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Wednesday, September 28, 2011

Bargains, if you know where to look

Published September 28, 2011

There are 'many pockets of great value', particularly if you are able to hold the stocks for five to 10 years, reports GENEVIEVE CUA

MARKETS are not yet in 'buy' territory, although a capitulation may be near, says Ben Funnell, equity strategist and portfolio manager for GLG Partners. None of the four indicators that he tracks - valuation, economic momentum, market positioning, and credit - are signalling a trough in markets yet. But if European leaders manage to get their act together on a grand plan to save the eurozone, that could be a buy signal, he says.

So far, there is little that is concrete. Reports of an ambitious scheme that could quadruple the eurozone's bailout plan and inject billions of euros into European banks buoyed markets yesterday. GLG manages roughly US$33.9 billion in assets as at June. It is part of the Man Group. Mr Funnell is the manager for the firm's global equity and mixed asset funds.

To date, fear has been the dominant driver of markets. EPFR Global reports that for the week ending Sept 21, investors have taken money out of equity, bond, and even money market funds. Eight of the nine major equity fund groups posted outflows, as well as six of the seven major fixed-income fund groups.

Still, Mr Funnell says there are 'many pockets of great value', particularly if you are able to hold the stocks for five to 10 years. In times of market stress, however, investors' horizons tend to shorten.

'If I was running a sovereign wealth fund, I'd love this because the market is coming to me, to the extent that I have assets that are not deployed or are in cash, I can buy with Ben Graham's margin of safety pretty much with impunity . . . I'd say for anyone with the time horizon and strong hands, this is a great opportunity to accumulate great values.'

He cites a German utilities stock, for instance, with dividend yield of at least 10 per cent and Chinese consumer stocks with single-digit PEs but with 20 per cent compounded growth rates.

For now, on the question of whether markets have become cheap enough to buy, the answer, he maintains, is not yet. Based on Shiller PE, which reflects today's stock prices based on the S&P 500 divided by the 10-year average earnings, the level for the US is 19 at mid-September - 'still quite a long way from the buy zone'. The Shiller PE needs to get to around 12 or lower for the US.

'When we get to 12 or lower, you have very high positive hit rates; 80 or 90 per cent of the time, if you hold for three years from that point, you have gains in your equity position and usually quite substantial.'

Economic momentum also hasn't troughed. The ISM index has dropped from 60 to about 50. Recession level is about 42. 'But the rule of thumb I use is that you should get defensive from the peak in the indicator until 50. From 50 to the trough, you should absolutely be out of equities and in cash. The stock market tends not to fall between 60 and 50, but between 50 and 30, the stock market will be killed. That's the situation we're in at the moment. I find it very hard to believe that the indicator won't fall substantially further.'

In the credit space, the iTraxx Crossover CDS index - which reflects the cost of insurance against default of 50 sub-investment grade European companies, is currently just below 850. During the 2008 crisis, it soared past 1,100.

He believes that Europe is in recession and the US is 'on the edge' of recession. 'My concern for the cycle is that I think we're at or past the point where financial market turbulence infects the real economy via the investment and hiring channels in the US . . . If we get quick action, it needs to be concerted and big. If that happens, I probably would give the US the benefit of the doubt and buy some US cyclicality.'

He is also cautious on Asia, even as he agrees with the consensus view that Asia is structurally very attractive. 'The one problem - and we see it across all markets in Asia - is capital flight.' US investors account for just 5 per cent of the world's population but about 50 per cent of world assets. In times of crisis, money is yanked out of risk assets and repatriated, causing risk assets such as emerging markets to tank and the US dollar to rise.

Meanwhile, managed futures manager AHL has outperformed traditional asset classes such as equity, with a relatively modest fall of just 1.9 per cent in the NAV of its flagship AHL Diversified fund in the current year to Aug 31. In that period, global equities fell 6.8 per cent and global bonds rose 3.7 per cent.

AHL is also part of Man Group. The fund is Man's largest with an estimated US$24 billion in assets. AHL assets are invested in futures contracts across a range of markets including interest rates, equity, and currency. It is purely quantitative and thrives on momentum and trend following. It seeks to generate returns while keeping risk at 14 to 15 per cent.

Harry Skaliotis, AHL investment manager, says the fund currently has a long position on bonds and interest rates, short on equities, and long on precious and base metals. Until recently, it was short on the US dollar but this has recently reversed to a long position. 'We're one of the few strategies that have consistently demonstrated a positive performance in weak equity markets and crisis periods.'

One of the fund's best years was 2008, when it generated a return of 25 per cent. That year, global stocks plunged 40 per cent and bonds rose 9.2 per cent. Man registered the AHL Trend Fund for retail sale last year, setting the minimum investment at $20,000. The fund is positioned as a diversifier in portfolios.

If it looks like a bear and moves like a bear...

Published September 28, 2011

(NEW YORK) After a week in which stocks sank more than 6 per cent, the sell-off in equities that began five months ago is coming perilously close to bear market territory.

Whether this correction turns into a full-fledged bear, and whether the economic slowdown that started the selling in late April is labelled a recession may not matter much in the end.

While it's true that the Standard & Poor's (S&P) 500-stock index isn't technically in a bear market now - at the end of the week, domestic equities were off 16 per cent from their April 29 peak - plenty of other parts of the market have dropped more than 20 per cent, the requisite mark of a bear.

Small-company stocks in the Russell 2000 index, for example, fell as much as 25 per cent earlier this year.

Foreign stocks in the Morgan Stanley Capital International EAFE index lost as much as 26 per cent. And the MSCI emerging- markets index was down around 27 per cent from this spring.

Four of the 10 sectors that make up the S&P 500, meanwhile, have also slipped into a bear market.

As for broad domestic equities, they've taken investors on a very rough ride since the financial crisis of 2008 and early 2009.

'This is about as severe as it gets without it being called a bear market,' said Sam Stovall, chief investment strategist at S&P Equity Research.

In fact, if this slide stops short of the 20 per cent mark, it will have been the most severe correction for the S&P 500 in recent memory that didn't morph into an official bear market.

This slide feels so much like a bear because of its speed, some market strategists say. Technically, the correction began on April 29, when the S&P peaked at 1,363.61.

But the bulk of the 16 per cent decline took place in two brief but volatile periods.

First, from July 25 to Aug 8, stocks fell about 16 per cent. After rebounding, they sank more than 6 per cent last week.

These free falls would make 'even rational, seasoned investors feel like they've been raked over the emotional coals', said James B Stack, editor of the InvesTech Market Analyst newsletter.

For nearly everyone, investors included, recessions are painful. That's another reason to hope the economic downturn doesn't morph into one. -- NYT

Sunday, September 25, 2011

S'pore equities not undervalued - yet

The Straits Times
Sep 25, 2011

Wait for pessimism to set in deeper, analysts to lower forecasts before wading into market

By Andy Mukherjee

A weak and nervous stock market brings out the worst in brokerage analysts and strategists.

The common refrain in the e-mails I get from some of them nowadays is: 'Look, equities are so cheap. How much more can they fall?'

Well, there is cheap, and then there is cheaper.

Is the Straits Times Index (STI) cheap, after its 16 per cent decline so far this year?

One of the silliest ways to answer that question is to rely on easily available indicators such as price-to-earnings (PE).

The fatal flaw of the PE ratio is that it tells you nothing about where we are in a business cycle when company earnings are evidently cyclical - they ebb and they flow.

A different way to analyse whether a market is trading at a fair value is to follow the advice of Mr Benjamin Graham, the father of value investing and Mr Warren Buffett's guru.

Following Mr Graham's exhortation, one should think of an equity share as nothing but a series of future dividends which will be paid out to shareholders. Obviously, $1 in future is worth less than $1 now. And $1 invested in a risk-free 10-year bond is a hurdle that we would require equities to beat. Otherwise, why bother to take the extra risk?

So dividend expected in future must be appropriately discounted, taking into account the real, risk-adjusted cost of making an equity investment. The sum total of this discounted dividend stream is the fair value of the company's share today.

Typically, analysts' forecasts for dividends are available for only a couple of years. So the valuation formula makes an assumption about the 'terminal' rate of growth at which we can expect dividends to grow in perpetuity after the initial two-year period.

Following this approach, one can get a relative measure of overvaluation or undervaluation. Assume that today's price for the STI is its fair value; then apply the dividend-discount formula described above to get an implied value for the terminal rate of dividend growth beyond this financial year and next, the period for which explicit forecasts for dividends are available.

A low value for this number means investors are pessimistic about the ability of companies to enhance profits and payouts. A high rate of future implied dividend growth indicates investors are bullish on this count.

Conducting this exercise on the STI, my estimate of future dividend growth is 10.6 per cent for the index as a whole. The absolute value is unimportant - you may arrive at numbers that are different from mine, based on your own assumptions. What is more interesting is how this number has behaved.

There were 12 occasions in the past three years when this expected rate of terminal dividend growth fell below 10 per cent. These were buying opportunities, because the market was too bearish. Most of these opportunities came in the second half of 2009, but there were a few last year as well.

You should have bought the index every time this dividend signal flashed green and liquidated all these investments on Sept 21 last year. Why that date? That was the first time in three years that investors got so bullish they started assuming future dividend growth of more than 13 per cent.

Such high dividend growth rates in future were unrealistic hopes, which needed to be dashed. The volatility that we have seen in equity prices since then confirms the hypothesis.

If you had followed this investing approach, your average return would have ranged between 5 per cent and 46 per cent without a single loss. (See chart.)

On an annualised basis, even the single-digit returns would have been mouthwatering.

