Celebrating 55!

Part of the 2,000 or so retiring CPF members who attended the seminar. Their ages added up to more than 100,000 years!

In a few months' time, I will be 55. In the blink of an eye, I have worked more than 30 years with my current employer. I have collected Long Service Awards (LSA) countless times. (I am lucky to have a benevolent employer who gives out LSA every 5 years from the 15th year of employment onwards.) It seems like only yesterday that I wrote this post when I turned 50.

Most working Singaporeans know that turning 55 is a watershed in their lives. You will be considered a senior citizen if there is a GST offset package again and you will be given a Senior Citizen's Bonus. You also qualify for Senior Citizen Admission Rates when you visit most of National Heritage Board's museums. However, you age slower when you travel on our public transport system - you don't qualify for its Senior Citizen Concession Card until you turn 60. (Could it be that driving on Singapore roads is so stressful that it makes you age faster? Must be due to the frequent traffic jams and the exorbitant COE and ERP charges that you have to pay when you drive. So if you take public transport, you are not considered a senior citizen until you are 60.)

In preparation for the big day, I attended Central Provident Fund (CPF)'s "Celebrating 55! Seminar" on 27 June 2010 (Sunday). According to CPF's website, at the seminar, members "will find out what happens to their CPF savings when they reach 55, and learn about the new CPF LIFE scheme. A guest speaker from MoneySENSE will share useful financial planning tips on how to invest in one’s golden years".

It's a bittersweet feeling. I'm happy that I'll be collecting the fruits of my labour (never mind if for me, it's only 30%) after more than 3 decades of hard work. At the same time, I'm sad that I'll soon be considered neither productive nor reproductive. My total CPF contribution rate was slashed from 35% to 29% barely 5 years ago and it would be further cut down by another 8.5% when I reach 55. (Refer to table here.) Tell me if that is not a way of saying that I am not so productive.

However, I am grateful that I can still collect 30% of my total CPF balance. Tough luck for those who turn 55 after 2013 - they get nothing unless they could set aside the required minimum sums in their Medisave and Retirement Accounts.

The CPF Board presented everyone who attended the seminar a "Celebrating 55 Years" umbrella. If I walk the streets of Chinatown or Geylang with this umbrella, I am likely to attract female streetwalkers who are more interested in turning my 公积金 (CPF) into 供妓金 (fund for prostitutes). So I must be very careful where I use my CPF umbrella.


The CPF is really thoughtful. In addition to the handy erectile extendible umbrella, I am also given 2 golden eggs. They are not made of gold, of course, but only painted gold.


Most of us know that the golden egg signifies our valuable CPF nest egg or retirement savings. But suddenly, I realise that CPF might be sending me another message. Putting the 2 eggs together with the umbrella, I get this:


Hmm... maybe they are telling me that I will still be reproductive after 55? In that case, I really ought to be very careful where I use my CPF.

A Crooked Product Or A Crooked System?

Recently, many people who bought structured products burnt their fingers when Lehman Brothers collapsed and the global financial markets trended downwards. Investors of Lehman Brothers Minibonds, DBS High Notes, Morgan Stanley Pinnacle Notes and Merrill Lynch Jubilee Notes were among those affected.

There was an article about the debacle in the Sunday Times of 7 Dec 2008 titled "Structured Products, Anyone?". It appears that many people have lost confidence in such products, if not in the banks that marketed them. I for one have lost all trust and confidence in my banks and relationship managers (RM) to invest my money for me. DBS recently retrenched 450 employees in Singapore but it claimed that the retrenchment had nothing to do with the High Notes debacle. I personally don't believe that claim. A relationship between and a bank and its customers is based very much on trust. If you lose that, you have lost everything, not just people's money. And it is going to take a long, long time to build up that trust again.

It turned out that banks in Singapore started marketing such high-risk products to retail investors (aka ordinary folks like me) from as early as 1999. How they managed to do so for so long is a wonder. It was a disaster waiting to happen.

Many other questions remained unanswered:

1. How many similar products were sold?

2. What is the total sum of money involved?

3. How many people have bought such products?

4. How many of these products are still in-force, i.e. have yet to reach maturity date?

5. What are the current values of these products?

I am a risk-averse investor myself. When you are barely 2 years away from collecting your CPF money, you should not be taking high risks. Moreover, I have been burnt badly before in 2001 when the technology bubble burst so I know how it feels like to lose your hard-earned money.

