How To Understand Information in the Age of Lots of Information

Early this year, I wrote a post entitled The Modern Risks of Information and Advice. In that post I explained why we must be careful how we interpret information and advice, even when it comes from expert sources.

The key point is that no matter how knowledgeable an expert may be, his interests are not necessarily aligned with yours. Therefore he may or may not tell you what you really need or ought to know. Also, he is likely to say the things which are in his own best interests to say.

It doesn't mean that all experts are always out to deceive or mislead you. It does mean that whenever you come across any expert providing his views or opinions, you should take a moment to consider his possible motivations in providing such views or opinions.

A case study below. Suppose you are a property developer, with many units left to sell. Further suppose that it is suspected that a property bubble might be forming. Is it in your own personal interests to say that there is a bubble forming ... or that there isn't?

July 31, 2009
No property bubble forming
They say buying frenzy hasn't reached point where Govt needs to intervene
By Joyce Teo

PROPERTY developers are enjoying the surge in interest from buyers but they do not believe that speculation has reached a stage where the Government needs to step in.

They also maintain that the prevailing economic conditions will begin to cool the buying frenzy and stop a bubble forming in its tracks.

'It's not a bubble, it's just a blister after the pain we experienced in the global financial crisis and it comes before a recovery,' said Cushman and Wakefield managing director Donald Han.

Meanwhile the TODAY newspaper reports that yesterday, at a showflat in Tanah Merah, hundreds of people showed up yesterday and started queueing to get in - even though the showflat was supposed to open only today.

So the developer TID opened the showflat last night at 8 pm. It started sales by open ballot sometime after 11 pm. The balloting carried on "well into the wee hours of the morning" - we assume this must be 1 am or 2 am.
Bubble or not? Hmmmm ....

A late night property ballot ... is this a sign of the times?
Jul 31, 2009

The showflat was only due to open today.

But on Monday, some, mostly property agents, were already lining up for units at the Optima condominium at Tanah Merah. They went home after developer TID made it clear the queue would not be recognised.

However, this did not stop hundreds from turning up early yesterday - leading to a massive queue and the occasional ugly spat over queue-jumping. The result? TID decided, at about 8pm, to open the showflat doors and, unusually, kick off open balloting.

The process began after 11pm last night and carried on well into the wee hours of the morning. Successful applicants paid the 5-per-cent deposit on the spot.

Population Demographics and the Property Market

Population demographics are often viewed as one of the most important fundamentals of the property market. The rationale is simple to understand. A growing population increases the demand for housing, and the younger the population, the better for property investors. This is because in the coming years, a relatively higher proportion of people can be expected to grow up, move out, start families and need their own homes.

However, all rules of thumb are only approximately correct. Various factors might eat away at their correctness. What factors might nibble down the "population demographics" property rule? Here are a few suggestions.

(1) An increasing average lifespan. The longer the average citizen lives, the longer the period of time he will require a home (thereby propping up the property market). Suppose for example that in the past the average citizen lived to age 65, but that in the future, the average citizen lives to 85. Then on average, he will contribute to housing demand for an additional 20 years.

(2) Decline of the extended family. In the past, it was very common to find extended families. For example, three or even four generations might share one roof. However, nowadays it is more common for young adults to move out upon getting married, and for their parents to live on their own. This leads directly to additional demand for housing.

(3) More singles living on their own. Nowadays, young people in Singapore may not even wait until they get married, before they move out. For the sake of privacy and independence, they may move out earlier, renting a place of their own if they cannot afford to buy one. This change in lifestyle norms would contribute to greater demand for housing.

(4) Low interest rates. If bank interest rates are perennially low, then more cash-rich individuals will be driven to park their cash in other assets, such as shares, bonds or property. Thus if you have an extra $500,000 to spare, then instead of putting it in a bank, you might well choose to use it to buy an additional apartment and rent it out (consider that DBS pays only 0.45% for a 12-month fixed deposit of $500,000).

(5) Increasing foreign ownership. If the laws of a country are favourable to foreign ownership of property, then foreign ownership of property will increase. The clearer and more transparent those laws are, the stronger that trend will be. Many of those foreigners don't even need to be living in that particular country. They are just high net-worth individuals who hunt around the world looking for places to park their cash.

(6) Divorce rates. According to Wikipedia, divorce rates in Singapore have doubled over the past decade. If this social trend persists and grows, in time we may expect to see, at any given time, a higher proportion of individual adults needing to rent or buy a new place, because they have just separated from their ex-spouse.

The Property Boom is Back

Hard to believe, but it's true. The facts speak for themselves. Latest news on the HDB market:

ST July 24, 2009
HDB prices hit record high
By Jessica Cheam

PRICES of Housing Board flats have reached a historical record, rising 1.4 per cent in the second quarter this year, reversing a first-quarter dip of 0.8 per cent.

Fresh data released from the HDB on Friday shows the resale price index rising to 140.2 - beating the previous record set in the fourth quarter of last year when it hit just over 139.

The figures have come in slightly higher than flash estimates released earlier this month which showed that prices rose 1.2 per cent.

