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Thursday, June 30, 2011

Vital tears

By Lea Weeby
ST Mind Your Body on Thursday,
June 30, 2011 at 9:40pm

A study here has found that dry eyes may have a greater impact on people's quality of life than previously thought.

The study on 3,280 Malays aged 40 to 79 found that people with dry eyes had more difficulty with daily tasks such as recognising friends, reading road signs and driving at night than those who did not.

Said to be one of the first large-scale studies worldwide to look at the impact of dry eyes on a person's quality of life, the study was published in Eye, the journal of the Royal College of Ophthalmologists, last year.

Prior to the study, the popular belief was that dry eyes were just a minor discomfort to put up with.

'But our study shows that it has an impact on one's quality of life and even work. A taxi driver with poor night vision would not be able to work at night,' said one of the authors, Dr Louis Tong, consultant ophthalmologist from the Singapore National Eye Centre.

One in 10 participants reported they had symptoms associated with dry eyes at least once a week or all of the time.

The symptoms were: a feeling of dryness, grittiness, a burning sensation, redness, crusting along the eyelash and the tendency to shut their eyes because of tiredness or heaviness.

When the participants were asked to rate the level of difficulty in doing 11 vision-related activities, those with dry eyes had significantly more difficulty with at least seven of the activities compared to those without dry eyes.

These were cooking, climbing stairs, watching television, reading the newspaper and road signs, driving at night and recognising friends.

The results were the same even after the researchers used statistical tools to rule out factors like age, gender and eye diseases such as cataracts, which could have explained the participants' difficulty in doing these daily activities.

The dry eye study was done as part of the Singapore Malay Eye Study, with similar studies on Singapore Chinese and Indians still being analysed.

Dr Tong, who is also a clinical scientist at Singapore Eye Research Institute, said he would not be surprised if the findings were all similar.

He said: 'In our clinic, we encounter dry eye patients from different ethnic backgrounds.'

In people with dry eyes, the tear glands do not make enough tears or, as is more common in Singaporeans, they make enough tears but these evaporate at an abnormally fast rate so that dry spots appear in the eyes.

The prevalence of dry eyes is even higher when other methods of assessment were used, said DrTong.

In another study where 1,000 polyclinic patients aged 21 and above were tested using a diagnostic tool for dry eyes called the Schirmer's test, one in every two were found to have dry eyes. In the test, strips of filter paper were stuck in the eyes to measure the production of tears.

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Wednesday, June 29, 2011

Europe now is Asia in 1997

Why a crash is inevitable

by William Pesek 04:47 AM Jun 29, 2011

Watching Greece slide into chaos from 6,000 miles away is painful. Asia, after all, was the last region to experience what Europe may be about to endure.

Asia's implosion in 1997 toppled leaders, touched off riots, set back living standards a decade or more and tarnished the International Monetary Fund's (IMF) reputation. Expect similar developments as Europe's grand monetary experiment cracks.

Asia and Europe are half a world apart and it is true that the differences are considerable. Indonesia, South Korea and Thailand were much less developed 14 years ago than their euro-zone counterparts are today. China had yet to emerge as a dominant manufacturing economy. The United States was also in a better position to offer international assistance than it is today.

With that in mind, here are five lessons Europe might learn from Asia.

One: A default is unavoidable

What makes Europe's bailout efforts so hard to watch is that they are so futile. The Greek public has been very consistent about one thing: The belief that it bears no responsibility for all the debt its leaders took on over the last decade. If that does not provide the backdrop for debt repudiation, what does?

As Greece runs through more and more of the funds its European neighbours throw at it, other dominos will fall. We saw that in Asia after Thailand devalued the baht in July 1997. Indonesia swore up and down it would not get dragged into Thailand's mess - until it was. Korea assured the world it would avoid an IMF aid package - until it could not.

The US and Japan are near recession. China's boom continues to squeeze wages in uncompetitive economies such as Greece. This won't end well for the euro zone.

Two: Recovery is quicker once debts are purged

Greece fudged its way into the common currency with the help of Goldman Sachs Group Inc's financial creativity. That leaves the government in Athens with a yawning credibility gap. When it says the country can close its budget deficit with stop-gap measures, traders roll their eyes and policy makers lose more sleep.

In December 1997, Korea caved in and sought a US$57-billion (S$70.8-billion) IMF bailout. It acted quickly to let weak companies fail, closed insolvent banks, clamped down on tax cheats and came clean about the magnitude of its debts.

Greece will have to restructure its debt, and the fallout from this will increase pressure on Portugal, Spain and Italy. If Greece had acted a year ago, markets might not be spending every waking moment on edge over how and when a default will arrive.

"Asia's crisis showed that the quicker you deal with the root of the problem, however painful that may be, the quicker you are likely to recover from it," says Mr Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore. "Europe could do worse than to heed that lesson."

Three: Don't forget reforms

In all the obsessing over debt, European leaders are taking their eyes off the need to retool in a world increasingly influenced by China. Fiscal austerity is important, of course, but so is altering policies to make economies more nimble, competitive and conducive to entrepreneurs who create jobs.

In the years following its crisis, Asia worked to open service sectors to competition. It also cut red tape and took steps to limit cronyism.

It is a work in progress. Asia is still home to many of the world's poor and corruption is pervasive. What Asia got right is that crises cannot only be about austerity. While you are trimming spending, you must be creative about generating new dynamism. Since euro nations cannot resort to currency devaluation to revive growth, reform is the only way.

Four: Growth beats taxes when repairing fiscal balance

Japan is a cautionary tale when it comes to rich nations getting incentives wrong. It issued mountains of debt, assuming for 20 years that it was only one stimulus plan away from 5 per cent growth. That never happened. Then, amid a ballooning budget deficit, it increased consumption taxes in 1997. That killed a nascent recovery.

In the current global environment, growth is the route to balanced budgets, not higher taxes. The latter would simply destroy the former.

Five: Markets are quick to forgive and forget

Yes, there is a heavy price to pay for going hat-in-hand to the IMF. The key will be conditionality. There is much griping in Asia about how the terms of Greece's IMF package are far less stringent than those forced on Indonesia, Korea and Thailand.

Fresh starts are possible, though, as the powerful gains in Asian markets over the last 14 years attest. So drop the denial, Europe. Let Greece do what it needs to do, even if it means default, and move on. Asia shows there is life after crisis. BLOOMBERG

William Pesek is a Bloomberg View columnist. The opinions expressed are his own.

Hope for the best, prepare for the worst

Published June 29, 2011


POOR volume, weak prices and no real interest from the investing public - stockmarket players would by now be familiar with these features that have haunted markets for about three months now. Optimists claim this to be a 'soft patch' - the same term used to describe the current downturn in US and global growth. Once the soft patch is overcome, then the second half will see a recovery take grip and markets rallying, they say.

Is this really the case? Or are there good reasons for investors to think that, this time, things may be different?

First, don't let the Straits Times Index's (STI) modest 4 per cent loss for the year fool you, because the index really owes its relatively lofty position to only a handful of stocks like the banks and those in the Jardine group. The FT ST Real Estate index, in the meantime, is down 8 per cent in 2011, the All-share index has lost just over 7 per cent, and the Catalist index is down 14 per cent.

Anecdotal evidence from dealers is that the current funk the local market finds itself in is among the worst they have ever experienced because not only are the external economics bad, so is local confidence - badly shaken by the frequent uncovering of fresh China-related scandals.

Much of the blame for the downturn rests with Western markets - in particular, the US and Europe. Both are plagued by problems stemming from excessive leverage; Wall Street's were exposed first in 2008 and its banks had to be rescued by a sympathetic central bank that now realises it has run out of ammunition to keep the ball rolling, while Europe's debt problems, on the other hand, are only just starting.

In America's case, officialdom's strategy of pushing up the stock market with free money in the hope that it would create a cascading wealth effect on the broad economy has failed, mainly because Wall Street operates as a closed club - which means the free money went straight into the pockets of the small number of investment banks that caused the 2008 crisis in the first place, with precious few other beneficiaries.

Now that that money has run out, things don't look particularly good: unemployment is above 9 per cent; consumer sentiment and spending in an essentially consumer-driven economy are weak; manufacturing (which was never a strong point) is slipping; public and private debt are still at record levels; and the housing market is still sinking. Federal Reserve chairman Ben Bernanke last week expressed surprise at the weakness, saying he did not have precise reasons why the latest economic numbers have been bad. (To be honest, the only real surprise is that he should be surprised.)

Over in Europe, there are reports that Greece's problems are just the tip of a derivative-laden iceberg. The New York Times last week reported that the gross debt of Portugal, Italy, Ireland, Greece and Spain is US$616 billion, but this figure may be magnified if derivative exposure is taken into account. If so, then the repercussions of multiple defaults could be devastating.