In June this year, I visited a well-known foreign bank in Singapore together with a good friend. I was there to look at their investment products. I told the RM that I was a risk-averse investor because of my previous bad experience investing in technology unit trusts. She showed me pamphlets of 3 products - the first was an agricultural commodity fund, the second was a structured product called JPMorgan AsiaConfidence Notes while the third was something called a "retail note" which I believe is also a structured product.

The expected return for the first product was not stated in the brochure. At that time, prices of commodities like wheat and rice were already quite high. So was the price of crude oil, at above US$120 a barrel. I thought the high prices were unsustainable, so I decided against this product. As for the second product, it paid an attractive coupon of 7.5% p.a. The principal was safe unless any of the 4 indices fell below 50% of the initial levels of the indices. (I do not know if any of them has already reached this so-called "unlikely" scenario by now.) I thought that the second product was too complicated and also likely to be of higher risk because of the high coupon payout. In the end, I invested a 5-figure sum in the third product which paid what I considered as a very modest 3.3% p.a. fixed coupon payout on a 5-year investment. The RM also reassured me that the third product was very safe. After all, she asked, "What is the probability of a country going bankrupt? Practically zero, right?"


Well, after what had happened in the global financial markets in recent months, I am not so sure if I could agree with her now. In any case, I now know that with structured products, you could lose your entire investment even if the reference entities did not fail. This was the case with the Lehman Brothers Minibonds and other such products. It looks like I have also been misled into investing in a vulnerable product. The irony is that in the eyes of the financial regulator, I am not considered as a vulnerable investor. I understand that the unofficial (or should it be official?) definition of a "vulnerable investor" is "someone who is above 62-year-old and has no more than primary education", arbitrary though the definition may seem.

After I had indicated my interest in the product, the RM quickly filled in a survey form for me, saying that it was an MAS requirement. I remember that I specifically told her that I was not willing to take any risk at all. It took less than half an hour to close the deal. Such easy money (for the RM and the bank)! I did not receive a copy of the prospectus nor the survey form that I signed. It didn't occur to me to ask for them. Now I know that I should have. All I received was a brochure with a lot of fine print:


A few weeks later I received my bank statement and was very surprised to see the product that I bought being classified under "non-capital protected investments". I quickly looked for the brochure and scanned the small print. And I found this statement:


DAMMIT!

I got to be crazy to risk my entire principle for just a miserly 3.3% p.a. yearly return. You bet I will never trust a bank or an RM ever again. The next 4-1/2 years is going to be a very long and nervous wait for me. Meanwhile, nobody could say how likely my note-issuer might collapse like the Lehman Brothers or how much money I would get back in the end, if at all. To make matters worse, there are people who would say that I am greedy or I "went in with my eyes open". For some people, the situation is so bad that they are even contemplating suicide. Don't worry, I am not thinking of that yet.

Effects Of The Current Financial Turmoil (2)

MAS is in the news again
Not the escapee from prison
Shouldn't it be keeping our savings selamat?*
People who lost money are understandably mad

Some investors bought "minibond"
Now their money could be all gone
Its complexity's beyond the layman
Many didn't know it was linked to Lehman

The product with a fanciful name
But minibonds and bonds are not the same
Who would think a 5% dividend is reasonable
When you could lose all of your principal?

For some it was their entire life savings
Yet the distributors said it had good ratings
"Your risk is very small"
Spinning a tale that's very tall

Is it the buyers' carelessness?
Or rather the sellers' callousness?
Were the buyers simply greedy?
Or were the sellers obviously shifty?

Many elderly people were targeted
The products were indiscreetly marketed
Some were not educated highly
A prospectus they'll not understand easily

Many of them were retirees
Who have collected CPF monies
The banks knew they were cash-laden
So what if there's no diversification?

Some had only wanted fixed deposits renewed
But instead had their investment strategies reviewed
The banks not caring all this while
If the products fit the customers' risk profile

Some VIP even said something like this
If you're unwilling to take any risk
Leave your money with the CPF for 4% return
A very good rate with no risk taken

* - "Selamat" is Malay for "safe". It is also part of the name of the escaped terrorist.

Below are some funny cartoons published in last Sunday's New Paper:

Effects Of The Current Financial Turmoil (1)

I read with sadness that quite a number of people have lost large sums of money recently because they invested in structured deposits linked to the collapsed Lehman Brothers bank. For some of these people, the money they lost were their entire retirement savings. I heard one elderly Singaporean couple invested $250,000 and may not get any of their money back.