So what now?

The present assumption of 10.6 per cent dividend growth in future is still not low enough. It is not a fail-safe entry point to get into the STI as a whole through an exchange-traded fund. You will have to wait for pessimism to set in deeper and for analysts to lower their expectation of earnings and dividends more meaningfully.

By all means hunt for bargain stocks if you can find them. The STI is not cheap - yet.

Thursday, September 22, 2011

Can China escape the debt crisis?

22 September 2011
Ambrose Evans-Pritchard

When America became the first casualty of the global credit bubble in 2007, Europe's political elites thought it had nothing to do with them.

Even after Lehman and AIG collapsed a year later - and Europe's economy crashed into slump - it remained an article of faith in Berlin, Paris and Rome that this was just fall out from the Anglo-Saxon casino.

Few understood that the "China Effect" had engendered credit bubbles everywhere, and that Europe's variant was even more pernicious because euro-banks were more leveraged, with much greater liabilities, and the structure of the Economic and Monetary Union (EMU) concentrated the damage on weaker states with no policy defence against sovereign collapse.

By the "China Effect", I mean the Asian trade tsunami that flooded Western markets and deflated the price of everything from shoes and clothes, to washing machines and solar panels. This seduced Western central banks into running uber-loose monetary policies for 20 years, and disguised the build-up of dangerous asset bubbles.

It was coupled with Asia's "Savings Glut", as Federal Reserve chairman Ben Bernanke calls it. The rising powers accumulated US$10 trillion (S$12 trillion) of reserves, either because they were holding down currencies to gain trade share, or because their economic and social structure was geared towards mercantilism and excess output.

China's consumption rate has fallen to 36 per cent of gross domestic product from 48 per cent in the late 1990s. Academic libraries are bursting with PhD papers trying to explain why. Some posit the welfare theory, arguing that ageing citizens must save for a future with almost no pension or health provision; others that China has frantically leveraged an infrastructure and manufacturing boom to buy time and contain the wrath of 200 million migrant workers.


Whatever the mix: There is simply too much global investment, and too little consumption. The system is out of joint.

It does not feel like the 1930s because we are richer in the West, with a better safety net, and emergency stimulus has so far cushioned the effects, but Bertil Ohlin, John Maynard Keynes, and Irving Fisher would find it unnervingly familiar.

The "Savings Glut" flooded global bond markets, especially the EMU markets as central banks rotated into euros. Hence the collapse in yields during the long bubble. Pension funds were forced to search for better return in ever riskier countries and assets to match their liabilities.

This is why Greece was able to borrow for 10 years at 26 basis points over Bunds, and Spain at four points of spread at the end of the boom, and why Italy's ?1.8 trillion (S$3.1 trillion) public debt did not seem to be a problem. It hid all sins.

Capital was hanging from the lowest branches, almost free for all. America took it, Britain took it, Iceland took it (a lot), and Euroland took it.

Yet China itself must ultimately be a victim of this warped structure as well, and that is where we are in late 2011. Act III of the global denouement is unfolding. The world will have to lance the debt boils of Asia as well before clearing the way for another cycle of global growth.

The facts are simple. China dodged the Great Contraction of 2008 to 2009 by unleashing credit on a massive scale.

Professor Zhu Min, the International Monetary Fund's deputy chief and a former Chinese official, said loans had jumped from 100 per cent of GDP before the crisis to around 200 per cent today - if you include off-books financing from letters of credits, trusts and such like.

To put this in perspective, a study by Fitch Ratings found that credit in America rose by just 42 per cent of GDP in the five-year period before the housing bubble popped. It rose by 45 per cent of GDP in Japan from before the Nikkei cracked in 1990, and 47 per cent before the Korean crisis in 1998.

Home construction is running at 10 per cent of GDP, about the same as Spain in the "burbuja" of late 2006, and much higher than in either Korea or Japan at any point during their catch-up Tiger phases.

"China's banking system is the largest, fastest-growing, but most thinly capitalised among emerging markets. Such a rapid run-up in leverage is a sign that the incremental return on credit has declined," said Fitch. The economic boost from each extra yuan of credit collapsed from 0.75 to 0.18 per cent during the crisis and has yet to recover.


My impression from China's "Summer Davos" in Dalian is that Beijing's elite is less deluded about the risks than Europe's leaders were for so long.

"The whole world needs to lower its expectations from China," said Mr Lee Kaifu, the country's software mogul. "There is an even bigger threat than a global double-dip, and that is a prolonged recession with no growth and very limited policies to fight it. We are already in it."

Dr Cheng Siwei, head of Beijing's International Finance Forum and a former vice-president of the Communist party's Standing Committee, said China is entering a "very tough period" as growth runs into the inflation buffers, paralysing the central bank.

"The inflation rate and the growth rate are conflicting with each other; it is very troubling," he said. China faces the sort of the incipient stagflation that hit the West in the 1970s.

Matters have reached the point that even a light tap on the brakes by China's central bank - through credit curbs (deposit rates are still minus 3 per cent in real terms) - is already threatening a hard-landing.

Dr Cheng said local authorities had built up US$1.7 trillion in debt, mostly using arms-length finance vehicles. This is coming back to haunt. "The tightening policy is creating a lot of difficulties and causing defaults. This is our version of subprime in the US, and the government is taking this very seriously," he said.

Whether the housing market will also set off a chain of defaults is the great question dividing analysts. "Decidely bubbly", is the IMF's politically-correct view. Its own data shows that price to incomes ratios range from 16 to 22 in the Eastern cities of Shenzhen, Shanghai, Beijing, and Tianjin, multiples of the worst extremes in the very tame US boom.

Caixin Magazine reports that Guangzhou R&F Properties is slashing prices by 20 per cent, and other big developers may soon follow.

China has not abolished economic gravity. Its policy of yuan suppression against the dollar and euro has been impossible to sterilise, leading to an imported credit bubble of epic proportions. Its export-led strategy has left it with a deformed economy that relies on perma-demand from exhausted debtors in America and Europe.

As China Premier Wen Jiabao said in Dalian, "China's development is not yet balanced, coordinated and sustainable." The next five-year plan is a breakneck switch towards a domestic growth. Bravo, but awfully late.

China is acutely vulnerable to the second leg of depression in the West - should that occur - and cannot conjure a second rabbit out of the hat. This will not stop the rise of China as the great force of 21st Century, any more than America's jolting upset in 1930 stopped US ascendancy.

Yet economic history has taught us two iron-clad rules. There is no escape from credit hangovers, and surplus trading powers suffer just as much as deficit states - if not more - once Kondratieff slumps turn really serious.'

Ambrose Evans-Pritchard is International Business Editor of The Daily Telegraph.

Wednesday, September 21, 2011

Avoiding risky, impulsive moves

Published September 21, 2011

Long-term stocks investment planning is essential to maintain an even keel in volatile markets, writes TARA SIEGEL BERNARD

(NEW YORK) JUST as you caught your breath after the stockmarket mayhem of 2008 and 2009, it has become increasingly clear that this ride isn't over just yet.

Changing risk perception: When you need to begin withdrawing savings, stockmarket valleys can appear deeper and more turbulent than earlier ones you've seen

This is particularly worrisome for people who are nearing retirement, as well as those who have already left the work world, many of whom are probably spending a fair bit of time wondering if the world markets have suddenly become a riskier place.

When you need to begin withdrawing savings, the stockmarket valleys can appear deeper and more turbulent than the ones you experienced earlier in your career because there is often little time to recoup your losses.

'What changes, and very radically, is risk perception,' said Dave Yeske, a financial planner in San Francisco. 'The scariness of short-term volatility disproportionately blinds us to the long-term scariness of inflation,' he added, saying that the recent inflation rate of 3.6 per cent would erode your purchasing power by half in 20 years.

The latest bout of volatility is no exception. The summer was punctuated by rounds of dysfunctional politicking and then, on Aug 5, the unprecedented downgrade of the US credit rating. Concerns about a double-dip recession continue to linger, while the debt crisis in Europe is another wild card.

Not surprisingly, the markets reacted. Look at a stock chart during the week after the downgrade: The zigs and zags form a distinct W, which took shape when the Standard & Poor's 500-stock index plummeted nearly 7 per cent, and then, in the days following, rose about 4.7 per cent, gave up 4.4 per cent, then rose 4.6 per cent once again.

Stress test for investors

Further market gyrations are inevitable. So to protect your portfolio from yet another risk - your emotional impulses - during these unsettling times, you might consider reassessing whether your money is invested in a way that you can truly handle for the long haul. Start by trying to answer these questions: How much risk can I tolerate? Although the most recent downturns are painful, they have served a purpose.

'It did provide a nice stress test for investors,' said Fran Kinniry, a principal at Vanguard's Investment Strategy Group.

How did you do? Were you able to ride out the crash in 2008 and 2009 (or perhaps even the debt ceiling debate) without touching your investments - or did you fold and go to cash? If it's the latter, then you were invested too aggressively, experts say.

'If they were at 60 per cent in stocks and 40 per cent in bonds going into the bear market, and sold during the downturn, then that is above their tolerance for risk and they shouldn't go back to the level,' said Rick Ferri, author of All About Asset Allocation and founder of money management firm Portfolio Solutions. 'Perhaps 50-50 or 40-60 is more appropriate - that is, if they need to take that much risk based on their situation.'

At financial planning firms across the country, advisers have been re-evaluating their clients' stomach for volatility.

'We moved a lot of our retirees who exhibited lower risk tolerance during the last crash to lower equity exposures once the recovery was well under way,' said Rick Kahler, a financial planner in Rapid City, South Dakota. 'In the last year, many wanted to return to their previous portfolio that had the higher equity exposure, and we discouraged them.'

