Perils for the Retail Investor

A letter to the ST Forum:

ST Sep 24, 2008
Minibonds worry: 'How is the layman supposed to beware when the prospectus is filled with jargon that even the sellers do not fully comprehend?'

MY WIFE wife and I are joint account holders of Maybank Singapore. We purchased $100,000 of the Minibonds Series 5 from Maybank's investment banker around August last year. We were under the impression then that these were supposedly very safe bonds.

Every few months, I would even call up Maybank to ask about the performance of our Minibonds and whether I should still hold on to them. Each time, I was informed that these bonds were still sound, and there wasn't any need to bail out.

Now that Lehman Brothers is bankrupt, and the public disclosure that our Minibonds investment has, in fact, nothing at all to do with bonds, but are instead Collateralised Debt Obligation (CDO)-related derivatives, we are extremely disappointed, distressed and upset with Maybank's lack of professionalism and poor product knowledge.

The investment advisers are more interested in closing the deal and going through the motions during the investors' risk-analysis.

We fully understand the concept of buyer beware. However, in this situation, how is the layman supposed to beware of what they're being sold when the 60-odd-page prospectus is filled with legalese and technical jargon that even the sellers themselves do not fully comprehend?

Ngo Chee Keong

I've never really had to deal with such issues at work. I have years of experience within the banking industry, but the clients I deal with have always been the MNCs, the government bodies, the hedge funds and other banks.

We call these clients the "big boys". A big boy is a strong, powerful client who knows, or should know, what he's doing.

When we do business with a big boy, we usually sign some form of a "big boy" letter (or other written agreement). In a big boy letter, both parties confirm to each other that they understand the risks of the transaction; neither party is advising the other party; and neither party is relying on the other party for advice.

The idea is that neither party will hold the other party responsible, for any losses that it may subsequently suffer.

"Big boy" letters are not possible with the man in the street. If a bank sells complex financial products to Mr Tan Ah Kow, the law requires the bank to assess the customer's needs; to recommend suitable products, and to give appropriate advice. Furthermore, complex financial products generally can't be sold to the retail public, unless they satisfy a range of regulatory requirements.

One of the common regulatory requirements is a prospectus. This is a thick document with a lot of small print describing the financial product in great detail and setting out all the relevant risks. If a bank fails to disclose all the relevant risks, it could be committing a criminal offence. Therefore banks are very eager to disclose as many risks as they can think of.

Consequently, prospectuses tend to grow into very long, detailed documents. Inevitably the prospectus is packed with technical terms. Finance is a technical field, and if you want to properly describe the risks fully and properly, you will need to use all the technical financial terms.

And of course, the thicker and more technical the prospectus is, the less likely it is that the retail customer will actually attempt to read it. That's the irony.

Two Perspectives on the Emigrated Ex-Singaporean

The first perspective comes from an article by one Philip Lee. The article was published in both the New Paper and the Straits Times (on 30 August and 1 September respectively).

Retiring abroad ain't bed of roses
By Philip Lee

THEY are day-dreaming, those young Singaporeans who said in a recent survey that they wanted to retire abroad.

A make-believe Utopian world is always more pleasant than the real one.

Harmless reverie, I suppose. A form of escapism when all roads here seem to lead to ERP gantries.

But we need to also get real. It ain't all hunky-dory in the US. G'days come with bad ones too in Australia. And there's no milk and honey aplenty in Canada, Malaysia or China.

Who needs this reality check? The poll result showed that a desire to live abroad was the highest among those aged between 21 and 34.

They probably had in their young minds attractive lures such as cooler climate, cheaper housing, lower cost of living, wide open spaces and so on.

Pardon me, while I burst a few bubbles.

First, housing abroad is not as cheap as we once thought, except perhaps for sub-prime property.
Nor is the cost of living. And by the time these youngsters retire, costs would have soared even higher.

A change of weather? Yes, spring, summer and autumn are nice seasons, although in many countries early spring and late autumn are as chilly as winter.

Winters can be so severe that old joints ache, parched lips crack and aged minds go into depression.

The last is the result of a phenomenon known as Seasonal Affective Disorder (SAD).

This is believed to be caused by the deprivation of sunlight during the short winter days.