As for me, I have made quite a few bad investments myself. A few weeks before the dot-com bubble burst in Mar 2000, I bought into ABN AMRO Star Global Information Society Fund. Needless to say, when I sold off the investment after the bubble burst, I got back only less than 20% of its original value. It was only after the dust had settled that I realised that the fund was classified as "high-risk and narrowly-focussed". To make matters worse, the investment was sold to me by a very close relative. I won't deny that our relationship had suffered because of this unpleasant experience.

More recently (in Aug 2008), my wife and I bought some OCBC non-convertible preference shares. We were attracted to them because they paid 5.1% annual dividends - not bad when you consider that interest rates for savings and fixed deposits are only a small fraction of that. As promised, the shares did pay a 5.1% pa dividend, i.e. S$33.53 for every S$10,000 invested for the 24 days which the shareholder had held on to the shares. Not too bad except that the closing price of the share had dropped from $100 to $93.42 within the same period - we had a paper loss of more than $1000 within less than a month and got back only less than $100. Would you have subscribed to the shares if you know that this is the outcome? Of course, with the benefit of hindsight now, the answer is an obvious one.

My many bad experiences in investment make me wonder how people like Mr Oei Hong Leong can make S$7 million by trading AIG shares in such a difficult market condition. No wonder they say that the rich gets richer (people like Mr Oei) while the poor gets poorer (people like me). Alright, Mr Oei did a good and noble thing by donating his S$7 million gain to the Lee Kuan Yew School of Public Policy. (I would like to donate too but now, I am badly in need of donations myself.)

I feel that our MAS has not been very pro-active in its role as a financial regulator. It should not have allowed highly risky products to have been marketed as relatively safe investments to risk-averse investors. This would have constituted as misrepresentation by the sellers. The least it could do is to label the products as "high risk" and this fact should be made known to buyer by the seller. The buyer should also be told in layman's terms the various scenarios which will cause a loss to the investment and by how much.

Do You Want S$11,600?

While Frannxis was shocked with his recent experience with a bank, I was elated. No, I am not 幸灾乐祸 (gloating over someone else's misfortune). You see, yesterday I received 3 signed cheques from UOB - one for S$7,000.00 and two for $2,300.00 - making a total of $11,600. I just can't believe my luck! Nobody has ever given me so much money before.


Make no mistake, the cheques are not specimens; they are real. They come with the banks' authorised signatures. I was really tempted to bank them into my account until I read the accompanying letter properly:

"Transfer your outstanding balances... to us... or get cash drawn... at this special rate of 2.88% p.a. for 6 months by banking in the cheques into your non-UOB account... The prevailing interest rate will apply thereafter."

Phew, lucky thing I know English... and a bit of Maths. ;)

With such easy credit available, it is little wonder why the number of bankruptcy cases is rising in Singapore.

How I Won From All The Mahjong Kakis

In case you are wondering about the meaning of the word kakis in the title of this blog, someone who plays mahjong is known locally as a mahjong kaki. Kakis is simply the plural of kaki. It is a Malay word that means "leg" or "foot". Frankly, I do not see any connection between "mahjong" and "leg" apart from the fact that a mahjong table has 4 legs and you need 4 people to play the game.

My late mum loved to play mahjong. She played with like-minded neighbours in a spacious common area next to the staircase on the 4th storey of our SIT flat. This was in the 1960s. I loved to sit beside her to watch the game. There was another reason why I loved to sit beside her. (Read on to find out why.)

As a result, like what Kenny Rogers sings in the song The Gambler, I "got to know when to hold them" (the mahjong tiles, that is) and when to throw them away. In other words, I grew up being quite good at the game but being quite bad as well, if you consider playing mahjong as a vice.

Each pok (session) of game would last one or two hours on the average. Every player started with $2.90 in chips. If the player lost all the chips, he/she would have to fork out $3.00 in cash to settle the account. Why the extra 10 cents? The answer is that the "missing" 10 cents went into what Chun See mentioned in Peter's mahjong post as "chow soi" (imposing tax).

(Don't you ever scoff at the seemingly small amount of mahjong money at stake. $3.00 may seem very little money nowadays as it may not even buy a bowl of noodles in a food court. To put it in perspective, the monthly rent of our smaller than 500 square-feet SIT flat was just $24. It was what my dad could just afford with his monthly salary of about $150 which had to feed a family of 7 people.)