There is also a strong argument that the problem faced by Greece and some of the other debt-laden nations is outright insolvency and not illiquidity. And stating 'there's little defence against another slump' last week, finance professor Nouriel Roubini highlighted Europe's 'large and rising public and private deficits and debt, damaged financial systems that need to be cleaned up and recapitalised, massive loss of competitiveness, lack of economic growth and rising unemployment' as further signs that make a double-dip recession a distinct possibility.

So what should investors do? The obvious answer is to 'go defensive' - that is, switch to high-dividend-paying stocks with solid pedigree such as real estate investment trusts (Reits) and bank-linked preference shares. Beyond that, it may be that when the record books are written on 2011 sometime next year or thereafter, they will show that this was indeed a temporary blip in the long road to recovery.

However, given that the authorities appear to have run out of policy options (as well as ideas), it would probably be advisable for investors to hope for the best but prepare for the worst.

Tuesday, June 28, 2011

Why markets are now so difficult to forecast

Published June 28, 2011

Central banks, politicians and bankers have turned global investment arena into a casino


PREDICTIONS are a waste of time in today's volatile global markets. Rather than follow usually wrong central bank prognosis, economists' forecasts, chartists' configurations or charlatan soothsayers, it is safer to assess the situation on the basis of what is happening here and now.

Reckless experiment: The Fed's monetary policy is one of the main economic and financial risks in global markets. Mr Bernanke's initial liquidity injection helped ease the 2008 credit crunch, but his subsequent quantitative easing programmes in 2009 and 2010 have created a host of global problems
Current news reports, anecdotes, in-depth investment analyses and healthy scepticism for dated statistics are the necessary tools to gauge risks against potential rewards. After the market depression of late 2008 to 2009, the subsequent steep bull market and this year's small correction, the following maxim applies: 'If in doubt, stay out!'

Now, more than ever, institutional and retail investors need to be on their guard against frantic banker and broker advice. The investment bank business is under acute strain. Volatility is driving away customers. Trading volumes and commissions have fallen sharply and investment bank proprietary traders are struggling to cope with unpredictable price gyrations.

The result is that investment and private bankers are under severe pressure to encourage clients to either overtrade or buy hedge funds and other products.

The antidote for the investor is to stand back and carefully assess the risks. Even though money is being offered at almost zero interest, it is better to be liquid and await opportunities than to hold something that is falling in value.

Here are some of the main reasons why currency, equity, bond and commodity markets have become increasingly risky and exceedingly difficult to forecast.

Much has been written about the Greek and European crisis in recent weeks and some 1.2 trillion euro (S$2.1 trillion) exposure of the European Central Bank (ECB) and German, French, British and other commercial and investment banks. Western geo-political worries about Iran and the rest of the Middle East persist, while Japan is struggling following the tsunami and nuclear power plant disaster.

The two main economic and financial risks in global markets, however, are Ben Bernanke's Federal Reserve Board's monetary policy and China's bubble.

Fed chairman Bernanke's initial liquidity injection helped ease the 2008 credit crunch, but his subsequent quantitative easing (QE) programmes in 2009 and 2010 have created a host of global problems. QE is an untried reckless monetary experiment of the Fed and Bank of England while the ECB is applying it through the back door.

In essence, these central banks purchase hundreds of billions of bonds from banks and other institutions and investors, and the money flows into the banking system. Interest rates have been kept at almost zero levels for banks borrowing from central banks.

The aim has been to bolster economies and reduce unemployment. QE succeeded in boosting US and global shares and corporate bonds from their 2008-2009 bear market lows. This helped raise confidence and enabled companies to raise capital. QE, unfortunately, also has inherent weaknesses.

Since the Fed has been purchasing government bonds, it has been monetising the state's debt. The flood of money into the banking system has caused US dollar devaluation and consequently a surge in prices of oil and other commodities, and contributed to an increase in global inflation.

China factor

Banks have used the money to speculate in foreign currencies and commodities and encouraged their customers to do the same. QE thus caused 'mal investment', or misallocation of capital and a business climate that did not bolster job-creating businesses.

In the meantime, confidence and consumption slid because higher energy prices and inflation have been an effective tax on the consumer. Retired people relying on income have been panicked and are risking their hard-earned savings. Banks charge corporations and individuals much higher rates and since they are encumbered by many dud loans, they have a much stricter lending policy.

The 'misery index' of stubbornly high unemployment and inflation has turned sharply upwards. QE has also caused instability in Asia as funds poured into Singapore and other nations, followed by inevitable increases in property prices and inflation.

China, a semi-command economy, also embarked on stimulation and monetary ease to counter recession early in 2009.

Now the authorities are trying to curb monetary excess, inflation and wild speculation in property, gold and commodities. Global investors have also become alarmed by numerous reports of listed China companies' opaque account keeping.

Since growing numbers of China's directors are allegedly issuing crooked reports, global investors are becoming worried that the authorities are also rigging economic statistics.

Several Western economists and business people are maintaining that China's business conditions are deteriorating. They do not believe the propaganda of the regime and allege that it is overstating growth and under-reporting inflation.

Anecdotes are doing the rounds of suppressed protests about the high cost of food and goods while corrupt wealthy businessmen and officials are living the high life. Some have contravened exchange control regulations and have funnelled money into real estate, art and various funk holes.

Wild market fluctuations in recent months are a warning sign that investors are worried about America's QE failures and events in China and Europe. The tide has begun to turn as investors have become fearful of high-priced financial assets and commodities.

Markets are up one day and down the next as whipsawed investors and traders grapple with unpredictable moves and fear economic downturns and a decline in corporate profits.

These are classic danger signs for long-term investors. Foolhardy, closeted central bankers, China's authorities and US and European politicians and bankers have turned the global investment arena into a casino.

Wednesday, June 22, 2011

There's nowhere to hide on the Web

22 June 2011

NEW YORK - Not too long ago, theorists fretted that the Internet was a place where anonymity thrived. Now, it seems, it is the place where anonymity dies.

Women who were online pen pals of former United States Congressman Anthony Weiner (picture) learned how quickly Internet users can sniff out all the details of a person's online life. So did the men who set fire to cars and looted stores in the wake of Vancouver's Stanley Cup ice hockey defeat last week when they were identified and tagged by acquaintances online.

The collective intelligence of the Internet's 2 billion users, and the digital fingerprints that so many users leave on websites, combine to make it more and more likely that every embarrassing video, every intimate photo, and every indelicate e-mail is attributed to its source, whether that source wants it to be or not. This intelligence makes the public sphere more public than ever before and sometimes forces personal lives into public view.

To some, this could conjure up comparisons to the agents of repressive governments in the Middle East who monitor online protests and exact retribution offline. But the positives can be numerous: Criminals can be ferreted out, falsehoods can be disproved and individuals can become Internet icons.

When a freelance photographer, Mr Rich Lam, checked his pictures of the riots in Vancouver, he spotted several shots of a man and a woman, surrounded by police officers in riot gear, in the middle of a like-nobody's-watching kiss. When the photos were published, a worldwide dragnet of sorts ensued to identify the "kissing couple." Within a day, the couple's relatives had tipped off news websites to their identities, and they appeared on the Today show. Scott Jones and Alex Thomas were the latest proof that, thanks to the Internet, every day could be a day that will be remembered around the world.

"It's kind of amazing that there was someone there to take a photo," Ms Thomas said on Today. The "kissing couple" will most likely enjoy just a tweet's worth of fame, but it is noteworthy that they were tracked down at all.

This growing "publicness", as it is sometimes called, comes with significant consequences for commerce, for political speech and ordinary people's right to privacy. There are efforts by governments and corporations to set up online identity systems. Technology will play an even greater role in the identification of once-anonymous individuals: Facebook, for instance, is already using facial recognition technology in ways that are alarming to European regulators.

"Publicity" - something normally associated with celebrities - "is no longer scarce," Mr Dave Morgan, the chief executive of Simulmedia,wrote in an essay this month.

He posited that because the Internet "can't be made to forget" images and moments from the past, like an outburst on a train or a kiss during a riot, "the reality of an inescapable public world is an issue we are all going to hear a lot more about". THE NEW YORK TIMES

The sun is the best optometrist

by Sandra Aamodt and Sam Wang 06:06 AM Jun 22, 2011

Why is near-sightedness so common in the modern world? In the early '70s, 25 per cent of Americans were near-sighted. Three decades later, the rate had risen to 42 per cent and similar increases have occurred around the world.