I was a sufferer when I lived in Vancouver for 10 years. Some are afflicted year after year and may need exposure to artificial sunlight. Some feel suicidal.

When one has reached retirement age, making new friends is not going to be easy. Set in their ways, they cannot discard their idiosyncrasies accumulated over so many years on earth.

Idiosyncrasies and new friendships don't mix. Don't believe that everyone ages gracefully. Many are cantankerous, irascible, suspicious and anti-social.

At a time when you most need the sight of the familiar faces of family and friends, you'll find yourself among virtual strangers - living in a strange land and feeling like a second-class citizen.

I know of friends who migrated to the West years ago after renouncing their Singapore citizenship, only to regret this after a few years.

Immigration: Many countries in the west and in Australia today prefer young, qualified immigrants, not oldies with money.

So the picture is not as rosy as the young imagine. Let's hope they wise up.

The second perspective comes from one of my readers, Cheong Wing Lee. From his home in Vancouver, Canada, he sends me an email. Rather long, but the highly specific information will be helpful for those seriously considering emigration.

Dear Mr.Wang,

Mr. Philip Lee's critical assessment about the pride of Singaporeans retiring abroad cannot be left unchallenged.

I have been retired for more than ten years and have been spending my time between Guangzhou in China and Vancouver in Canada. Contrary to what Philip Lee had said, both these cities are interesting, fun and cheaper than Singapore.

In Guangzhou, I live in a penthouse apartment that I bought for S$150,000 five years ago. It is situated in Tian He district (similar to District 10 in Singapore) and next to the beautiful 1,000 acres botanic garden that residents of the condo can access for free through a side gate. It is a gated community with a club house and first class facilities, Olympic size swimming pool and modern security services. A similar apartment in Singapore would have cost at least S$900,000 or more.

For about 5,000 yuan or about S$1,000 a month I live extremely well. A similar lifestyle in Singapore would cost me at least S$5,000 a month. One can easily survive well in Guangzhou for 2,000 yuan or about S$400. It would be cheaper if one decides to live in smaller cities like Fushan or Chungshan. A Singaporean who speaks proficient English can easily get a part-time job teaching English and earn 3,000 to 5,000 yuan a month.

A retired professor from NTU in Singapore has been living in the same estate as I in Guangzhou for the past few years. He teaches science at a local university and earns about 10,000 yuan a month. He too can testify to the cost of living in Guangzhou. He is unlikely to move back to Singapore as he has liquidated all his assets there.

In Vancouver, I live in a 5,000 sq feet waterfront property that costs me less than S$1 million. A similar piece of waterfront property in Singapore would have cost at least S$3 million or perhaps more. Attached is a photo of the view from the windows in my house.

I drive a Honda Civic Hybrid that I brought brand new five years ago for S$25,000. A similar new Honda Hybrid in Singapore would have cost close to S$100,000 if you include COE. If one prefers to drive more prestigous cars like a brand new Mercedes 250 or a BMW 325, these cars cost less than C$50,000. The cost of living for my wife and myself is less than S$2,000 a month. The cost of living for me in Vancouver would drop significantly when I reach the age of 65 when I am entitled to old age pension from the Canadian government. My wife and myself would then receive more than S$2,000 a month from the government.

Factor in the savings in the cost of purchasing a house and a car in Vancouver vs in Singapore, and the difference is more than enough to pay for a happy, comfortable retirement for the rest of your life.

If a person is more adventurous and hands-on, the cost of living in Vancouver can be only about a few hundred dollars a month. You can fish, catch crabs and prawns, grow your own vegetables, hunting etc. There are lots of places to fish and hunt. All you need then is to purchase rice, sauces, spices and pay for essentials like gas and electricity for the house you stay, telephone bills and transportation. These items amount to no more than S$500 a month. I have tried it and it is fun.

It is impossible to find similar opportunities in Singapore.

Philip Lee had personal experiences of depressing tales about lack of friends for retiring Singaporeans living overseas. I sympathize with him for "suffering from seasonal affective disorder", but I suspect Mr.Lee is an introvert and does not have a sociable personality. As long as one is an extrovert and willing to engage in and be pro-active, he will have lots of friends.