The mahjong game usually lasted from morning till late at night. On weekends, it would even be "thong siew" i.e. played throughout the night till the next day, which meant that the players went without sleep for 48 hours or more at a stretch. If that happened, several dollars of "tax" could be collected for that mahjong session.

So what happened to the "taxes" collected this way? The funds were used in 2 ways:

1. Every year, during 中元节 (Zhongyuan Jie or Ghost Festival) on the 15th day of the 7th lunar month, a portion of the money would be used to buy offerings and food for the spirits. After the festival was over, the food items would be apportioned to all the regular mahjong kakis.

2. Every one or two hours during the mahjong game, I got a chance to earn some pocket money. It worked like this:

The players would give me 30 cents to buy coffee for them - 10 cents was officially declared as my reward while a kettle of black coffee with sugar from the coffeeshop downstairs cost 20 cents. The coffee was enough to fill 5 small enamelled tin cups. Sometimes, I even got to drink the fifth cup.

Even as a young kid, I knew how to maximise profits. I added 3 tablespoonfuls of sugar from my mum's sugar jar and bought only 10 cents of black coffee (without sugar) from the coffeeshop. This way, I earned 20 cents with every kettle of coffee that I bought. Over time, I saved up quite a tidy sum. And that was how I beat all the mahjong kakis and ended up as the ultimate winner.

Did You Lose Money Recently?

No, I am not talking about losing money in a casino, the share and property markets or even a bad business deal.

You see, I was at the food court in basement 1 of the Toa Payoh HDB Hub last Friday at about 6.30 pm. For those of you who do not know the existence of this food court, I am sorry but where have you been ah? You are certainly losing (not money but) out on one of the best rojak stalls in Singapore.


(This photo is taken from Tingwo's article on Toa Payoh food hunt)

The stall is called Soon Heng Rojak and it dishes up the wet version of rojak. For the benefit of my foreign friends, there 2 kinds of rojak sold in Singapore:

One is the dry type. It usually has yu char kuay (curlers made from flour and deep-fried till golden brown), tau pok (deep-fried beancurd) and dried cuttlefish. The ingredients are grilled, preferably on an open charcoal fire for that added "burnt" fragrance. However, nowadays an electric grill is often used instead. The ingredients are then cut up with a pair of scissors and then topped with some hae ko (dark, thick prawn paste) and crushed peanuts. The dish is best served hot and crispy.

The other type of rojak is the wet type. For those who have not seen it before, the preparation of this dish is quite interesting to watch. It has many ingredients - mang guang (turnip), tau geh (bean sprout), tau pok, cucumber, pineapple and soaked cuttlefish. The seller has a large clay bowl. He first puts in all the flavourings - sugar, sour plum sauce, hae ko and chilli paste, if preferred. He would mix them all up using a wooden scoop. Then holding a big piece of vegetable in one hand, he would deftly slice it into little pieces. The vegetable slices would all "fly magically" into the earthen bowl. When all the ingredients have been cut up this way, he would then mix them up well using the scoop again. Finally, he would scoop everything up from the bowl and serve it to you or wrap it up if you prefer ta pao (takeaway).

This rojak stall is so good that it has an electronic queueing system, not unlike the one used by HDB just upstairs for flat applicants. It is a necessary investment because queueing time is often half-hour or longer. Not only that, there is a second stall of the same name in the same food court! Now tell me, how often does that happen in Singapore?

Oops, I think I have digressed too much. When I talk about rojak, my ideas also tend to become rojak (all mixed up). What was this article originally about? Oh yes, it was about losing money.

Okay here come the toppings. While I was eating, I noticed some money lying on the floor by the next table where an elderly man was having his dinner. No one else seemed to have noticed the money even after I have finished my meal. Then I walked over, picked up the money and asked the elderly man, "Did you drop some money?" Old man Oh man, he was even more honest than I - his reply was a very firm "no".

So if you are the one who lost the money around the date, time and venue specified above, I would gladly return it to you. However, the condition is that you must describe the money as accurately as possible - the amount, the denomination, how it was packaged, etc. From your description, I will be able to tell if you are the genuine owner. (Hello, this is not a contest hor.)

And if you don't read my blog, then I am sorry to say that you are a real loser (of the money, that is). If there is no claimant after 3 months, I will donate the money to a charity (not NKF, Teen Challenge or Ren Ci).