with an Opposition coalition in power.  Singapore will lose investor confidence simply because the Opposition do not have enough calibre candidates to fill up a competent Cabinet.  Could any of us imagine someone like Muhamad Faisal bin Abdul Manap as a full minister?  Heaven forbid.

We would have some upheaval within the Civil Service, since after 55 years of PAP rule, the Permanent Secretaries are closely aligned with the PAP.  It would take time for them to realign the goals and strategic objectives of various ministries.  Overall, however, it will be business as usual since it would not be in the interest of the new government to shake the market.

Malaysia is an interesting mirror here.  We had a new coalition, Pakatan Harapan, come to power, albeit with an old face at the helm.  Even then, they wasted all that political capital by infighting, alienating the bureaucracy, and demonstrating their inexperience and incompetence.  That all but guaranteed their failure.  I would expect such an Opposition coalition to fail unless it can form a coalition with the PAP, or a faction of it.