That sort of flip-flopping can be attributed to a behavioural phenomenon known as recency bias - the tendency of investors to weigh recent events more heavily than those in the past.

Although advisers say that many of the 'risk tolerance' questionnaires available on the Web are an overly simplistic gauge, many of them use FinaMetrica, a 25-question tool that combines psychology and statistics and generates an investor risk profile illustrating where they stand relative to others. While it is geared for advisers (and costs US$45 for consumers), it could prove to be an educational exercise, or serve as a conversation starter for couples with different outlooks.

How much stock do I need? The amount of stock funds you can tolerate may not necessarily match what's recommended to reach your retirement goals. (But you generally want to take as little risk as you need to reach those goals.) The optimal allocations will vary depending on your specific circumstances, and how much money you need to withdraw for annual expenses not covered by Social Security, pensions and other income sources. Since retirement does not come with a 'do-over' option, it often pays to visit a certified financial planner, particularly one who charges an hourly rate or a flat fee, to help you sort this out.

Target-date funds

Still, even among investment professionals, the recommended allocations tend to differ. Consider the varying allocations of target-date funds - whose investment mix becomes more conservative as you age - for people who recently retired or are nearing retirement.

Schwab's Target 2010 fund, for example, holds slightly more than 38 per cent in domestic and foreign stocks, while Vanguard's 2010 target-date fund is nearly 46 per cent in stocks. Fidelity's Freedom 2010 has 47 per cent, and T Rowe Price's Retirement 2010 fund has 53 per cent. Meanwhile, a Vanguard fund for people who have already retired or are over the age of 69 has a stock allocation of 30 per cent.

Mr Ferri, the author and money manager, suggests some investment mixes in his book that could serve as a starting point. For example, a person who is about 3-5 years from retirement and has a moderate tolerance for risk may consider a diversified portfolio evenly split between stocks and bonds, he said, while a conservative investor may keep only 30 per cent of his portfolio in stocks.

Once retired, moderate investors may dial down their stock allocation to 40 per cent, Mr Ferri said, while more aggressive investors may still decide to keep 60 per cent in stocks.

'These examples probably cover 80 per cent of retirees,' he said. 'There are some people who can and should be more aggressive, and those who should be more conservative. It all depends on how much they have saved and whether that's enough, or if they have much more than enough and are really investing for someone else.'

How much should I have in cash? People nearing or in retirement might consider setting aside anywhere from 1-5 years of their expenses in a safe and cashlike account, experts said. This may help you rest easier since you know that your immediate needs will be met.

Alan Moore, a financial planner at Kahler Financial Group in Rapid City, South Dakota, said some investors do not like seeing a sizeable chunk of money sitting on the sidelines, but he called it market insurance.

'We set up direct deposits into their checking account for their monthly expenses,' he said, 'and each year we replenish the cash reserve.' If the market is on the decline, and a retiree isn't comfortable selling, they wait.

Am I keeping my risk level in check? Over time, market swings will inevitably throw your portfolio out of balance, so you need to establish a strategy to periodically recalibrate your investment back to your targets. For most investors, it usually makes sense to rebalance either annually or semi-annually, when a particular investment category - say, large-cap stocks or bonds - deviates about 5 percentage points from your target, according to a study by Vanguard based on historical market returns.

It's a counterintuitive strategy: you are generally selling your winning investments and buying the laggards. The study, however, found that investors who rebalance after big market drops have typically been rewarded over the long term. Increasing your stock allocation (especially when stocks are cheap) can position you for an eventual rebound, which can help returns over time. But at its core, rebalancing is not about maximising your returns.

'Rebalancing is about maintaining risk tolerance and objectives of the portfolio,' Mr Kinniry said. 'What we do know is that over long holding periods, the portfolios that are allowed to drift have slightly higher returns, as expected, as the average equity position is larger. But it has significantly more risk.'

Am I focusing on the big picture? This is admittedly hard to do during periods of uncertainty. But consider the recent performance of a diversified portfolio. Since the market peaked in October 2007, a portfolio split evenly between stocks and bonds had a cumulative return of 5.9 per cent through Sept 6, while a portfolio with 30 per cent stocks and 70 per cent bonds had a cumulative return of 15.8 per cent. An all-stock portfolio, meanwhile, lost 18.9 per cent over the same time period, according to calculations by Vanguard.

Rewind 30 years, and the same evenly split portfolio returned an annualised 10.3 per cent from July 31, 1981, through the same date this year, while the 30 per cent stock portfolio earned 9.9 per cent, and the 100 per cent stock portfolio yielded 10.9 per cent annualised.

What's my contingency plan? Â If your retirement date happens to coincide with a significant market downturn, it can do long-term damage to your plan since the money you withdraw will not be invested for a potential recovery.

'A person considering retirement should determine how much of a contraction he or she could withstand and still be able to meet their retirement spending goals,' said Troy Sapp, a financial planner at Commencement Financial Planning in Tacoma, Washington.

For Chris Gruber, a 63-year-old research psychologist in Long Beach, California, and his wife, Diane, a retired surgeon, the market swings have underscored their need to remain flexible. The couple finished paying off their son's college bills and her medical debt a little more than a decade ago.

They saved aggressively in the years that followed, and they both planned to work part-time for a year or so after they gave up their full-time positions. But when his wife's retirement date rolled around 2-1/2 years ago, he said her employer eliminated many part-time slots - just as the market crashed. 'My wife and I say we chose the worst time in 75 years to retire,' he said.

Fortunately, his part-time prospects were much better, and he discovered that he enjoyed working part time, especially since he was able to give up many administrative duties. But in light of the market swings, he said they've already done some belt-tightening.

His wife's pension and their Social Security will cover about 60 per cent of their annual expenses once they're fully retired, with the remainder coming from their savings, which is largely invested in stock funds.

'On any given day, I can tell you how much I have over my nut to spend,' said Mr Gruber, who has created a spreadsheet tracking how close their funds match their spending goals. Right now, they're about 30 per cent below their targets, which is well below his comfort zone. 'I manage my risk by readjusting what I can do for the rest of my life,' he said.

The couple's goal was to keep their four-bedroom ranch for 10 years, but now they may stay only five, which will allow them to spend more time in Colorado, where they have an apartment near their son's family. 'We are willing to downsize as it becomes necessary.' - NYT

How to prevent a depression

21 September 2011
Nouriel Roubini

The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers in 2008.

The risks of an economic and financial crisis even worse than the previous one - now involving not just the private sector, but also near-insolvent sovereigns - are significant. So, what can be done to minimise the fallout of another economic contraction and prevent a deeper depression and financial meltdown?

First, we must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. So, if countries in the euro zone's periphery are forced to undertake fiscal austerity, countries able to provide short-term stimulus should do so and postpone their own austerity efforts.

These countries include the United States, the United Kingdom, Germany, the core of the euro zone, and Japan. Infrastructure banks that finance needed public infrastructure should be created as well.

Second, while monetary policy has limited impact when the problems are excessive debt and insolvency rather than illiquidity, credit easing, rather than just quantitative easing, can be helpful.

The European Central Bank should reverse its mistaken decision to hike interest rates. More monetary and credit easing is also required for the US Federal Reserve, the Bank of Japan, the Bank of England and the Swiss National Bank. Inflation will soon be the last problem that central banks will fear, as renewed slack in goods, labour, real estate and commodity markets feeds disinflationary pressures.

Third, to restore credit growth, euro zone banks and banking systems that are under-capitalised should be strengthened with public financing in a European Union-wide programme.

To avoid an additional credit crunch as banks deleverage, banks should be given some short-term forbearance on capital and liquidity requirements. Also, since the US and EU financial systems remain unlikely to provide credit to small and medium-size enterprises, direct government provision of credit to solvent but illiquid SMEs is essential.

Fourth, large-scale liquidity provision for solvent governments is necessary to avoid a spike in spreads and loss of market access that would turn illiquidity into insolvency. Even with policy changes, it takes time for governments to restore their credibility. Until then, markets will keep pressure on sovereign spreads, making a self-fulfilling crisis likely.

Today, Spain and Italy are at risk of losing market access. Official resources need to be tripled - through a larger European Financial Stability Facility (EFSF), Eurobonds, or massive ECB action - to avoid a disastrous run on these sovereigns.

Fifth, debt burdens that cannot be eased by growth, savings or inflation must be rendered sustainable through orderly debt restructuring, debt reduction and conversion of debt into equity. This needs to be carried out for insolvent governments, households and financial institutions alike.


Sixth, even if Greece and other peripheral euro zone countries are given significant debt relief, economic growth will not resume until competitiveness is restored. And, without a rapid return to growth, more defaults - and social turmoil - cannot be avoided.

There are three options for restoring competitiveness within the euro zone, all requiring a real depreciation - and none of which is viable:

- A sharp weakening of the euro towards parity with the US dollar, which is unlikely, as the US is weak, too.

- A rapid reduction in unit labour costs, via acceleration of structural reform and productivity growth relative to wage growth, is also unlikely, as that process took 15 years to restore competitiveness to Germany.

- A five-year cumulative 30 per cent deflation in prices and wages - in Greece, for example - which would mean five years of deepening and socially unacceptable depression. Even if feasible, this amount of deflation would exacerbate insolvency, given a 30 per cent increase in the real value of debt.

Because these options cannot work, the sole alternative is an exit from the euro zone by Greece and some other current members.

Only a return to a national currency - and a sharp depreciation of that currency - can restore competitiveness and growth.