I have lots of friends of all races both in Guangzhou and Vancouver. I participate in dragon boat races in Vancouver, San Francisco, Guangzhou, Hawaii, etc. I am the only Singaporean with the rowing team and the oldest. The rest of the team are from Hong Kong, Taiwan, China, Thailand and some European countries. I play golf with friends of all races. I give free English lessons to Guangzhou universities students as well as local business persons.

I am a member of both the Guangzhou and Vancouver Toastmasters clubs, Guangzhou Canadian Friendship club, Friends of Taiwan club, etc. I am always welcome by friends in Guangzhou and Vancouver. We have activities all year round, i.e. snow hiking and skiing in winters, fishing, gardening, cruises to Alaska, and BBQ during summers, pot-lucks, mahjong, hunting, etc., throughout the rest of the year. There is hardly a dull moment.

My wife who is a retired teacher from Singapore gives free English lessons to doctors and nurses at Chungshan Hospital in Guangzhou. She does volunteer work when in Vancouver. Life is so rewarding and there is simply no time to be depressed.

It is surprising that Philip Lee had said that we are treated as second-class citizens. It is inevitable that there will be a small minority of people who are racists and bigots. These people even hate their own kind. It is not the norm and that happens in any country including Singapore.

I have kidney failure and it cost the Canadian Government S$8,000 a month to treat me at no cost to me. There are nine friends who are willing to donate their kidneys to me. They include a Caucasian, a Taiwanese, a Malaysian, a Korean, a Mainland Chinese (a doctor herself) and four members of my family. It is unfair to say that we are 2nd-class citizens when people like Dr Ron Werb, head of department at St. Paul's Hospital personally accompanies us in dragon boat rowing practices twice a week together with other doctors.

I remember when I first immigrated to Canada more than twenty years ago, all my three children were given C$250 each as "milk money" until they reached high school. This policy is still ongoing. There are plenty of support organizations to help new immigrants of different cultures and races to assimilate into the Canadian society.

The Canadian Government even pays for my medical treatments when I travel overseas. Healthcare is very costly and a very important factor for retirees. To have access to good, free medical treatment during retirement is like striking a million-dollar lottery .

The benefits of free healthcare in Canada makes Singapore's claim of a lower cost of living quite meaningless.

Now, note the next part. Here's a personal invitation from Wing Lee. SPH and Mediacorp employees, please take note. This could be your chance to write an interesting story. Wing Lee has given his telephone number to me (and I have his email address, of course) - if you are a journalist and you want to contact Wing Lee, please feel free to email me.

To prove my case, I welcome any member of the Press to visit Guangzhou or Vancouver and stay with me for a month and experience the truth. However, I have one condition. Do not send an introvert and an eternal pessimist who only engages in self-pity and complaints. Then there is nothing to prove. The person should be open-minded and adventurous and enjoy sea sports. He must be a hands-on person and preferably be able to handle a rifle and likes hunting and able to cook.

Philip Lee is correct to say that life is not a bed of roses, but only if one is not prepared to make the necessary adjustments to adapt. If one works hard and stays positive, it is difficult to fail. As for me and many others, we are very happy immigrants. Life could not be better. There is no shame and we certainly have clear conscience when emigrating from Singapore.

Regards
Cheong Wing Lee

Just a small note from me now - perhaps not terribly relevant. Last month, around the National Day period, I wrote a long blog post with a patriotic theme. Its title was self-explanatory: "Why I Will Not Emigrate From Singapore".

But I never posted that article. After I finished writing the article, I looked at all my personal reasons for staying on in this little island, and I realised that collectively, all those reasons made me a rare statistical quirk, an improbable oddity in the Singapore landscape.

In other words, my reasons for staying on in Singapore will apply only to a very, very small number of other Singaporeans. That is to say, if my personal circumstances were more like the typical or average Singaporean's, I think I might struggle to find reasons to stay.

So as not to dampen everyone's happy National Day mood in August, I decided not to post that article. But now let me just state, very briefly, some of the reasons why I will not emigrate from Singapore:

1. I have a congenital heart defect and no NS liability. Therefore I am personally not disadvantaged by NS, vis-a-viz the ever-increasing number of foreigners on this island.

2. My children are extraordinarily bright and I believe they will belong to the tiny minority who can sail through the local education system with minimal tears and suffering.