There is significant evidence that the trait is inherited, so you might wonder why our myopic ancestors were not just removed from the gene pool long ago, when they blundered into a hungry lion or off a cliff. But although genes do influence our fates, they are not the only factors at play.

In this case, the rapid increase in near-sightedness appears to be due to a characteristic of modern life: More and more time spent indoors under artificial lights.

Our genes were originally selected to succeed in a very different world from the one we live in today. Humans' brains and eyes originated long ago, when we spent most of our waking hours in the sun. The process of development takes advantage of such reliable features of the environment, which then may become necessary for normal growth.

Researchers suspect that bright outdoor light helps children's developing eyes maintain the correct distance between the lens and the retina - which keeps vision in focus.

Dim indoor lighting does not seem to provide the same kind of feedback. As a result, when children spend too many hours inside, their eyes fail to grow correctly and the distance between the lens and retina becomes too long, causing far-away objects to look blurry.

One study published in 2008 in the Archives of Ophthalmology compared six- and seven-year-old children of Chinese ethnicity living in Sydney, Australia, with those living in Singapore.

The rate of near-sightedness in Singapore (29 per cent) was nearly nine times higher than in Sydney. The rates of near-sightedness among the parents of the two groups of children were similar, but the children in Sydney spent on average nearly 14 hours per week outside, compared with just three hours per week in Singapore.

Similarly, a 2007 study by scholars at Ohio State University found that, among American children with two myopic parents, those who spent at least two hours per day outdoors were four times less likely to be near-sighted than those who spent less than one hour per day outside.

In short, the biological mechanism that kept our vision naturally sharp for thousands of sunny years has, under new environmental conditions, driven visual development off course. This capacity for previously well-adapted genes to be flummoxed by the modern world can account for many apparent imperfections.

Brain wiring that effortlessly recognises faces, animals and other symmetrical objects can be thrown off by letters and numbers, leading to reading difficulties. A restless nature was once helpful to people who needed to find food sources in the wild, but in today's classrooms, it is often classified as attention deficit hyperactivity disorder. When brains that are adapted for face-to-face social interactions instead encounter a world of email and Twitter - well, recent headlines show what can happen.

Luckily, there is a simple way to lower the risk of near-sightedness, and the summer solstice - the longest day of the year - is the perfect time to begin embracing it: Get children to spend more time outside.

Parents concerned about their children's spending time playing instead of studying may be relieved to know that the common belief that "near work" - reading or computer use - leads to near-sightedness is incorrect.

Among children who spend the same amount of time outside, the amount of near work has no correlation with near-sightedness. Hours spent indoors looking at a screen or book simply means less time spent outside, which is what really matters.

This leads us to a recommendation that may satisfy tiger and soccer mothers alike: If your child is going to stick his nose in a book this summer, get him to do it outdoors. The NEW YORK TIMEs

Sandra Aamodt, a former editor-in-chief of Nature Neuroscience, and Sam Wang, an associate professor of molecular biology and neuroscience at Princeton University, are the authors of the forthcoming Welcome to Your Child's

A cautionary tale of three fiscal crises

by Simon Johnson 06:06 AM Jun 22, 2011

In today's world, there are three kinds of fiscal crises brought on by too much government spending, and three kinds of responses. We can call them the nightmare scenario, the preemptive experiment and the head-in-the-sand model.

In the nightmare scenario, a country runs large deficits for a decade or more - and the financial markets are happy to buy its debt at low interest rates. But then the markets suddenly turn, deciding that the country is going straight off a cliff. The cost of financing the national debt goes through the roof. The government has little choice but to make immediate, large spending cuts.

Higher interest rates combined with cuts in spending contract the economy and increase debt relative to gross domestic product, further undermining market sentiment. The debt ends up largely in the hands of sympathetic governments and the International Monetary Fund, which agree to roll over the loans at low interest rates indefinitely - or the country defaults.

Either way, recovery will take a long time. If you have not figured it out by now, this is Greece. Last year, its debt relative to GDP was 142 per cent, or about twice the average of most industrialised nations.

UK's preemptive approach

In the preemptive model, a government tries to get ahead of potentially negative market sentiment by bringing down the deficit over a number of years. This slower fiscal adjustment allows smaller spending cuts and revenue-raising measures to work over time. As long as the markets see that politicians are willing and able to bring down deficits, they should be greatly reassured.

This particular government has a secret weapon - a free-floating exchange rate - not available to Greece or other euro zone countries. If the currency depreciates, it will help the economy by increasing exports and tourist spending, and will boost sectors that compete against imports. The central bank can also cut interest rates.

Inflation may be a constraint on monetary policy, but moderate increases in prices and wages will help keep house values up and consumer debt down, relative to disposable income.

This model, of course, is Britain. Its spending cuts are relatively small, and although its fiscal policy is contractionary, the overall policy mix remains expansionary. The key dynamic in the eyes of the market is debt relative to GDP, so the trick is keeping up economic growth while debt comes under control. With most growth predictions in the range of 1.5 per cent to 1.9 per cent for this year, and 2.1 per cent to 2.5 per cent next year, the consensus view is that fiscal policy will not push the United Kingdom back into recession. Britain's gross debt should peak at 87.4 per cent of GDP in 2013, according to the IMF.


The main political parties refuse to take seriously the need for new revenue. At the end of last year, instead of cutting spending or raising taxes, they recklessly agreed to extend costly tax cuts. And no one wants to deal sensibly with government-funded healthcare, the biggest future spending item of all.

This is the United States. The IMF does not like to appear critical of the US, so you need to dig deep to find its negative assessment, on Page 127 in Statistical Table 7, of the fund's authoritative Fiscal Monitor, published in April. It says gross debt will increase through the end of the forecast horizon in 2016, when it will reach 111 per cent of GDP. That's about the nastiest thing you can say about a country in today's market environment.

The problem is not that this fiscal trajectory will precipitate an immediate crisis, but that savers around the world will continue to give the US enough rope to hang itself. Interest rates are likely to remain low as long as there are no other equally attractive reserve currencies. Foreign central banks and private investors like to keep their rainy day funds in US Treasuries.

The US should take this opportunity to start gradual fiscal consolidation, not Greek-style spending cuts that would contract the economy and push up government debt relative to GDP. A path slower than Britain's would be entirely reasonable, restricting future spending increases and allowing revenue to rise as the economy recovers. A credible deficit reduction plan should lower long-term interest rates.

The danger in the US is complacency masquerading as fiery fiscal rhetoric. The debt limit debate so far has not contributed anything to fiscal stability. The spending limits on the table are largely meaningless. Ruling out tax increases makes international investors roll their eyes.

The US could do a preemptive, and relatively gentle, fiscal adjustment. Or it could wait for the nightmare scenario, when markets eventually turn against it. At the moment, the politicians just wait. BLOOMBERG

Simon Johnson is a Bloomberg View columnist. The opinions expressed are his own.

Thursday, June 16, 2011

Clearing cataracts and poor vision

Thursday, 16 l 06 l 2011 Source: Mind Your Body; The Straits Times
By: Ng Wan Ching

New lenses fitted during cataract surgery can correct other vision woes too, reports Ng Wan Ching

Having a cataract leaves one in a blur but surgery could also offer the sufferer a chance to get perfect eyesight again. Lens implants have progressed so far that it is now possible not only to replace the eye’s cloudy lens with a clear one, but also with one that corrects for up to three other conditions at once. They are either myopia (short sightedness) or hyperopia (long sightedness); presbyopia (laohua in Mandarin) and astigmatism.

These newer lenses have been available here for the past 1 1/2 years, doctors said. Each costs up to $1,800 more than the standard lens which corrects only myopia or hyperopia. In 2004, 23,259 cataract operations were done here.

At Singapore National Eye Centre, which did about 10,500 cataract operations last year, 80 per cent of patients choose standard lenses. About half of the patients treated at Shinagawa Lasik Centre choose the newer lenses. Previously, all lens implants were of a type called a monofocal lens implant. It provided good vision after cataract surgery – but at one set distance, usually for seeing objects at a distance, which corrects either myopia or hyperopia. The patient would still need to wear glasses for any type of near vision activity, such as reading, sewing, playing cards or keeping a golf score.

Today, eye surgeons can offer patients the choice of a multifocal lens implant, which can correct a combination of defects. There are different manufacturers who make these lenses, such as AMO, Carl Zeiss and Alcon. The price differs, depending on the company and on the type of lens, with the most complicated being the most expensive.