Leaving the common currency would, of course, threaten collateral damage for the exiting country and raise the risk of contagion for other weak euro zone members.

The balance-sheet effects on euro debts caused by the depreciation of the new national currency would thus have to be handled through an orderly and negotiated conversion of euro liabilities into the new national currencies. Appropriate use of official resources, including for recapitalisation of euro zone banks, would be needed to limit collateral damage and contagion.


Seventh, the reasons for advanced economies' high unemployment and anaemic growth are structural, including the rise of competitive emerging markets. The appropriate response to such massive changes is not protectionism.

Instead, the advanced economies need a medium-term plan to restore competitiveness and jobs via massive new investments in high-quality education, job training and human-capital improvements, infrastructure, and alternative/renewable energy. Only such a programme can provide workers in advanced economies with the tools needed to compete globally.

Eighth, emerging-market economies have more policy tools left than advanced economies do, and they should ease monetary and fiscal policy.

The International Monetary Fund and the World Bank can serve as lender of last resort to emerging markets at risk of losing market access, conditional on appropriate policy reforms. And countries, like China, that rely excessively on net exports for growth should accelerate reforms, including more rapid currency appreciation, in order to boost domestic demand and consumption.

The risks ahead are not just of a mild double-dip recession but of a severe contraction that could turn into Great Depression II, especially if the euro zone crisis becomes disorderly and leads to a global financial meltdown.

Wrong-headed policies during the first Great Depression led to trade and currency wars, disorderly debt defaults, deflation, rising income and wealth inequality, poverty, desperation, and social and political instability that eventually led to the rise of authoritarian regimes and World War II. The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now. PROJECT SYNDICATE

Nouriel Roubini is Chairman of Roubini Global Economics, Professor of Economics at the Stern School of Business, New York University, and co-author of the book Crisis Economics.

Nouriel Roubini

Tuesday, September 20, 2011

How did Europe get into its debt mess?

11:35 AM EST September 20, 2011

The 17 nations sharing the euro are in deep crisis, saddled with massive debts and dangerously weakened by political division over how to find a way out, just as the world economy flirts with another downturn.

Growing alarm that Greece may default or even leave the euro, potentially triggering contagion in the much larger economies of Italy and Spain, puts the debt crisis at the heart of IMF, World Bank and G20 meetings in Washington this week.

Investors and top officials, including U.S. Treasury Secretary Timothy Geithner, are urging European politicians to act and say a failure to do so could provoke a crippling recession and even the break-up of the European Union itself.

Following is a look at how the euro zone got into debt, possible scenarios and how it might end the crisis.

Heavy borrowing
With the euro's introduction in 1999, unified interest rates allowed members to borrow heavily. Bonds issued by southern European nations were taken to be as safe as German ones. Money flowed into Greece. Spain and Ireland had real estate booms.

The bursting of the housing bubble in the United States and Europe in late 2007 dealt the first blow to the euro zone's aura of invincibility. Then in late 2009, when a new Greek government found that its predecessor lied about its borrowings and had run up huge debts, the revelation provoked a drastic loss in investor confidence that spread across the currency bloc.

In a recurring theme of the debt crisis, euro zone politicians were slow to react, calling for an investigation into Greece's financial dishonesty rather than trying to reassure nervous investors who began pulling their money out of the country and demanding punitive interest rates on its debt.

Larger euro zone economies and the International Monetary Fund extended Athens an emergency credit line in May 2010, but by then Greece's finances had destroyed the illusion that all euro zone members were equal. Investors quickly turned on the weaker economies of Portugal and Spain, driving up their borrowing costs.

Massive losses at Irish banks stemming from the housing bubble forced Ireland to take a bailout six months after Greece; uncompetitive Portugal then followed in May this year.

Still, euro zone leaders missed another chance to reassure markets. Reluctance in Germany, the region's biggest economy, to fully commit to helping wayward member states meant the rescues did not constitute an effective firewall -- markets continue to be difficult for Spain and Italy, which have a combined debt of about 2.5 trillion euros.

Meanwhile, the strict austerity measures imposed on Greece in return for its financial aid have led to a deep contraction in growth, and debilitating spending cuts and tax increases, further undermining confidence.

Adding to the difficulty, Athens is dragging its feet over privatisations and reforms it promised in return for help, putting its next aid disbursement at risk and possibly leaving the government without money for salaries and pensions next month. The liquidity of the sovereign is now in question.

Worst-case scenarios of Greek default
Hyperinflation, a run on Greek banks, violence, economic depression, international isolation and investor panic spreading to Italy and Spain make up the worst-case scenario if Greece were to default on its 370 billion euro debts.

European banks that lent to Greece at the height of the borrowing binge would certainly be hit; French banks have been particularly under pressure in recent days for their Greek exposure.

A Greek default would also likely set off a domino effect. Since investors would no longer believe the euro zone protects its own members, they would sell off Spanish and Italian paper, possibly sparking more defaults. Banks and governments around the world holding euro assets would take major losses.

Given those costs, euro zone leaders are adamant that Greece will not default. Some privately like to talk of an "orderly" Greek default: bank deposits would be protected, bankrupt banks would be kept functioning to keep the economy running and other euro zone governments' bonds would be protected from contagion.

A default could allow Greece to restructure its debt and force creditors to take a 60- to 80-percent loss on their bonds, perhaps providing a chance to return more quickly to economic growth, although some reforms would probably still be necessary.

But if Argentina's default a decade ago is anything to go by, Greece would likely be forced to devalue by leaving the euro and taking back the old drachma, making imports prohibitive. Credit would dry up, demand would shrivel and the country would be plunged into a prolonged depression.

If Spain and Italy were subsequently forced to leave the euro, some economists estimate it could cost them anywhere between 25 and 50 percent of their annual output, while the break-up of the currency bloc could cost trillions of euros.

What is to be done?
Some European politicians and economists say euro zone states should consider issuing bonds jointly underwritten by all countries in the bloc -- euro zone bonds.

The bonds would create a common interest rate for the bloc and allow weaker states to access markets at reasonable rates.

But the implementation of such an idea could take years and currently there is fierce opposition to the idea in Germany.

Washington has suggested the euro zone should leverage its rescue fund to increase its lending capacity beyond its current 440 billion euros, giving it ammunition to help Spain and Italy, if needed.

More immediate solutions include sorting out weak banks and helping economies where growth has been hit by budget-cutting measures, weakening government finances.

The ECB could also increase its programme of buying Italian debt to contain the widening spreads over German benchmark bonds, but the bank is divided and the scheme has already prompted ECB chief economist Juergen Stark to resign in protest.

Ultimately, Europe's politicians must convince markets that they stand completely behind the sovereign debt of euro zone members to avoid any further investor panic.

Can governments agree?
The risk of a collapse of the euro or even of the European Union itself could eventually force Germany, the EU's paymaster, to do whatever it takes to back weaker euro zone nations, whether it be with the ECB intervening in markets to buy riskier debt or providing more funding to recapitalise European banks.

But for now, European politicians seem more divided than ever, particularly on issues such as budget sovereignty. Even countries central to the European project, such as the Netherlands, are increasingly wary.

That division was underscored by last week's meeting of finance ministers in Poland, who agreed no new action, despite the critical hour.

Swedish Finance Minister Anders Borg, whose country stands within the European Union but outside the single currency, put it politely: "There are different voices in the debate."

Monday, September 19, 2011

Euro's death by 1,000 cuts

19 September 2011
Paul Gilfeather

Time is running out for one of the most ambitious political adventures of the last 100 years - the European Single Currency.

Yesterday the big beasts of the euro zone, France and Germany, were in a state of total paralysis as the currency they hoped would guarantee peace on the continent forever stared into the abyss.

I actually witnessed the birth of the euro 12 years ago. As a news reporter in London, I was dispatched to the German city of Frankfurt to cover the opening of the European Central Bank (ECB).

But I would be fibbing if I said that I thought the complex and diverging economies of Europe would live together happily ever after. Even then the union looked doomed to fail. But this is not a time for an "I told you so".

It brings me no joy to witness its demise, because such catastrophe presents only serious ramifications for the rest of the world.

At the weekend, German Chancellor Angela Merkel told her Parliament that "if the euro fails, then Europe too will fail". The EU is facing its worst crisis in 60 years. The current financial crisis, which began in Greece, now threatens to spread to other southern euro zone states, like Portugal, Spain and Italy. With this looming disaster comes the threat of the kind of riots and disorder we saw in Athens as the public rose up against austerity measures.

The big problem is debt - billions of euros of debt incurred by these countries when times were good. The danger now is that they will soon default on their sovereign obligations and effectively go bust. Such a crisis is now a distinct possibility and the outcome for the EU too terrible to consider.

What is needed more than ever is bold leadership from the aforementioned big beasts and a package of radical measures which goes beyond the sticking plaster repair job which has only succeeded in staving off disaster for a few weeks at a time.

Last week, in a move which smacked of total desperation, leaders of Europe and the International Monetary Fund put together a new mega-fighting fund to defend against sovereign defaults.

At the same time, British Prime Minister David Cameron travelled to Paris and Berlin to hear first-hand from French President Nicolas Sarkozy and Dr Merkel exactly what else they planned to do about the financial avalanche hurtling towards them.

The blame for this disaster sits fairly and squarely at their doors. The euro was always about Franco-German reconciliations and a banishing forever from Europe the spectre of war. It was also about allowing Germany, in particular, to become the most powerful nation in Europe without reawakening fears of domination.