Sales of HDB resale flats also surged 58 per cent, reflecting improved market sentiment, to reach 10,184 transactions in the second quarter, compared to 6,446 in the first quarter.

And here's a snapshot of the private property market:

July 24, 2009
Buyers snap up home deals
Lower prices, pent-up demand driving surge in sales of private homes
By Melissa Tan & Smita Krishnaswamy

THE current recession-defying surge in home sales is being driven by pent-up demand from local buyers with enough savings to swoop on lower-priced units and a determination to invest or upgrade.

These buyers are not acting on impulse but have been saving up for years.

Another key factor is the fear of missing the boat ahead of another property boom, The Straits Times has found after speaking to buyers and market analysts.

Last month, an all-time record of 1,825 private homes were sold, continuing a major upswing that started in February. The June figure exceeded that of August 2007 - the height of the last property boom.

On recent weekends, showflats have been crammed with families, couples and singles. Some want to buy a condo as an investment with prices still quite low; others wish to upgrade from HDB flats.

And just six months ago, practically all the real estate analysts were saying that 2009 would be a disaster for the property market. In fact, June was cited as the time when things would go really, really sour, just because of the number of projects that would TOP around then.

One of those situations where truth turns out to be stranger than fiction.

Same Old Temasek Again

An article from Today:

Did somebody forget this thing called culture?
by PN Balji

AS THE buzz about Mr Charles Goodyear's sudden departure from Temasek Holdings continues to dominate discussions, one can't help but ask this question: Could a no-nonsense CEO who bulldozed his way through a traumatic merger to form mining giant BHP Billiton, retrenching thousands in the process, have fitted into a Singapore culture, which for all its outward glow of modernity, is essentially conservative?

Temasek is no ordinary company. To run it, having good business acumen is not enough. You need to understand not just the dynamics of the company, but that of its associate companies, the Ministry of Finance, the Cabinet and the people of Singapore. It is a jewel in Singapore's crown and the person protecting and growing it must have the clout to push through his initiatives. If not the clout, then at least the savvy to win over its stakeholders.

Pity Mr Goodyear. It looks like he did not even have the time to go on a charm offensive, assuming that plan was in his briefcase at all.

Just four months after he was appointed to the Temasek board and just two-and-a-half months before becoming the CEO of the sovereign wealth fund, the 51-year-old American businessman is leaving with questions being asked about not only his style but about Temasek's ability to pick the right person and about whether a foreigner can ever run an outfit like Temasek.

His credentials are impeccable, they have been talking to him for two years, Minister Mentor Lee Kuan Yew described him as one who had an affinity for Temasek's values, yet Temasek and Mr Goodyear are parting ways. Strategic differences was given as the official reason. How could that be?

PN Balji, you'll never know. You can speculate, and make your guesses. Maybe from somewhere within your personal network, you might even hear some rumours of the "inside" story. But you'll never know for sure.

Why? Because this is Temasek. You know their style. Through all these years, it has not changed. Basically, Temasek will never tell you anything, except perhaps the reasons why it will never tell you anything. And even those reasons will be vague and obscure.

Take Goodyear's departure, for instance. It is revealed that he left because there were "strategic differences". No further details. This kind of answer could mean anything and everything, and therefore means nothing.

Except one thing. It means - Temasek doesn't want to tell you, lah.

Perhaps one day, Singaporeans will understand - how risky it is, for so much of the nation's money to be managed in this way.

My Thumbs Up for Own Time Own Target

So I watched the play Own Time Own Target yesterday. It was almost full house; the sales must have been doing well, and for good reason. The show was very, very good, and both Mrs Wang and I enjoyed it a lot. Try to catch it if you can - it's on for one more week.

Here's the Straits Times review if you want to know more about the show.

The first show - Full Tank, by Laremy Lee - weaves a highly improbable scenario into a hilarious comedy. An SAF tank commander is angst-filled about his career decision to stay on in the army. In a moment of folly, he commands his crew to leave a military exercise and drive their tank to Orchard Road. The plot is interwoven with the story of an escaped terrorist and how the incompetent Minister of Internal Security tries to cover up his bungles by exerting his power over the press.

(I'm sure Wong Kan Seng won't enjoy this show though, LOL).

The second show - Botak Boys, by Julian Wong - is a musical about five recruits thrown together for the first two weeks of BMT. All its colourful characters were memorable, from Simpson the chow ah beng, to Eusoff, the guitar-playing Malay relak jack. The main character Justin Lim was, errrr, a much more challenging role to play (you'll know what I mean, if you watch the show) - but he stood out with his singing performances and was the star voice of the show.

The highlight of both shows were the assortment of funny, colourful, true-to-life and yet bigger-than-life characters. Great acting by all the cast members.

I cannot help but look back at Madam Wee Hua Boey's letter, which I had blogged about several days ago. About the show, she had written:

"I am sure I was not the only one who was disturbed by the excessive cursing and swearing by the officers at the recruits. My observation was that people laughed out loud not at the clumsiness of the recruits but mostly because they felt uncomfortable with the profanities."

No, Madam Wee. I think you really might have been the only one. Other people laughed out loud, and kept laughing throughout the show ... because the show was really very funny!