Someone who opted for a multifocal lens was Mr Wong Chee Seng, 49, a manager. He began developing cataracts in his 40s, a relatively young age, after years of playing sports without wearing sunglasses to protect his eyes from the sun’s ultra-violet rays. He found out about his cataracts when he saw a general practitioner about an unrelated problem with his eye. The doctor checked his eyes and told him to see an opthalmologist for his cataracts. The problem he had been having suddenly became clear to him. “A couple of years ago, I started having blurry vision when I was outdoors or driving at night, but I just brushed it off,” he said.

Dr Jovina See, then at the National University Hospital, diagnosed him with subcapsular cataract, which causes blurriness and glare, especially in sunny conditions. She operated on his right eye in January last year. She removed his clouded lens and replaced it with an individually fitted lens implant which corrected his slight myopia and presbyopia. Two months ago, she did the same for his left eye. Now he has perfect eyesight. “I have no problems reading or seeing into the distance,” he said. He has, however, acquired some new spectacles – sunglasses. “I now have four pairs because there are other eye conditions to protect against,” he said. Dr See, who is now in private practice at Shinagawa Lasik Centre, said Mr Wong’s best visual acuity before his surgery was 6/9 and he had presbyopia. “His visual acuity after surgery is now 6/4.5 in both eyes,” she said. That is better than 6/6 vision.

She used a technique called phaco emulsification, in which a very small self-healing cut is made in the cornea, through which a tiny probe is inserted, transmitting ultrasound waves to break up the cataract. The emulsified lens is then sucked out through the probe. The implant is then inserted with a special lens implant injector. The surgery takes less than 30 minutes, with only light sedation and eyedrops to numb the eye. If a cataract is more advanced, a larger incision would be needed. This requires stitches which can take up to eight weeks to heal.

Dr See said it is a common misconception that cataracts have to be advanced before they need to be corrected. “Many people here still wait until they have no choice, when the cataract is very ‘ripe’ and their eyesight is very bad, before they go for cataract surgery,” she said. She recommends surgery as soon as a cataract interferes with normal activities, including driving, watching television, climbing stairs, playing sports, cooking and reading. “There is no need to wait,” she said. The National University Hospital is seeing more younger patients come for cataract surgery, said Dr Clement Tan, a consultant at its department of ophthalmology. “Patients have higher visual demands these days, both for work and leisure, so they are more likely to be bothered by symptoms when they have early cataracts,” he said.

Like Mr Wong, they can choose to have their sight corrected to perfect vision again, without any need for glasses. Dr See said: “The choice of lens will depend on the patient’s needs. For example, if there is significant astigmatism, or if the patient doesn’t want to wear reading glasses, prices will differ.” These lenses last forever. But there are risks to the surgery including infection, which may lead to blindness, retinal detachment and macular swelling. Dr See tells patients that there is a 3 per cent risk of complication for any cataract surgery. Patients can resume most daily activities on the same day of their surgery, such as watching TV or doing computer work. For vigorous activity such as jogging, it is advised that they wait for a week to prevent infection from the perspiration running down the forehead to the eye during exercise, said Dr See. “There is no need to suffer bad eyesight at all, especially with new artificial lenses today which can correct all types of poor vision,” she said.

Where to get lens implants and the costs

Subsidised patients at National University Hospital (NUH) and the Singapore National Eye Centre (SNEC) are limited to standard lenses which correct myopia or hyperopia. Private patients at both centres can have a choice of intraocular lenses that correct myopia or hyperopia, astigmatism and presbyopia. These include new multifocal lenses that can correct both myopia and presbyopia; and the latest lens, which corrects myopia or hyperopia, presbyopia and astigmatism at the same time.

At NUH, If they want the newer lenses, subsidised patients can opt to be upgraded to become private patients for the cataract surgery and revert to being subsidised after cataract surgery for other medical or hospitalisation needs. They cannot opt for subsidised surgery and pay full price for their intraocular lenses. But SNEC said that it will offer subsidised patients with special conditions such as high astigmatism after trauma, the multifocal lenses that they need.

Not all patients may benefit from some of these more expensive specialised lenses, and total spectacle independence would not be possible in some patients, said Associate Professor Chee Soon Phaik, a senior consultant ophthalmologist who is co-head of the cataract service at SNEC. Patients with more than one condition can also opt for monovision – correcting separate defects in each eye – that would allow them to be less dependent on reading glasses. “The master eye is corrected for distance vision and the other eye for near vision using the monofocal lens implants,” said Prof Chee. This allows for some degree of spectacle independence when seeing objects at both near and far range.

At SNEC, for subsidised patients using standard lenses, cataract surgery costs $1,284 per eye performed by any surgeon. For private patients using standard lenses, the fee depends on the seniority of the surgeon doing the operation. It starts from $2,100 for an associate consultant, $2,810 for a consultant and $3,200 for a senior consultant. Standard lenses are generally priced at $250 or under, while non-standard specialised lenses may cost between $800 and $2,500, depending on the type.

At NUH, the cost of the surgery and lens implant ranges from $3,697 to $5,217. In private practice, the total surgical fee starts from $5,000 to $6,000 and can go up to $8,000 to $10,000 per eye, depending on the surgeon and the type of lens one chooses.

Actress Emma Yong bounces back after battling stomach cancer

Emma bounces back on stage

Actress Emma Yong is stronger after battling stomach cancer and will be in a musical next month

Published on Jun 16, 2011

Positive thinking helped newly-wed actress Emma Yong recover from her illness and she is well enough to star as Cinderella in the musical Into The Woods from July 29

Actress Emma Yong, one-third of cabaret trio Dim Sum Dollies, hit headlines earlier for pulling out of two productions citing 'medical reasons' but has now revealed the true extent of her illness, and her remarkable recovery.

She was diagnosed with stage 4 stomach cancer in January this year.

In an exclusive interview with Life! at a cafe in the Botanic Gardens, the 34-year-old musical actress says she went for a body check-up after suffering stomach cramps during the run of Blackbird in September last year, a play in which she played a victim of paedophilia confronting her aggressor.

She was diagnosed with stage 4 stomach cancer, the most advanced of all cancer states, and was 'riddled with tumours', including in every single vertebra, her pelvis, kidneys and womb.

After undergoing 10 cycles of chemotherapy, she says that all her tumours are undetectable now.

Looking radiant in a grey cotton dress, she says: 'My oncologist told me recently that when he first saw me in January, he thought I would be dead in three to five months. Now I count every day as a miracle.

'I just got married, I'm enjoying the life of being newly-wed. We moved into our new place in Tiong Bahru late last year and we are enjoying setting up our new house.'

Her husband, whom she declined to name, is an interior designer and they had been dating for six years.

Yong is well enough to play Cinderella in Into The Woods, a Steven Sondheim musical put on by Dream Academy and directed by Glen Goei. It plays at the Esplanade Theatre from July 29.

However, there have been dark days.

She said the diagnosis was 'totally out of the blue'.

Her two older sisters, who are doctors, started crying when they saw the scans. 'They thought it was really bad.'

She decided to keep mum about her situation except to close friends and family, 'to conserve energy for healing'.

She pulled out of acting in Closer, a sexy play about tangled relationships, in February, and 881, the getai musical, in April.

She had earlier planned to get married in January and decided to go ahead with the wedding, a simple affair to which close family and friends were invited.

She started her chemotherapy the day after. On the occasions when her husband was not free, her good friends, directors Selena Tan and Goei, took turns sitting with her during the treatment sessions.

She says she is lucky that she did not suffer many side effects. She did not lose her hair or feel nauseous.

Her husband had been a big source of support and did not treat her 'like I was a cancer patient'.

She says: 'He doesn't give me extra privileges. When I try to say, 'I have cancer, can you wash the dishes?', it doesn't work on him.'

She maintained a positive outlook throughout. 'I didn't spend much time being despondent. I didn't feel ill.'

Meanwhile, 'the RGS (Raffles Girls School) girl in me' resurfaced and she ordered many books on cancer to educate herself on the illness.

There is no history of cancer in her family and she thinks her high-stress lifestyle and unhealthy diet probably contributed to her illness.

She confesses that she was a workaholic and tended to be emotional. 'I stressed myself out and probably gave myself an ulcer that developed into something else.'

She was also 'addicted to carbonated drinks' and was a 'junk food junkie'.

Now, she drinks only water and fresh fruit juice, and eats more vegetables. Her mother, a retired teacher, cooks for her every day.

Yong has no other engagements for this year apart from Into The Woods as she does not want to stress herself out.

'My attitude has changed towards performing. Now I'm grateful for every chance to sing and act, and to reach out to people. I feel very lucky.'

Professor Soo Khee Chee, director of the National Cancer Centre, says it is 'a rare occurrence' that tumours in stage 4 stomach cancer respond so well to chemotherapy.