The economic rules governing the currency seemed at the time of its launch to be almost an after-thought. Now the euro has come back to haunt Germany with a vengeance. With its enormous trade surplus, it cannot avoid helping to finance the deficits of states like Greece. This, after all, is monetary union and that equates to European solidarity.

But how will Dr Merkel sell another bail-out package to the German people if the Greek crisis is repeated elsewhere?

It was always difficult to see how monetary union could work, with members at different stages of economic development and stripped of the power of setting interest rates to fit their own economies.

Greece is often blamed for borrowing too much, running persistent trade deficits and falsifying statistics. But it was Germany and France who first broke the rules on budget deficits and had them relaxed.

Greece has come out and vowed never to abandon the euro, but behind the scenes it and many other governments are working on contingency plans to clear a path to total withdrawal should it come to that. You can include the euro zone's top two economies in that group.


US Treasury Secretary Timothy Geithner arrived at a crisis meeting of EU finance ministers in Poland last week looking for answers. He turned up a day after his Federal Reserve joined forces with the ECB, the Bank of England, the Bank of Japan and the Swiss National Bank in a plan to lend funds over the next three months to dig Europe out of its financial crisis.

These same banks are facing major potential losses if indebted countries across Europe default on their loans. When a bank is rumoured to be in danger of suffering large losses other banks stop lending to it for fear of not getting their money back - a scenario that created the global credit crunch in 2008. This is why what happens in Europe matters to the rest of us; the threat to the global economy is that banks stop lending to businesses and growth is stifled.

But the three-month rescue package means that banks will be able to deal directly with cash shortages by borrowing US dollars directly from central banks across Europe. If this three-month rescue package does not help, then who knows what euro zone bosses will come up with next? Are Europe's leaders capable of admitting mistakes and finally facing reality? Have they left it too late?

The euro owes little to economics and much to politics. In the beginning Germany wanted a "no bail-out" clause to joining the single currency because they were worried about weaker economies like Italy and Greece. But the logic of currency union is that the strong countries assist the weaker ones.

Today, there are only two answers to the euro crisis. In the short term, they can pay up and in the longer term, break up. Dr Merkel is caught between the crisis and an increasingly impatient German public. She prays for an alternative but in reality it does not exist.

The market now seems to expect the imminent break-up of the euro. This is bound to happen but in the meantime we will see a continuation of half-measures which allow the euro to limp on for another few years.

The euro will die by a thousand cuts which no amount of sticking plasters can cover. The ultimate timing is uncertain, but the death of the great euro adventure seems, to me at least, inevitable.

Paul Gilfeather is the principal correspondent at Today.

Sunday, September 18, 2011

Robert Kuok on hotel, sugar and his mum

Malaysia's richest man speaks out

He is often referred to as the "Sugar King" but he says it is a "fake fame".

Sun, Sep 18, 2011
The Star/Asia News Network

By Ng Si Hooi

MALAYSIA'S richest man, Tan Sri Robert Kuok, is often referred to as the "Sugar King" but the man himself says he does not like the title and deems it a "fake fame".

Kuok, whose empire includes the Shangri-La hotel chain, prefers the title "Hotel King" instead.

"I like hotel but the word king' is just a fake one," the 87-year-old billionaire said in an interview with China Central Television (CCTV) recently.

Major local Chinese newspapers have carried reports about the interview as the low-profile and media-shy tycoon rarely agrees to being interviewed.

Among the topics he talked about were his foray into the travel industry in China, the venture in the sugar refinery business and his mother.

Kuok said that when he first went into China's travel industry, the tourist facilities there, especially toilets, were poor and the country was unable to attract international tourists.

But "I had a feeling that China would have the most prosperous travel industry as it has historical relics and sites", said Kuok, who built the first Shangri-La Hotel in Hangzhou in the 1980s.

Today, there are 72 Shangri-La hotels throughout the world, and 34 of these are in China. There are 45 hotels under construction now, and 28 are in China.

Kuok said the hotel, as a service industry, depended on its employees, from the head manager to the menial worker, to serve their customers. Thus, it has been his principle ever since he first became involved in this industry to take care of the employees.

The biggest responsibility of the board of directors is to take care of its employees, he said.

When asked whether he was "unfaithful" because of his diversified investments in various industries including sugar, hotel and the media, Kuok replied that it was not "unfaithful" because all industries were inter-connected.

Recalling the early years, Kuok said his mother, Tang Kak Ji, and his brothers decided to form Kuok Brothers Ltd after his father passed away in 1948.

During one of the board of directors' meetings, Kuok said he suggested that they invest all their money in the sugar refinery business.

Besides rice and wheat, granulated sugar was also very important in the food sector, he reasoned.

"If children threw tantrums at night, the adults just needed to give them some sugar and they would remain quiet," he said.

Granulated sugar was cheap so it was a business that could earn profits, he added.

"Sugar is unlike petrochemicals where sometimes there is demand and sometimes there isn't. At that time, the information technology era had not started yet. So the simplest and wisest business to get rich in was the sugar refinery business," he said.

Kuok said building a successful business empire was 90% dependent on hard work. The rest was intellect. On his success in the sugar refinery business, Kuok said he was young then and could speak English.

He said the businessmen he went to meet in London and New York were curious that he, a Chinese, could speak good English.

He said he had to run to five or six offices during the day and had dinner with company officials at night to get to know their views before he reported by telegram back to Singapore. By the time he went to sleep, it was almost 1am.

"I think many people were cleverer than me. However, their night life was more messy. The next day, they would fall asleep at their desks. I did not fall asleep, so my horse ran faster'," he said.

He said those who want to venture into business must have courage otherwise they would remain poor forever.

"Every business has its own risks so if you are afraid, you just leave. It won't be a problem if there is a better opportunity as you can always grab the second one. But if you are not brave enough, you will always be poor," he said.

Kuok, who has held pole position as Malaysia's richest man since 2006 when Forbes Asia began ranking the 40 richest Malaysians, said he did not like money.

Nevertheless, he hopes his companies would continue to make profits so that all the employees would have bonuses.

This year's bonus for his employees was considered "okay", he said.

Kuok speaks fluent Mandarin, attributing this to his mother who, he said, always taught them to remember their roots.

He also singled out his mother as the person who had the most influence on him. She always advised him to be humble and to help the poor, and she hoped he would be a businessman with good ethics.

Kuok recalled the day he bought a Mercedes as a surprise birthday gift for his mother who was in her 80s then.

"When my mother saw it, her face changed. She asked me why I had bought a luxury car when I could have just got a Japanese-made car," he said, adding that he sent the car back at his mother's behest.

Kuok said his mother recognised his talent for business and knew he would be successful one day. But she was worried that he would become an irresponsible businessman and had given him valuable advice, including reminding him not to be greedy.

She would be very happy with his achievement and if she were still alive now, she would remind him to "continue to be humble, continue to help the poor".

"My love for my mum will be forever," he said.

Friday, September 16, 2011

Are S'pore REITs defensive?

16 September 2011
Tan Chin Keong

Since the listing of the first real estate investment trust (REIT) in Singapore in July 2002, the sector has grown by leaps and bounds. The Singapore Exchange now lists 23 REITs with underlying properties varying from retail, offices and industrial to hospitality and healthcare. This has made Singapore's REIT sector the second-largest in Asia, after Japan's.

REITs are popular because of the many advantages they offer. For one, they allow investors to diversify their property exposure, as REITs generally hold a basket of investment properties.

Another main attraction is their tax-efficient status. As tax pass-through entities, Singapore REITs do not pay income taxes at the corporate level. Individual shareholders are also exempt from paying income tax on the dividends they receive, although corporate shareholders are not.

In addition, REITs pay at least 90 per cent of their income available for distribution as dividends, making them high-dividend-yielding stocks. These, coupled with the fact that most REITs tend to have relatively stable income streams, are also the reasons why they are perceived as a defensive sector in the Singapore stock market.

Not all REITs are created equal

Give the number of REITs available, how does an investor decide which to choose?

In my view, not all REITs are created equal and some are more defensive than others. Based on experience, shopping mall and industrial property rentals tend to be more stable and resilient in downturns than office rentals and hotel-room rates, which means retail and industrial REITs tend to be more defensive than their office and hospitality peers.

This may be because retail properties tend to be more location-specific and thus less commoditised. For example, shopping malls near MRT stations do relatively better in terms of shopper traffic - and thus tenant demand - than those farther away from the stations even if the rentals for the latter are much lower.

Meanwhile, suburban shopping malls tend to cater more to tenants such as supermarkets, which are less economically sensitive because they provide staple goods. For industrial properties, their tenancy contracts are generally longer than the usual three-year period, giving them more rental stability.

In contrast, office rentals tend to be more economically sensitive, as seen from past downturns. One of the major tenants of prime offices, for example, is the financial sector, which is significantly exposed to the broader economic cycle. For hotels, rental incomes are relatively less stable, as they are not locked in and tend to fluctuate with daily occupancy rates.

Defensive as long as there is no credit crunch

Another important consideration is that the REIT business model relies significantly on the availability of credit. REITs do not retain much of their incomes and thus need to periodically tap the banks or the capital markets to refinance their debt.

In times when credit is unavailable, the inability to refinance becomes a real risk for some REITs. This is what happened during the credit crunch of 2008-09, when a number of small, highly-leveraged REITs came close to defaulting on their debts. This also helps explain why Singapore REITs, despite their high dividend yields, did not display their defensive characteristics and generally fell as much as the broad equity market in 2008 and early 2009.

That said, Singapore REITs have learnt their lessons. In general, they have actively diversified their funding sources and now hold lower debts levels than in 2008. Credit conditions are also currently normal and REITs are able to obtain debt refinancing from different sources.