3. Unlike most Singaporeans, I have no interest in driving a big car or owning landed property.

4. At work, I'm paid like foreign talent.

There, I told you. If my personal circumstances were more like a typical Singaporean's, I really would be quite unsure why I'd stay.

Friendly Reminders From the Nation-Building Press About The Dangers of Hong Lim Park

ST Sep 2, 2008
First legal demo since rule change lasts just 10 minutes
Non-profit group stages protest against maid abuse, watched by curious onlookers and activists
By Li Xueying

SINGAPORE'S first legal demonstration in two decades was held yesterday at the Speakers' Corner - and lasted for all of 10 minutes.

At 7pm, five members of a non-profit group, Hearer of Cries (HOC), gathered metres from the Clarke Quay MRT station exit at Hong Lim Park to stage a protest against employers who abuse their maids.

Against the darkening sky, they erected banners and played music, as a female member - complete with a neck brace - posed as an abused maid.

HOC founder Mike Goh, 46, gave a short message against abuse as others distributed leaflets to an audience of some 20 curious retirees, political activists and office workers on their way home.

By 7.10pm, it was over. There was no procession, shouting or burning of effigies. 'Is that it?' asked a disappointed Mr Steven Lee, 34, an engineer.

LOL, poor Mr Steven Lee. All these years, the PAP government has been telling him that demonstrations are dangerous; they mustn't be allowed; there will be riots; people will be killed etc. I guess Steven must have actually believed the PAP, at least partially.

Personally, I don't think that any demonstration at Hong Lim Park will be more dangerous than, say, the crowds at the Great Robinsons Sale.

Meanwhile (and by pure coincidence no doubt, LOL), today just happens to be the very day that the Straits Times has an article about an event that happened two years ago. And what happened two years ago?

Well, back in September 2006, a lady named Harkirat Kaur distributed some flyers & advertisements at City Hall MRT. What's so unusual about that, I hear you ask. After all, every day, people stand at MRT entrances distributing flyers, advertisements and brochures.

Oooooh, but this is different. Harkirat's flyers were VERY dangerous. She was publicising a demonstration at Hong Lim Park. And you know what the PAP government has been saying about demonstrations all these years, right? Demonstrations are dangerous; they mustn't be allowed; there will be riots; people will be killed etc.

No wonder Harkirat must be punished.

ST Sep 2, 2008
Illegal assembly: Woman fined $650
By Elena Chong

A WOMAN who took part in an illegal assembly two years ago to publicise a political rally was fined $650 yesterday.

Harkirat Kaur, 29, admitted to passing out fliers during a September 2006 gathering along North Bridge Road which allegedly involved members of the Singapore Democratic Party (SDP).

Party chief Chee Soon Juan, his sister Chee Siok Chin, assistant treasurer Jeffrey George and party chairman Gandhi Ambalam have also been charged in connection with the assembly.

They had earlier claimed trial and their next court date is tomorrow.

The court heard that Harkirat, who does freelance editorial work, took part in the assembly at the entrance of City Hall MRT around mid-day on Sept 10, 2006.

She distributed fliers promoting a rally at the Speakers' Corner in Hong Lim Park scheduled for six days later.

Me, I don't think distributing flyers is dangerous. Unless you're distributing them for opposition politicians to say that they will be speaking at Hong Lim Park. Maybe that's exactly what the Straits Times wants to remind you about, LOL.

On a related note, you might recall that last year, the Workers' Party had applied for a permit to hold a cycling event at East Coast Park. The police rejected the application. When Sylvia Lim went to Parliament to ask why, the Senior Minister of State for Law and Home Affairs Prof Ho Peng Kee said that:

1. East Coast Park is a recreational park for Singaporeans and their families. It is not meant to be used by a political party to promote its cause;

2. Apart from displacing the usual recreational users, East Coast Park is an open area where there is greater potential for breach of the peace, public disorder and unruly behaviour.

3. The police requires political events to be held indoors or in stadiums where problems could be contained, and this policy applies to all political parties.

However, guess where the PAP held its carnival, just last Sunday? At the West Coast Park. And guess who made his grand entrance on a bicycle? Yes, the Man himself, together with a troop of PAP ministers and MPs, all on bicycle.

"Ehhh, Mr Wang, don't say liddat lah,
West Coast Park not the same as East Coast Park, mah."
I must say - this country is as funny as it is sad.