He says the five-year survival rate for stage 4 stomach cancer is about 15 per cent. 'The fact that she responds to chemotherapy is a good sign. But it's better to be cautiously optimistic,' he adds.

In Singapore, more than 600 people are diagnosed with stomach cancer every year and about 400 die from it. Stomach cancer is the No. 5 cancer among men and the No. 7 among women here.

Yong says: 'I live well, I believe in the power of positive thinking. I'm grateful for every day. This definitely heightened my appreciation for life.'

Tuesday, June 14, 2011

It's more than a soft patch, says Roubini

Published June 14, 2011

US economy is in a bind, made worse by gridlock between parties in Congress


(SINGAPORE) Global economies are going through more than a 'soft patch', as problems with the US property market and the impasse over its budget deficit fuel pessimism, economist Nouriel Roubini said yesterday.

Mr Roubini: 'The Europeans are dealing with their own central government budget deficit, but the US is kicking the can down the road'
Prof Roubini, known for calling the fallout of the US housing market, said that about half of the households that have been mortgaged will have their mortgages under water in a year's time.

And when home values fall below the mortgage value, people will walk away from their debts, leaving banks stranded.

With demand declining but supply rising due to more foreclosures, today's US home prices are already 33 per cent below peak levels, said Prof Roubini. Although home prices had risen previously, this was artificially boosted by tax credits.

The US situation is exacerbated by the gridlock and lack of bipartisanship in Congress, as the Republicans and Democrats remain bitterly divided.

'The Europeans are dealing with their own central government budget deficit, but the US is kicking the can down the road,' said Prof Roubini. 'Nobody ever does anything serious about the deficit during election year. Whoever is going to be president in 2013 . . . he or she may start addressing (the budget) only in fiscal 2014.'

He also warned of the bond market vigilantes who are still 'in a coma'.

'(They are) going to wake up, and spike long interest rates and crowd out the recovery.'

Coupled with rising oil prices, a struggling labour market and painful fiscal adjustments that will slow economic growth, today's growth, while anaemic, is one that has already been 'stolen from the future'.

'If you look at the data on households, wage growth before taxes and transfers in the US is practically flat. What's been boosting disposable income has been tax reductions and transcript payments,' said Prof Roubini.

The US economy grew at a 1.8 per cent annual rate in Q1 - falling behind the consensus forecast - and was up 3.1 per cent in Q4 2010.

He added that if and when the government starts correcting the deficit through raised taxes, reduced transcript payments and government spending, there will be a 'double whammy', with fiscal drag and another round of real leveraging of households.

Prof Roubini also highlighted concerns about the emerging markets, noting problems of excessive credit growth and froth in asset prices, and that policymakers are not bumping up interest rates quickly enough to curb inflation.

'China is resisting excessive appreciation, and the rest in Asia and Latin America don't want to lose market share to China - 'if China doesn't want to move, I'm not going to move',' said Prof Roubini.

Warning of a hard landing in China after 2013, he pointed to China's over-reliance on fixed investment, which represents some 50 per cent of gross domestic product.

'No country in the world can be so productive. We'll need something of a miracle this time around, but I'm somehow sceptical.'

After it runs out of '10,000 miles of highways' to build, China would still have to turn back to domestic consumption as a means of creating growth - a 'structural change' that would take another 10 years to come about, he said.

But Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, yesterday said separately at the Nomura Asia Equity Forum that Prof Roubini's take on China would be a 'tremendous wake-up call' for the Chinese policymakers.

'One reason why China will not have a hard landing is because Nouriel Roubini said there would be a hard landing,' he quipped.

'Given the quality of economic management in China, I think they will find solutions to this.'

He cautioned that in spite of the shift of power towards Asia, the US military needs to be present in the region to maintain geopolitical stability.

US Secretary of Defense Robert Gates had responded to Prof Mahbubani's question over a US military presence in this region at the Shangri-La Dialogue last week with a $100 bet that its presence would be strong five years from now.

'The day after the meeting, I wrote him to say I accept the bet, because I guarantee you that if there are budgetary pressures from the population of America, the first thing they are going to go after is the defence budget,' he said.

Friday, June 10, 2011

Synthetic ETFs: knowledge is key

Published June 10, 2011


POPULARISING exchange-traded funds (ETFs) seems to be one of the initiatives actively pursued by the Singapore Exchange (SGX) and global ETF sponsors as they join hands to educate the media and public on what these products have to offer.

Synthetic ETFs will have its place when it comes to satisfying an investor's appetite for exposure to difficult-to-replicate physical indexes. However, like any investment, investors must do their homework. In particular, with any derivative, a little more education to the retail public would be beneficial.
- Michael Chan of BNY Mellon

However, the risks of ETFs are sometimes omitted at such events, making these educational efforts come across more as a sales pitch than an objective knowledge-imparting session.

On the occasions when such risks were discussed, many investors still walked away as clueless as they started off due to their inability to comprehend the product and the technical lingo used.

More importantly, some argue that while institutional and sophisticated investors may be equipped with the requisite knowledge and understanding of ETF methodologies to discern the benefits and downside of such products, retail investors might not possess the technical expertise to see beyond an issuer's initial marketing scheme.

Furthermore, the runaway success of ETFs has led to an era of increasingly complex products using synthetic structures, placing retail investors at an even greater disadvantage in terms of comprehension.

But that has not quelled the drive of ETF issuers to conjure up more synthetic products as the appeal of such ETFs far outweighs any points of apprehension, at least from their perspective.

For one thing, synthetic ETF issuers are able to cut down on cost pertaining to the rebalancing of a physical portfolio and other index balances, as a synthetic ETF replicates returns via the use of derivatives, instead of a basket of physical assets.

Furthermore, via the use of derivatives - such as total return swaps - synthetic-type products are able to ensure greater effectiveness in the tracking of the underlying securities, reducing overall tracking error.

As such, it is no random anomaly that synthetic replication has been a key growth driver for the ETF industry over the past few years.

In fact, Manooj Mistry, head of equity ETF structuring at Deutsche Bank, notes that over 50 per cent of assets under management in ETFs located in Europe are in synthetic ETFs and most new issuers are catching on fast by adopting the structure.

Sceptics have, however, raised the flag as they warn against synthetic ETFs' over-reliance on derivatives in the tracking of an index objective.

Notably, regulators in the US Securities and Exchange Commission (SEC) and Europe's Bank for International Settlements (BIS) have already initiated reviews in the last few months on the potential systemic risks of structured ETFs.

After all, it was derivatives - in the form of credit default swaps - that crippled financial systems around the world in the fateful year of 2008, triggering one of the worst global recessions since the Great Depression of the 1930s.

So it is perfectly normal - indeed, wise - for investors to practise some caution when dealing with such products.

Besides, as everyone knows, there's no such thing as a free lunch in this world; good things always come at a cost.

In the case of synthetic ETFs, the reduction in tracking error is exchanged for increased counterparty risk. In layman terms, counterparty risk is the probability that the total return swap provider goes bust.

In the past, many would have laughed at such a thought, as counterparties were usually global investment banks that were believed to have pockets as deep as the Pacific Ocean.

However, sentiment has since shifted, especially after the demise of the seemingly indestructible Lehman Brothers - which has since vanished from the face of the financial world, leaving many of its employees and investors in the lurch.

In such an event, the synthetic ETF would lose its ability to generate returns, and all that investors would have to fall back upon would be collateral.

But would the collateral be enough to recover all the funds an investor places in a synthetic ETF?

The answer, at best, is maybe.

Though in practice, excess collateral is typically used to back a synthetic ETF in times of counterparty default, there still lies the risk that the collateralised assets might not be able to be liquidated fast enough.

Moreover, the longer it takes to liquidate the collateralised assets, the more likely the assets would plummet in value.

In such a scenario, investors would not be able to get back the full market value of their ETF shares.

So the quality of the collateral assets backing a synthetic ETF is of utmost importance, and investors should make a special effort to understand the nature of these assets before plunging into buying a synthetic ETF.

Currently, a number of ETF issuers and sponsors publish their collateral policy and contents in each fund's collateral basket on the Internet for public scrutiny, although few would be able to decipher the meaning of the array of technicalities, such as product codes, so frequently used in such fact sheets.

For now, there is no requirement for collateral to be held in the same securities that the ETF tracks.

This suggests that a collateral basket can be filled with all kinds of controversial securities, such as junk bonds, unrated bonds and illiquid small-cap stocks - all of which would face much difficulty if there arises a need for quick liquidation.

More pertinently, investors should be wary of synthetic ETFs using a funded or prepaid swap to replicate returns, as the ETF provider in such cases is not the beneficial owner of collateral assets - which implies that it can be frozen by a bankruptcy administrator in the event of a counterparty default.