Parentage matters

However, a new credit crunch - if it materialises, perhaps due to a worsening of the euro zone debt crisis - could significantly dent the defensive characteristics of Singapore REITs. In such a scenario, investors are likely to be better off holding the larger REITs with strong corporate parents.

The advantage of having strong parentage is that during a credit crunch, banks may only provide financing to REITs that are deemed safer from a credit perspective, which usually means those with strong corporate parents. Furthermore, strong parents could step in to provide equity financing if credit is unavailable, thus providing some stability to the REIT business model.

Tan Chin Keong is an analyst at UBS Wealth Management Research.

Wednesday, September 14, 2011

Don't Waste That Lemon Peel

by: Junji Takano surya

Lemon prodctions became more and more abundant around the world
because of its nutritious contents. Lemons are used in many different
ways in lemon industries and factories, but not among households.

## How do you eat or taste lemon in your house?
Probably, you do not know how to apply lemon the right away.
Do you just squish a few drips to your whisky, vegetable salad,
bread, ice cream, roasted meat, cake, baked chicken, fruit drinks, or
to your other favorable dishes? If so, what a waste!

## Here, I'll tell you the real use of lemon

I'm sure you know how nutritious a lemon is. But you may only know
how to use it as a simple seasoning, as most people do, and not as a
side dish. You think that only the squished juice from lemon is used,
while the lemon peel is thrown away. Yes, you think that you only
need that sour, citrus taste of the lemon's juice, is that right?

However, we found out that many professionals in restaurants and
eateries are using or consuming the entire lemon and nothing is

How can you use the whole lemon without waste? the
lemon in the freezer section of your refrigerator. Once the lemon is
frozen, get your grater, and shred the whole lemon (no need to peel
it) and sprinkle it on top of your foods.

Sprinkle it to your whisky, wine, vegetable salad, ice cream,
vegetable soup, chicken soup, curry soup, noodles, spaghetti sauce,
rice, sushi, meat loaf, sausage, fish dishes, and ramen. It doesn't
matter whether it's a Chinese dish, Italian dish, French dish,
African, Indian, Japanese, Korean, or Latin American dishes, you just
name it.

All of these foods will unexpectedly have wonderful taste, something
that you may have never tasted before in your life. You don't believe
me? Just try it and you will agree with me. Everything will certainly
taste great!

Most likely, if you hear the word lemon, you only think of lemon
juice and vitamin C. Not anymore. Now that you've learned this lemon
secret, you can use lemon even in instant cup noodles.

## What's the major advantage of using the whole lemon other than
preventing waste and adding new taste to your dishes?

Well, you see lemon peels contain as much as 5 to 10 times more
vitamins than the lemon juice itself. And yes, that's what you've
been wasting. But from now on, by following this simple procedure of
freezing the whole lemon, then grating it on top of your dishes, you
can consume all of those nutrients and get even healthier.

The lemon peel is good in making you slim if you are a fat person, or
makes you healthy fat if you are skinny.

It is very good that the PYRO-ENERGEN is also for the taste of all
people. It's also good that lemon peels are health rejuvenators in
eradicating toxic elements in the body.

Place your lemon in your freezer, and then grate it on your meal time
every day. It is a key to make your foods tastier and you get to live
healthier and longer! That's the lemon secret!

Time to address retail brokers' concerns

Published September 14, 2011

THERE'S a strong sense of quiet resignation and resentment brewing within the ranks of retail brokers, negative emotions that stem from a growing belief that their days as market intermediaries are numbered with each new initiative announced by the Singapore Exchange (SGX).

From the controversial cancellation of the 12.30-2pm lunch break to enable full-day trading, to the introduction of a lightning-fast trading engine, retail trading representatives believe - not without some justification - that the cards are being increasingly stacked against them.

Take, for example, the buying-in of naked short-sold positions, where various penalties are possible, reaching $5,000 per day if the initial SGX buying-in proves unsuccessful. Remisiers argue with some justification that the only time these fines would reasonably apply would be during failed buying-in of illiquid penny stocks, which in turn implies that retail investors and their trading representatives could end up paying for what are usually inadvertent errors.

Many also point out the injustice of having to worry about large short-selling fines which wouldn't be needed in the first place if the current trading infrastructure
was similar to other developed markets like Hong Kong and Australia, where over-selling from one's central depository (CDP) account is not possible because of various safeguards embedded within the trading infrastructure.

In other words, if the local trading setup was more sophisticated and efficient (for instance, if brokers' trading platforms were linked to investors' CDP accounts) naked
short-selling, buying-in and punitive fines would not be necessary. Note also that having a cash market where securities can be delivered the next day would also do away with complicated buying-in procedures and short-selling fines. Yet, for some unknown reason, the exchange is reluctant to reintroduce this segment of the market.

Full-day trading is a particularly contentious subject which has already been extensively discussed in this column. Although there were strenuous objections from
brokers, the exchange pushed ahead with extended trading from Aug 1 on the grounds that an extra 90 minutes of trading should lead to improved volume.

That was the theory and although it's too early to draw definitive conclusions, the evidence so far is mixed - August's turnover did improve but this could have been
because of the large-scale volatility wrought by Europe's sovereign debt worries. Meanwhile, September's volume so far has dropped, sinking to levels experienced before full-day trading took effect.

Suffice it to say that the jury is still out on claims of a volume boost from extended trading, with many sceptical brokers pointing to Hong Kong, where the market still enjoys a 90-minute midday pause during which activity here also tapers off.

Yet another area of unhappiness is the perceived difference in treatment between a retail broker and one who employs a sophisticated computer programme. Here, the complaint revolves around what exactly constitutes a 'false market'. For example, if a retail broker were to rapidly enter and withdraw quotes, he or she inevitably draws a query from SGX's surveillance personnel and risks being accused of false market creation. Yet anecdotal evidence from many observers is that lightning-fast order entry and withdrawal is a common tactic employed by computerised trading and appears to be condoned by the exchange. Since the only way to beat a machine is probably to have a faster machine, one dealer remarked that 'nowadays, it's us against the machines and there can only be one winner'.

There's more, but it should be clear by now that festering anger and resentment among retail brokers who are key service personnel in what is essentially a service
industry cannot be a healthy state of affairs. These trading reps provide a vital link between thousands of retail investors and the stock market, so their welfare or concerns should not be taken lightly. If all parties concerned do not sit down to thrash out their differences and address these concerns, things can only get worse.

Tuesday, September 13, 2011

46 Million Americans Live in Poverty, Most Ever

David Morgan, Reuters
9:18 p.m. EDT, September 13, 2011

WASHINGTON (Reuters)— A record 46 million Americans were living in poverty in 2010, pushing the U.S. poverty rate to its highest level since 1993, according to a government report on Tuesday on the grim effects of stubbornly high unemployment.

Underscoring the economic challenges that face President Barack Obama and Congress, the U.S. Census Bureau said the poverty rate rose for a third consecutive year to hit 15.1 percent in 2010. The number in poverty was the largest since the government first began publishing estimates in 1959.

The report surfaces at a time when the economic straits of ordinary Americans are at the forefront of the 2012 election campaign.

Obama is suffering from low job approval ratings on the economy and evidence of rising poverty could give popular momentum to the $450 billion job-creation program he unveiled last week.

The Census data also could come into play in the deliberations of a bipartisan super committee in Congress, which has been charged with finding at least $1.2 trillion in budget savings over 10 years by November 23.

The United States has the highest poverty rate among developed countries, according to the Paris-based Organization for Economic Cooperation and Development.

The poverty line for an American family of four with two children is an income $22,113 a year.

The data showed that children under 18 suffered the highest poverty rate, 22 percent, compared with adults and the elderly.

In a sign of decline for middle-income Americans, the figures showed continued decline in the number of Americans with employer-provided health insurance, while the ranks of the uninsured hovered just below the 50 million mark.

Underlying the Census data was a rate of economic growth too meager to compensate for the loss of hundreds of thousands of jobs from 2009 to 2010, as the recession officially ended but the jobless rate shot up from 9.3 percent to 9.6 percent.

"All of this deterioration in the labor market caused incomes to drop, poverty to rise and people to lose their health insurance," said Heidi Shierholz of the Economic Policy Institute think tank. "One of the immediately obvious issues this brings up is that there is no relief in sight."


The numbers would have been worse, analysts said, but for government assistance programs including extended unemployment compensation, stimulus spending and Obama's health reforms, which appeared to reduce the number of uninsured young adults.

In Obama's hometown of Chicago, Salvation Army Major David Harvey knows well the effects of grinding poverty on the city's South Side, where he attended a food giveaway on Tuesday.

"There are more families falling into poverty," he said. "That's multiplied on the South Side of Chicago where there are pockets with 20 percent, or more, unemployment."

You've got people crying for jobs. They move out of state to get jobs because employers are leaving because of the tax increases here," Harvey said.

The poverty rate increased for non-Hispanic whites, blacks and Hispanics but did not differ significantly for Asians. Blacks and Hispanics together accounted for 54 percent of the poor with whites at 9.9 percent and Asians at 12.1 percent.

The South fared worst among U.S. regions, recording the highest poverty rate, a significant drop in median income and the largest number of residents without health insurance.

The administration was quick to seize on data showing a 2.1 percent drop in uninsured young adults, aged 18 to 24, as evidence that families were benefiting from an Obama healthcare reform that allows parents to extend their coverage to children as old as 25.

The Affordable Care Act is the centerpiece of Obama's domestic policy agenda but has come under fierce attack from Republicans including presidential candidates who hope to challenge the president in the 2012 general election.

"We expect even more will gain coverage in 2011 when the policy is fully phased in," Health and Human Services Secretary Kathleen Sebelius said in a blog posting.

Monday, September 12, 2011

Demographics may hit S'pore's equity valuations

Published September 12, 2011

Population segment most likely to invest in equities is on the decline: HSBC report


SINGAPORE'S market valuation may be held down over the coming years, simply because the proportion of its middle-aged share of the population has already peaked in 2005.

And as people between the ages of 35 and 54 are the most likely to invest in equities, a shrinking of this segment will lead to a corresponding drop in equity demand and valuations.

In fact, Singapore's falling proportion of middle-aged people means that it has the third-least favourable demographics to support higher equity valuations, behind Hong Kong and South Korea, says HSBC Global Research's latest global equity strategy report.

The HSBC report, which considers the relationship between a country's demographics and equity market valuations, indicated that Egypt, South Africa and the Philippines have the most supportive demographics, with their middle-aged population segments projected to peak in 2035, 2050 and 2050, respectively.

With the exception of China and Korea, most emerging markets share similar supportive demographics since their middle-aged populations will continue to increase over the next 20 to 30 years.

Peripheral Europe has the most positive demographics among the developed markets.

This will mean an overall rise in demand for equities, which will exert an upward pressure on prices - therefore driving up equity valuations.

In contrast, in most of the developed world, the middle-aged share of the population has already peaked.

Among these countries, however, demographics are changing at different rates, leading to varying degrees of impact.

With a slower pace of expected decline, for example, any effect on equity demand, while negative, will be weaker.

The report also singled out four factors that may offset the effects of a country's unfavourable demographics: changing life expectancy, immigration, foreign investors and current valuations.

In particular, it noted that valuations in developed markets are already at 'very depressed levels' - giving less scope for them to fall further.

While these factors may offset the effect of a dwindling middle-aged population, history suggests that negative demographics will hold down developed market valuations over the coming years.

This supports the view that emerging markets will outperform developed ones in the medium term.

Researchers behind the report also highlighted that peripheral Europe has the most positive demographics out of the developed markets.

These countries are expected to see the share of their middle-aged population rise over the next few years, with Ireland and Greece not peaking until close to 2020.

'This could offer medium-term support to these markets - if they solve their immediate problems, they could perform well given how depressed their valuations are currently,' said the report. - BT

Sunday, September 11, 2011

Many Lives Many Masters

By Dr. Brian Weiss

Many Lives, Many Masters is the true story of a prominent psychiatrist, his young patient, and the past-life therapy that changed both their lives.

An interesting, well-written and thought-provoking exploration of the influence of past-life therapy on present behavior.

Using past-life therapy, he was able to cure the patient and embark on a new, more meaningful phase of his own career.

Download ebook
Many Lives Many Masters

Wednesday, September 7, 2011

Roubini: Slowdown Brings Forward New Crisis

By Scott Hamilton - Sep 7, 2011 12:28 AM GMT+0800 .

Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC, said the current slowdown in the world economy has brought forward the timing of a new financial crisis.

“I thought a few months ago that the perfect storm would be 2013,” Roubini said in an interview in London today. “But now, the economic weakness in the U.S., euro zone and the U.K. is front loaded. So we’re going to double dip earlier. The climax of it could be 2013, or it could be already earlier. It depends on what policy tools are available.”

Three years after the collapse of Lehman Brothers Holdings Inc., financial shares in Europe are under assault and the cost of insuring bank debt is at records as the global recovery falters and the euro-region crisis weighs on the economy. There’s a 60 percent probability that most advanced economies will fall into a recession, while authorities are running out of options to provide emergency support, said Roubini, also a professor at New York University’s Stern School of Business.

“You need to restore economic growth, not five years from now, you need to restore it today,” Roubini said. “In the short term, we need to do massive stimulus, otherwise there’s going to be another Great Depression. Things are getting worse and the big difference between now and a few years ago is that this time around we’re running out of policy bullets.”

The economist said another financial crisis “is already manifesting itself” in developed economies.

Cash Holdings
Roubini said if he had large amounts of money to invest, he would “mostly keep it in cash,” especially in dollars, as the U.S. currency tends to strengthen during financial crises. He said he would also favor government bonds of countries with small budget deficits and low public debt, such as Canada and Australia, and avoid stocks and commodities.

“If we see a nasty global recession, then risky assets, starting with equities, are going to hurt and going to hurt big time,” Roubini said.

Roubini predicted a bubble in U.S. housing prices before the market peaked in 2006. His forecasts haven’t all been accurate. When the Standard & Poor’s 500 Index fell to a 12-year low on March 9, 2009, he said it probably would drop to 600 or lower by the end of that year. Instead, the U.S. equity benchmark gained 65 percent for the rest of 2009.

Monday, September 5, 2011

S-Reits and its investment opportunities

Apart from offering a high dividend yield of 6.5% currently, it also offers a stable yield that will keep growing.

Mon, Sep 05, 2011
The Business Times

By Derek Tan
Analyst, DBS Vickers Securities

WHEN planning for the golden years, it is important to ensure that one's retirement nest egg is able to support one's ideal retirement lifestyle. In practical terms, that means putting the retirement funds to work, to make the funds last longer than it would otherwise. This also means that the retirement stash has to weather inflation, which can significantly erode the real value of the funds.

Inflation has averaged 2.8 per cent over the past decade. Therefore, it is important to protect one's retirement nest egg through investments that yield enough income to keep up with inflation. In addition, this income should be stable, with regular payouts, which can serve as additional income to supplement the retirement funds.

Attractive options

With these considerations in mind, Singapore real estate investment trusts (S-Reits) stand out as an attractive option for investors looking to stretch their retirement dollars. Apart from offering a high distribution (or dividend) yield of 6.5 per cent currently, S-Reits also offer a stable yield that is expected to continue growing.

Regular payouts are an added benefit: S-Reits have either quarterly or semi-annual distribution policies. S-Reits also allow investors to invest in a professionally managed portfolio of income producing real estate, indirectly allowing them to reap the rental income and growth in value of the underlying commercial properties that most investors would not otherwise have access to and without the hassle of having to manage the properties themselves. In addition, as S-Reits are traded in the equity market, it offers liquidity that one might not get as a landlord.

Encouraging results

As an equity class, while prices may fluctuate according to changes in market sentiment, share price performance of S-Reits have been encouraging as over the past two years, the FSTREI Index (a Reit Index which measures the price performance of S-Reits) has outperformed both the STI (Straits Times Index) and the FSTREH (Real Estate Developers Index) by 3 per cent and 10 per cent respectively.

S-Reits have also proven their mettle in the recent equity market volatility by falling only 5 per cent, in comparison to the 12 per cent and 20 per cent fall in the STI and FSTREH.

This relative out-performance, in our view, can be attributed to S-Reits' good income visibility, stability and their prospective high distribution yields. Current S-Reits yields of 6.5 per cent are attractive. Spreads of 5 per cent against the ten-year Singapore government bond which presently is at 1.6 per cent, is also higher than its historical average.

This is also higher than other yield benchmarks such as the Central Provident Fund (CPF) ordinary and special account interest rates of 2.5 per cent and 4.0 per cent respectively.

Adding to the appeal of S-Reits are tax regulations that make it mandatory for S-Reits to distribute 90 per cent or more of their taxable income to shareholders as dividends annually. This ensures a stable and regular income flow for investors. In actual practice, most S-Reits have maintained a 100 per cent payout ratio record. Moreover, the dividends are tax-free in the hands of individuals.

Hedge Instrument

S-Reits offer relatively strong income visibility for investors as their distributions are backed by rental income earned as landlords. S-Reits tend to derive rental income through the ownership of a portfolio of properties and having individual tenants each contributing to a small percentage of total portfolio earnings, thus further diversifying its income.

In fact, faced with a positive rental outlook, S-Reits are expected to continue growing its yields at an average rate of 5.2 per cent in 2011, which is above inflation rate, highlighting S-Reits' effectiveness as an inflation hedge instrument.

To complement their underlying portfolio growth, growing dividend yields are complemented by S-Reits ability to acquire assets that contribute to distributions over time. In this respect, we saw S-Reits being active in acquiring properties to expand their portfolios and this behaviour is a major contributor to the sector's earnings' growth potential.

Properties acquired are primarily in the Asia-Pacific region, and they range from commercial assets to logistic properties and retail malls. We also note that there have been more offshore acquisitions in the Asia Pacific region as S-Reits look to jurisdictions that offer higher asset yields, which is positive as apart from offering higher earnings growth, these overseas acquisitions also help to diversify their portfolio concentration in Singapore.

Underpinning the S-Reit sector's stability is a robust regulatory framework set by the Singapore authorities that emphasises transparency and financial prudence. S-Reits' balance sheets remain robust and hovers at a current financial leverage average of 34 per cent, which is low and compares favourably against the average longer term optimal gearing target of between 40-45 per cent. (S-Reits are able to leverage up to a high of 60 per cent if they have obtained a credit rating from any one of the credit rating agencies, if not leverage ratio will be subjected to a limit of 35 per cent).

The current prudent balance sheet position allows S-Reits to pursue acquisition opportunities or development projects in order to grow their portfolios through taking on further debt.

However, we believe that S-Reit managers, in complementing their growth strategy, will endeavour to continue to manage their capital wisely, apart from just utilising their debt headroom for acquisitions. They will also periodically tap the equity market for additional capital. This strategy in our view is a boon for income investors who are looking for a stable and regular source of income in the long term.