In such an unfortunate instance, the collateral will not be released to the ETF issuer, and some investors will inevitably be left holding the bag.

All said and done, however, it's not as if synthetic ETFs should be avoided like the plague.

In fact, investors who fully understand the complexities of synthetic ETFs' workings should go ahead and vest their funds in these products and capitalise on attractive features such as low management fees.

On a similar note, Michael Chan from BNY Mellon reiterated: 'Synthetic ETFs will have their place when it comes to satisfying an investor's appetite for exposure to difficult-to-replicate physical indexes. However, like any investment, investors must do their homework. In particular, with any derivative, a little more education for the retail public would be beneficial.'

Auditors spill the milk on China firm

Published June 10, 2011

KPMG's report on China Milk reveals irregularities in transactions and payments

(SINGAPORE) Special auditors of China Milk have unravelled several irregularities in the company's transactions and found significant payments made without board approval and documentation.

A damning report released yesterday details sloppy corporate governance and non-compliance with listing rules and accounting standards in the group.

But, in an unusual move, it was the Singapore Exchange (SGX) that released the report. SGX said that it did so after China Milk's audit committee 'did not take prompt action' despite a reminder to release the report by 5pm yesterday.

SGX had on April 5 last year instructed China Milk to appoint special auditors to probe its state of affairs. This followed the group's failure to inform SGX of the outcome of a cash audit, after China Milk defaulted on its convertible bonds for failing to meet repayment obligations amounting to US$170 million.

The group had assured then that it had enough cash within China to settle the repayment but there was 'administrative' delay in remitting the funds.

But KPMG said in its findings that China Milk did not have sufficient funds to meet its liabilities to the bondholders as its consolidated bank balances as at Feb 12, 2010, was US$85 million.

The special auditors reviewed four major financial commitments totalling US$203.4 million that China Milk had struck since March 2009.

There were no minutes to suggest that the board was properly apprised and due diligence was undertaken before the agreements were signed and payments made, KPMG said.

One of the projects was a joint venture agreement for a 40 per cent stake for about US$20.6 million. KPMG found that the group spent substantially more and there was no meaningful documents to prove the completion of the acquisition.

The group's main operating subsidiary, Daqing Yinluo Dairy Co Ltd (DQYL), also spent about US$72.8 million to secure land use rights, work the land and cultivate alfalfa, a herbal crop. But the amount spent on working the land and for cultivating alfalfa totalling US$52.2 million was not announced by the group, KPMG said.

Another US$72.9 million was spent on improvement works to the farm and facilities. But DQYL was not able to identify the improvement works performed during the auditors' visit, KPMG added.

China Milk also spent US$37.1 million to buy replacement cattle around February and March 2010. Ironically, KPMG found that the group's population of cows fell by about 53.5 per cent over 12 months between April 2009 and March 2010.

The dairy cows purchased were also found to be of similar average age of five years, instead of the average age of two years as claimed by the cattle broker whom KPMG interviewed.

Undisclosed expenditures on grassland improvement and cultivation of alfalfa run up to at least 355 million yuan, close to the group's full-year net profit of 382.5 million yuan for the year ended March 31, 2009.

'In our view, the undisclosed expenditure is a significant expenditure which would materially affect the value or price of the company's securities had this been announced by the company,' KPMG said. 'As such, we are of the opinion that the undisclosed expenditure should have been disclosed.'

KPMG said that its investigations 'encountered numerous obstructions', ranging from an uncooperative bank manager to a dodgy main contractor allegedly engaged by DQYL.

Further visits to DQYL after June 22, 2010, were thwarted by group CEO Liu Hailong, who took the view that KPMG was acting outside the scope of its engagement, KPMG said.

'The perception we formed cannot be said to be a company ready to be transparent in its commercial affairs,' KPMG said in its report. 'It is also apparent to us that the company failed to reach the high prudential standards expected by the exchange of a public listed company.'

Wednesday, June 8, 2011

Investing in extraordinary businesses

Published June 8, 2011

Any market-beating technique should contain this one essential ingredient: a focus on the return on equity


BEATING the market is rather simple, especially when the index you are trying to beat is composed of mediocre businesses whose only qualification is their size. To win, buy extraordinary businesses at prices below their intrinsic value and hold them until they either cease to be extraordinary or cease to be reasonably valued. The amazing thing about this approach is that it is simple and it works.

Roaring business: A screen projection of the OS X Lion at the Apple Worldwide Developers Conference in San Francisco on Monday. Apple has a sustainable competitive advantage - something unique that a high return on equity may indicate. Apple's products and the user experience are unique, and there's an almost religious fervour when it comes to the brand

In the short run, the stock market swings from wild enthusiasm to irrational bouts of depression and despondency. Over the long run, however, it has been my experience that prices follow intrinsic values. And if your intrinsic values are based on the performance of the business, then over the long run, price must follow that performance. Your job then is to establish what makes an extraordinary business.

And, of course, opportunities to buy these extraordinary businesses cheap are presented 'in bulk' when fear and pessimism is greatest. In preparation for these inevitable extremes, it is worth establishing what an extraordinary business looks like.

How many times have you heard a commentator on the radio or television referring to earnings per share or dividends per share? Investing magazines and tip sheets are replete with these statistics. But they don't hold the key.

While many professional investment advisers and 'tipsters' will tell you to watch earnings or growth or dividends, these measures also fail to take into account something business owners worry about constantly.

To win at this game, buy extraordinary businesses at prices below their intrinsic value and hold them until they either cease to be extraordinary or cease to be reasonably valued.

You see, earnings and dividend growth only report what is coming out of a business; they are not concerned with how many dollars are required to produce that profit and dividend.

Business owners think about how many dollars they are required to invest in the business, to get those dollars of profit out. Given that the stock market is a place to buy pieces of businesses, you should be concerned with how many dollars need to be injected, in order to generate that dollar of profit.

That is what a ratio called 'return on equity' measures. A high rate means that profits are high compared with the amount of money being invested in the business. A company with equity earning a high rate of return can be likened to a bank account earning a high rate of interest.

Imagine I offered you the opportunity to invest in two start-up businesses, that will each produce a profit of $1 million next year, and profits that will rise by $1 million each year thereafter. The difference is that the first business requires you invest a total of $5 million in brand development, machinery and staff. And that's it. The second business requires an initial investment, in the same things, of $50 million.

The business that requires the lower investment or commitment from you - the business that produces the higher return on your equity - is the one to own.

I have found the best performing stocks over the long run are backed by underlying businesses that sustain high rates of return on equity. Indeed, simple arithmetic can show you that if you buy (and later sell) a share of a company, on the same price earnings ratio, that retains all its profits, your return will equal the return on equity of the company. Therefore, it makes good sense to focus on businesses with high rates of return on equity rather than earnings growth.

Even a company with high earnings growth will produce substantial losses for its investors, if return on equity is declining. An Australian childcare company that had global growth aspirations, called ABC Learning Centres, was just such a business. Years before its collapse, the company had been simultaneously reporting rising earnings but returns on equity that were declining precipitously.

Between 2001 and 2007, ABC Learning reported earnings that grew from virtually nothing to almost US$150 million. Return on equity over the same period, however, had fallen from over 30 per cent per annum to less than 8 per cent.

The company's declining return on equity reveals that growth in earnings was achieved only because shareholders kept shovelling more money into it. You can do the same, if you tip more money into a regular bank account. There is nothing special about that.

By 2006, the returns the business reported, on the nearly US$2 billion that shareholders had stumped up to help the company grow, were just 5 per cent. This was even less than the returns available from a bank deposit at the time. And bank accounts have a lot less risk.

You wouldn't invest $2 billion into a business if all you could expect was 5 per cent. If you aren't prepared to own the whole business for a long time, you shouldn't be prepared to own even a few shares for a short time.

Ultimately, these low returns will be reflected in low returns to shareholders, and the collapse of ABC Learning provided the lowest possible return.

Return on equity tells us many things about a company. Firstly, high rates of return on equity can suggest sound management. While high sustained returns on equity are more likely to be the result of a great business than great management, they may indicate a combination of both - a great vessel and a great skipper.

Secondly, a high return on equity may indicate there is something unique that prevents others from competing directly or successfully with the business. This is known as a sustainable competitive advantage. Apple has it. Consider how quickly the iPad was sold out in Singapore and elsewhere - and it arrived late in Singapore with 'the mother of all backlogs'. Apple's products and the user experience are unique, but more importantly, there's an almost religious fervour when it comes to the brand. This is impossible for another company to buy - even with billions of dollars. Extraordinary! The result is high rates of return on equity and a rising intrinsic value.