Hospitality, retail

Amongst the various S-Reit sectors, hospitality and retail Reits are expected to perform better than the rest.

We believe that rental growth stemming from exposures in the hospitality and retail sectors (with average distribution growths of 11 per cent and 6 per cent respectively) offer the highest earnings upside given their positive outlook after the opening of the two integrated resorts.

We continue to expect strong demand for rooms stemming from sustained record visitor arrivals in the coming months. As such, hotel earnings should continue to see upside. We also see retail Reits enjoying the spillover effect from the buoyant tourism outlook.

This comes on top of the current positive consumer sentiment, and should inevitably spur higher retail spending in the coming months.

In terms of stability, the outlook for industrial S-Reits remains one of the more stable ones amongst the various sectors owing to a larger proportion of longer-termed lease expiries from tenants who typically rent an entire industrial property (known as master lessee) or those who take larger spaces.

Looking ahead, we expect industrial landlords to enjoy a slight up-tick in earnings and distributions from expected positive rental reversions on the back of a healthy demand for industrial space, coupled with high tenant retention and high average occupancies at their properties.

Office Reits

Commercial office Reits should enjoy positive recent news flow of robust Grade A rental outlook as they look towards narrowing the spread between expiring and re-contracted leases, with newly completed buildings also seeing high take-up rates and those in the pipeline also reporting healthy pre-commitment rate and positive net absorption in 1H11.

However, we are less sanguine about its prospects in the nearer term as earnings recovery in office Reits would only be felt from 2012 onwards as they are currently renewing rents signed in the previous peak in 2007-2008.

What are the potential drawbacks? On the back of current market volatility, S-Reits unit share prices might fall to changes in market sentiment, but we have noted that while share prices have fallen recently, performance continue to remain more resilient compared to the STI and FSTREH.

In addition, rising interest rates might lead to higher interest costs and cut into the profits of S-Reits, however we believe that this risk is likely to be mitigated in the shorter term as S-Reit managers have taken the prudent step in locking in a majority of their loans into fixed-rated debt, thus any impact on rising interest costs is not likely to be excessive in our view.

In summary, we believe that S-Reits, with their high yields, stable income growth and regular dividends coupled with its effectiveness as an inflation hedge, is an attractive investment class that one should have as part of a retirement portfolio.

This article was first published in The Business Times.

Sunday, September 4, 2011

Don't get seduced by analysts' darlings

The Straits Times
Sep 4, 2011
small change

Investors who buy these four stocks could end up kissing their money goodbye

By Andy Mukherjee

If you have cash stuffed in your mattress or bank account, and if you are itching to put it to work in the markets, let me try to talk you out of it.

For choppy markets to get better, sentiment must first hit rock bottom. Like it did in the first quarter of 2009.

Conditions are different now. Analysts are still overly bullish. They are beginning to turn nervous, but are far from throwing in the towel.

In this column, I'll discuss four stocks as examples. These stocks have fallen between 12 and 16 per cent in the past month, underperforming the Straits Times Index, but analysts are overwhelmingly sanguine about their prospects. What if the analysts' optimism is misplaced?

A disclaimer before we proceed: I have selected the stocks based on some rules that I'll shortly explain. I don't have any position in them, nor do I intend to take any.

If these stocks outperform the index over the next six months, well, I'll have egg on my face. And if I'm proved right in my scepticism, I'll start holding investment seminars (just kidding).

Let's move on. What the four stocks have in common is this: Analysts are in love with them. Their ardour is beginning to cool, but it'll be a while before the consensus opinion on these stocks turns negative. At that point, they'll become interesting again.

Measuring love is simple. I required consensus estimates for the target price - the analyst community's opinion of a stock's fair value - to be at least 25 per cent higher than the current price.

But how do we know whether analysts are beginning to feel nervous about these companies that they are so enamoured of?

With that in mind, I pared down the list to retain only those stocks on which at least twice as many analysts have cut their full-year earnings forecasts in the past month as have increased them.

I looked at only those Singapore-listed stocks for which 'buy' ratings by analysts, compiled by Bloomberg, comprised at least 60 per cent of all recommendations in the past year.

Further, to exclude illiquid stocks that aren't widely covered by analysts, I whittled down the list to only those that have secured at least 10 'buy' ratings from analysts in the past year.

At the end of this exercise, I was left with four names.

Noble Group

Analysts are still wildly bullish about Noble, which supplies energy, food and mining products where these are needed. The consensus estimate for the stock suggests a 35 per cent upside.

But some cracks in confidence are beginning to emerge. Ms Zuo Li at IIFL Capital cut her earnings growth forecast for Noble by 12 to 20 per cent for the current year and the next two.

Keep an eye on the European money markets. As the 2008 crisis clearly showed, when money markets dry up, trade - and traders - get hit.

Noble shares fell more than 80 per cent between June and October 2008.

Indofood Agri Resources

Indofood Agri, which produces and refines palm oil, is another analysts' darling languishing in the dumps.

With the hiving off of Salim Ivomas Pratama, which was separately listed in May, the company is sitting on 6.1 trillion Indonesian rupiah (S$860 million) in cash, with little clarity from management on future expansion. Meanwhile, the profit accruing to Indofood shareholders grew less than expected in the June quarter, according to a Nomura report.

Still, analysts are hopeful. The consensus estimate for the stock's target price is about 33 per cent higher than the current price.

Genting Singapore

'Spurned'. That's how Ms Magdalene Choong at PhillipCapital titled her analysis of the casino operator's 'exceptionally weak' second-quarter earnings.

Chip volumes declined 13 per cent from the previous three months' as high rollers took a breather to nurse the previous quarter's losses. Or they may have gone to Marina Bay Sands to gamble the night away.

According to Ms Choong, who downgraded the stock to 'hold' last month, the outlook for the stock does not look enticing.

'In view of the downwards revision on GDP as well as rising risks from Western economies, we further reduce Genting's valuation,' she wrote.

Overall, though, the analyst community is still gung-ho on Genting. After as many as 12 downgrades in the past month on the company's full-year earnings potential, the consensus target price is still 28 per cent higher than the market price.

The longer the analyst community stays on the wrong side of the market, the more quickly it can surrender.


With the United States Federal Reserve promising to keep overnight interest rates at about zero until mid-2013, local-currency interbank rates in Singapore, to which the domestic banks' lending rates are pegged, have collapsed. One key rate - the swap offer rate - has even turned negative.

'This development has dashed whatever hope there was in the market earlier about net interest margin bottoming out and recovering next year,' Kim Eng Securities analyst James Koh wrote in a recent research note, cutting his rating on all three Singapore banks to 'sell'.

The consensus in the analyst community, however, is that DBS Group's fair value is 28 per cent higher than what the stock currently sells for.

If the Singapore economy slips into a technical recession this quarter and loan growth slows markedly, then the lingering optimism on DBS could dissipate. That could be risky for investors.

For now, the cash in your mattress is quite safe where it is. If you really want to do something with your money, consider stocks with high dividend yields.

Saturday, September 3, 2011

Financial literacy for life

by Koh Cheng Hwee 04:45 AM Sep 03, 2011

Financial literacy is the ability to understand and manage one's finances. Essentially, it is the set of skills and knowledge that allows you to make informed and effective decisions about your finances, be it day-to-day budgeting, saving, protecting or growing your wealth.

People often think that financial literacy is only applicable when one has started working. In fact, it is applicable to all stages of our life, from youth to retirement years.

Laying the foundation

Parents can give children a head start by helping them understand the value of money and the importance of savings. When children are mature enough to appreciate the complexities of investment, parents can involve them by letting them have a small stake in their investments.

Parents can also invest on their children's behalf early on and use the investment to demonstrate how the investment amount, horizon and time value of money should reflect one's financial goal.

Young adults need discipline

A lack of discipline in savings is an issue that many young adults face. They have the tendency to succumb to peer pressure and indulge in expensive exploits. It is important to instill financial literacy as young adults who control their spending from young tend to achieve their accumulation goal much earlier than those who spent indulgently.

Young adults should set clear financial goals and be disciplined in working towards that. Those who have difficulties controlling their spending can consider having different accounts for saving and transactional needs. They can also consider a debit card that will minimise overspending while giving them access to benefits typically accorded to credit cardholders.

Young adults can also take advantage of the various finance related workshops available to learn how to manage their finances properly.

Investments for working adults

Established adults should consider protecting and growing their wealth, especially for parents with dependent children, to ensure that they and their families' needs will be taken care of whatever the circumstances, and perhaps even leave something substantial behind for the next generation.

Ideally, working adults should save 15 to 35 per cent of their monthly income. After accumulating savings amounting to six months of expenses, they can explore ways to invest the savings to generate higher returns. There are many books and workshops where investors can learn about the various financial products. Prior to trading, they should also take advantage of the trial period that the various trading platforms offer to gain some hands-on experience.

When looking at various investment solutions, one should pay attention to the risks and returns. Younger investors may get carried away and not recognise that higher rate of returns are usually accompanied by a higher level of risk. Instead of looking at portfolios based on individual merits, young investors should look at how investing in a new investment product can help enhance the risk/return ratio of the overall portfolio.

It is important to have a diversified portfolio based on the three main asset classes (fixed income, equity and cash) and different sectors. It is also important to invest in asset classes that are not highly correlated for greater portfolio diversification.

Don't stop at retirement

While seniors will focus on wealth protection rather than accumulation, they need to make informed decisions about their various assets such as houses and ensuring they are sufficiently covered for living and healthcare expenses. Seniors may also wish to place their monies with less volatile vehicles such as fixed deposits.