Contrast Apple with SingTel, Singapore Airlines and the banks. These are trophy stocks of Singapore's Blue-Chip Club, but are they truly extraordinary businesses? With return on equity of 6-16 per cent over the last 10 years, these businesses may be good but perhaps not extraordinary. For example, despite Vodafone's best efforts, SingTel remains Singapore's preferred carrier and this is reflected in an average return on equity for SingTel of 16 per cent for the last decade. But the Australian luxury accessories brand Oroton - who has just opened its first Singapore store at Marina Bay Sands - has recently achieved a return on equity of greater than 80 per cent.

Extraordinary stockmarket returns, over the long run, require extraordinary returns on equity. When it comes to determining an appropriate rate of return on equity to look for, remember that, as the sexy actress Mae West once observed: 'Too much of a good thing . . . is wonderful.'

Thirdly, return on equity can also tell us whether the company should reinvest its profits or pay the earnings out as a dividend. Companies generating high rates of return on equity should keep the money, while those generating low rates of return on equity pay dividends. Because this decision is made by management and the company's board of directors, return on equity can help show us which teams understand how to allocate capital properly and therefore those that treat their shareholders like owners.

Fourthly, return on equity can tell us something about whether the auditors and the board of directors are realistic when it comes to what they think balance sheet assets are worth. If the return on equity is consistently very low, it may suggest that the assets on the balance sheet are being valued artificially high.

Investors lose millions when companies announce writedowns because promised 'synergies' from acquisitions fail to materialise. If a company makes a big acquisition and projected returns on equity are very low, it's usually wise to take advantage of any enthusiasm and sell your shares.

Finally, return on equity is also an essential ingredient in establishing the true worth of a company and its shares. Ultimately, investing is all about buying something for less than it is truly worth. And at the heart of working out what a company is worth, is the return on equity ratio.

Seek out and invest in companies that can sustain high rates of return on equity over a long period of time, and you cannot help but beat the markets.

In my next column I will explain why debt not only increases the risk of a company but causes it to be mispriced in the market.

The writer is founder of Montgomery Investment Management Pte Ltd, a Sydney-based investment manager. His book, ' - How to value the best stocks and buy them for less than they're worth', is available exclusively online at

The urge to trade could hurt

Published June 8, 2011

New poll finds that 41% of Singapore's rich believe they have to trade frequently to make money, reports GENEVIEVE CUA

NUMEROUS academic studies show that frequent trading can be damaging to your wealth, but the affluent in Singapore may be oblivious to that.

A global survey by Barclays Wealth has found that 41 per cent of Singapore respondents - with at least £1 million (S$2 million) in wealth - believe they have to trade frequently to make money. Yet they also wish they had more self control.

Says Peter Brooks, Barclays Wealth behavioural finance analyst: 'People want more discipline. When you have sizeable wealth to manage, the lack of discipline can be pretty harmful . . . Because people trade frequently, the returns they achieve can be lower than when they buy and hold.'

Barclays polled 2,000 wealthy individuals globally for the study, Risks and Rules: The Role of Control in Financial Decision Making. There were 500 respondents from the Asia-Pacific, and Singapore accounted for a fifth of that, or 100.

The report looks into different financial personality traits among the wealthy, and the self-imposed rules and strategies they use to deal with those traits. It says 'emotional' trading can cost investors nearly 20 per cent in returns over a 10-year period. Those who use some control strategies, however, have an average 12 per cent more wealth than those who do not use rules.

Control strategies include a cooling-off period that is typically a feature of investments funds, or a self-imposed practice of waiting a few days before making a decision. Yet another strategy is to set deadlines to avoid procrastination.

In Hong Kong, the proportion who feel they need to trade frequently is 46 per cent. The global average is 32 per cent; and those individuals are also three times as likely to think they trade too much. In Hong Kong, 55 per cent believe they are over-trading, compared to just 15 per cent among Singapore respondents.

Not surprisingly, 47 per cent of Singapore respondents are willing to bear high levels of risk to achieve higher returns. But 61 per cent are actually more concerned with preventing bad things happening than ensuring that good things happen.

'There's a slight disconnect between how people think about taking risk and achieving returns, and their focus on prevention. Those (elements) shouldn't really exist together; there is tension between the two.

'If you go down that road, you could become very stressed which can lead to a poor financial experience.'

Singapore respondents, in fact, report that they are more likely than their global counterparts to become stressed. They are also less likely to delegate financial decision making.

Paradoxically, the Singapore wealthy are the most satisfied with their financial situation (76 per cent) compared to the rest of Asia. The proportion in Hong Kong who are satisfied is 55 per cent, and in Japan it is 52 per cent.

Mr Brooks says the findings suggest that wealth managers have opportunities to provide advice on investment discipline and reduce the damaging effects of over-trading. 'Asset allocation and diversification are great for the long run but for individual investors the route along the way is important.'

Almost half of Singapore respondents wish they had more control over their financial behaviour, compared to the global average of 41 per cent. Globally, the need for increased financial discipline is likely to be felt by those at the wealthiest end of the scale (more than £10 million in wealth).

An earlier Barclays study found that 73 per cent of Singapore respondents felt financially responsible for their children - the highest in Asia. Mr Brooks said: 'These findings reflect the fact that Singapore HNWIs may let their emotions influence their investment decisions because of a deep sense of family. Even though local investors historically focus on careful planning, they should not shy away from seeking financial counsel.

'In many cases it may not only help them pass on wealth to future generations, but possibly grow their wealth by providing alternative investment options that are aligned to their personalities.'

The affluent and the trading paradox

Published June 8, 2011

(NEW YORK) For nearly all investors, frequent trading is a terrible proposition. Many people know they trade more than they should - but they just can't stop.

The fundamental problem with frequent trading is that very few people can consistently outsmart the market - at least not while playing by the rules.

Behavioural biases lead many of us to trade at the wrong times. It can be comforting, for example, to buy when stocks are rising and nearly irresistible to sell when they are plummeting, as US stocks did last week. This means buying high and selling low, a fine recipe for financial misery.

Furthermore, when costs mount, as they will when you trade frequently, the odds of beating the market are slim indeed.

It's been long known that these kinds of mistakes have serious consequences. A study by Dalbar, a mutual fund research firm in Boston, found that in the 20 years through December, the average stock fund investor had annualized returns of 3.8 per cent, compared with 9.1 per cent for the Standard & Poor's 500-stock index. The average person, in short, would have been much better off buying an index fund and holding it for 20 years.

Now, a new study shows that many well-heeled and apparently well-informed people feel compelled to trade frequently - while believing that their trading is excessive (see story above).

The existence of this 'trading paradox' is a central finding of the study, which was conducted by Barclays Wealth, a division of Barclays, the global bank based in London.

'This trading paradox exists, to one degree or another, everywhere in the world,' Greg Davies, the head of behavioural and quantitative finance at Barclays Wealth, said in a telephone interview. 'Not everyone is prone to frequent trading, but among those who feel that they must trade frequently to do well, there is a substantial proportion who are troubled by their behaviour. This is a novel finding for me.'

At the core of the study was a survey of more than 2,000 affluent people around the world conducted in January and February by Ledbury Research, a market research firm based in London. Participants were people whose net worth met a minimum threshold - for example, in Britain, it was £1 million (S$2 million).

The survey asked participants a series of questions about their behaviour. It found that 40 per cent said they practise market timing rather than stick to a buy- and-hold strategy.

The market timers were 'over three times more likely to believe they trade too much', the study said. Nearly half of those who said that 'you have to buy and sell often' to do well also said 'I buy and sell investments more than I should'.

How is it that so many people hold apparently contradictory views, believing both that frequent trading is beneficial and that they trade too much for their own good? The answer isn't simple, the study said.

'On the face of it,' it said, 'you might think that those who were trading more actively would be more experienced, sophisticated and able to control themselves, but that seems not to be the case - trading becomes addictive.'

In fact, the study found, 'the basic problem is that investors feel they need to engage in active trading, but they cannot then control how much they do it'. Much like overeating, over the top trading isn't easily curbed, Mr Davies said.

Overall, nearly half of the investors said they needed more self-control. Strategies like setting deadlines to avoid procrastination and using cooling-off periods to reflect on decisions were widely used, the study found.

Men were more likely to say they engage in market timing than women - 41 per cent of men versus 36 per cent of women. That's in line with research suggesting that women are generally more careful and consistent investors than men. Women were far less likely to say they overtrade - with only 11 per cent of women saying they do, versus 17 per cent of men.

Based on data collected for the survey, anyway, the US looks like a fairly sensible place. Only about a quarter of American investors said they engaged in market timing compared with about half globally. Only 8 per cent said they traded too frequently, compared with 16 per cent globally.

The reasons for this aren't entirely clear. Mr Davies said it may be that affluent people in the US have had more time to grow accustomed to dealing with wealth than, say, people in an emerging market like Malaysia. -- NYT

Friday, June 3, 2011

Singapore Tops in Millionaires

As World Millionaires Multiply, Singapore Holds Its Lead

by Venessa Wong
Friday, June 3, 2011

Overall, global wealth grew fastest in the Asia Pacific region last year. North America came in second.

Singapore seems modest by some measures: Median income among working households was only about S$5,700 (about US$4,500) in 2010, according to the Singapore Department of Statistics. Yet in this small island nation of only 5 million, known for extravagant shopping, high-end restaurants, and draconian chewing-gum laws, nearly one in every six households has more than $1 million in assets, making it the densest population of wealthy households in the world, according to a new report by Boston Consulting Group.

As the financial markets improved last year, global wealth grew in nearly every region in the world. The fastest, at 17.1 percent, came in the Asia Pacific region (excluding Japan), followed by North America at 10.2 percent. "Global wealth is at an all-time high," says BCG Senior Partner Monish Kumar.

According to BCG's study, global assets under management grew 8 percent, to $121.8 trillion, about $20 trillion above the level during the depths of the global financial crisis. The number of millionaire households grew 12.2 percent, to 12.5 million, and although they represented only 0.9 percent of all households, they held 39 percent of global wealth.

Only Liquid Assets

BCG looked at 62 markets covering more than 98 percent of global GDP and measured assets that included cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets — but not wealth attributed to investors' own businesses, residences, or luxury goods.

Wealth in North America, the world's richest region, had the largest dollar-value gain: $3.6 trillion. The U.S. remains home to the most millionaire households — 5,220,000 (up 10.7 percent from 4,715,0000 households in 2009) — although the share was only 4.5 percent of all households, BCG data show.

While China and India are driving wealth creation in Asia, Singapore also grew at a fast pace. The number of millionaire households in Singapore jumped about 38.6 percent in 2010, to 170,000, from nearly 123,000 in 2009, according to BCG data. The country has had the largest proportion of millionaire households for several years, and the share continues to grow: Singapore's millionaire households increased to 15.5 percent of total households in 2010 from 11.4 percent in 2009.

The rise is due to Singapore's expanding economy, which has grown mainly on such exports as consumer electronics and pharmaceuticals, as well as financial services. Real GDP growth averaged 7.1 percent per year from 2004 to 2007, according to the CIA World Factbook and reached nearly 14.7 percent in 2010—faster than China's 10.3 percent growth rate.

Not Just Tycoons

Among Singapore's well-known billionaires are Wee Cho Yaw, chairman of United Overseas Bank Group (Singapore: UOB - News), as well as the families of the late real estate mogul Ng Teng Fong and financier and hotelier Kho Teck Phuat. Still, many of the country's wealthy are not tycoons but entrepreneurs and affluent immigrants, says Tjun Tang, partner and managing director of BCG in Hong Kong. Other billionaires include philanthropist Richard Chandler in New Zealand and real estate developer Zhong Sheng Jian in China.

City-states such as Singapore, along with other small countries and administrative regions with a high density of millionaire households, such as Switzerland, Qatar, and Hong Kong, tend to be hubs of commerce and finance and have greater economic generation within a smaller population, says Tang.

Another factor driving wealth: Singapore's investor scheme, which grants permanent residence to certain investors, says Tang. According to the website of Janus Corporate Solutions, people can "invest [their] way to Singapore permanent residence" by investing more than a certain minimum in a new business startup or Global Investor Program-approved fund or in expanding an existing business in Singapore.

More Money, But Higher Costs

With this wealthy population comes a relatively high cost of living. In a 2010 cost-of-living survey of 214 cities by consulting firm Mercer, Singapore is the 11th most expensive city in the world for expatriates, on a par with Oslo and more expensive than New York City.

Mercer also gave Singapore high scores in its 2010 quality-of-life study of 221 cities: It was the top-scoring Asian city, followed by Tokyo.

The economic trends remain a concern around the world, yet BCG expects that with strong capital markets, GDP growth, and increased savings, global wealth will grow at a compound annual growth rate of 5.9 percent through 2015. Singapore has already led with the highest proportion of millionaire households for several years. With the Asia-Pacific region's share of global wealth expected to increase to 23 percent in 2015, from 18 percent in 2010, Tang says, "the trends seem to be in Singapore's favor."

Here are the countries with the highest proportion of millionaires:

No. 1: Singapore
Millionaire households as a share of country's total households: 15.5%
Number of millionaire households: 170,000
2009 ranking: 1

Singapore is home to the world's greatest concentration of millionaire households. Deloitte expects that by 2015, it may surpass Switzerland in per capita wealth among millionaire households. Singapore is Asia's eighth-most-expensive location, according to ECA International.

No. 2: Switzerland

No. 3: Qatar

No. 4: Hong Kong

No. 5: Kuwait

No. 6: United Arab Emirates

No. 7: United States

No. 8: Taiwan

No. 9: Israel

No. 10: Belgium

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.

Thursday, June 2, 2011

Local equities: improve the substance too, not just form

Published June 2, 2011

THERE is probably no better way to gauge what the future holds for retail stockmarket investors than through the prism of the humble remisier - the broker who would have with quiet resignation contemplated the Singapore Exchange's (SGX) announcement this week of its decision to narrow the bid-ask quotes for local equities.

First came deregulated commissions over the past decade, then the scrapping of the lunch break and the imposition of vastly increased fines for non-compliance with the rules. Now comes Tuesday's news, which would have been greeted with no small measure of dismay by many in the industry who see it as yet another sign that theirs is a sunset profession.

From SGX's point of view, it has little choice; equity markets everywhere are embracing high-speed computerised trading and since exchanges survive on liquidity, narrower spreads should lead to lower transaction costs and, ultimately, more active trading.

So much for the theory which, incidentally, also applies to small players. In practice, however, there is now a chance - perhaps not that insignificant - that the retail side of the business might suffer.

Small traders will find it much more difficult to make money from 'buying the bid and selling the offer' - or, in simpler terms, to profit from trading the spread - and, if so, could abandon the market altogether.

This also means that contra punting might in time become a thing of the past, though this may not necessarily be bad since it opens the door to faster settlement - possibly (t+1) - instead of the present (t+3), where 't' is the transaction day.

It also remains to be seen how proprietary traders will adapt to the increased demands placed on them by the smaller spreads and what the possible impact on liquidity this might be.

SGX, however, probably reckons that the boost from computerised, algorithmic trades will outweigh the business lost by the exit or curtailment of the retail punter. So from the perspective of its bottom line, there may not be too much harm done though whether this actually turns out to be the case remains to be seen.

But looking through the eyes of a remisier (or, if you prefer, the average retail investor), one can't help but get the feeling that all the initiatives the SGX has undertaken over the years - the current lowering of spreads included - are simply directed at the form of the exchange's business, with insufficient attention devoted to the substance.

For sure, form is important - having the world's fastest trading engine, for example, or the narrowest spreads are nice feathers to display in one's cap - but surely more must also be done to address the substance of the local equity product. How best to do this?

The obvious means is through offering all investors - not just retail - better-quality listings; and there can be little doubt that SGX - already painfully aware that such offerings are few and far between, and struggling to contain the damage from a scandal- wracked S-chip segment - is surely working feverishly to raise the quality of new listings.

Less obvious is the need to do more to deter and thereby prevent rigging and manipulation by big players.

Most (if not all) of the disciplinary action taken by the authorities over the past few years appears to have involved only retail brokers, whose profits from their illegal activities can reasonably be described as modest.

Many observers quite rightly believe that until regulators come down harder on the large high-speed traders or institutions which regularly rig or fix prices and/or the Straits Times Index presumably for considerable profit, a perception which is already taking root - that the field is slanted in favour of the big boys - will become firmly entrenched.

In improving the substance, however, form should not be neglected. Here, one recommendation is to examine the current practice of allowing companies to list via 100 per cent placement. Apart from the obvious complaint (when it comes to good companies) that the practice unfairly excludes retail investors and makes a mockery of a public float, anecdotal evidence from dealers is that allowing all the stock to be distributed privately facilitates rigging because the shares can be given to parties acting in concert.

Finally: a lesson from the US space agency Nasa - which in the early 1990s adopted the slogan 'faster, better, cheaper'. A series of high-profile disasters in the late '90s led to a scrapping of this mantra and a focus instead on quality.

Hopefully, no calamities will be needed for SGX to realise that there are times when cheaper and faster isn't necessarily better.