30 May 2012
Woo Sian Boon
SINGAPORE - Despite Singapore's state-of-the-art skyscrapers and reputation as a clean city-state, it appears social etiquette has not kept pace with the country's rapid advancement.
This was the consensus reached by a panel of environmental pioneers during a dialogue session yesterday, in response to a question by a member of the audience, Mr Eugene Heng, who heads the Waterways Watch Society.
Addressing the three panellists - former National Environment Agency (NEA) director general for public health Daniel Wang, former NEA deputy chief executive officer Loh Ah Tuan and NEA deputy chief executive Joseph Hui - Mr Heng wanted their views on his observation that Singaporeans are littering and foreigners, hired by cleaning services, are tidying up after them.
Mr Loh said Singaporeans' "social responsibility is not there yet" despite the Government's efforts to educate people.
"We also engaged and empowered them. We tell them that Singapore is yours, and you should not be littering and dirtying the environment ...
"This is an issue about heart-ware, and not hardware," he said.
Added Mr Wang: "Singaporeans are very compliant, but only when there is a law in place ... It's very difficult for Singaporeans to do things from the heart, to think about community and not of self."
The panellists said it would take time for Singapore to reach the standards of Korea and Japan, where social responsibility has been successfully inculcated into the people.
During the session, organised by the Centre for Liveable Cities, a member of the audience asked how sustainable it is to throw rubbish inside plastic bags.
In response, Mr Wang said: "There's nothing wrong with plastic bags, so long as we reuse them.
"Any proposals to ban plastic bags irks me. In Singapore, we burn our rubbish, so whether it's bio-degradable or not, it doesn't make a difference; and secondly, because we encourage residents to bag their rubbish, so sanitation is maintained."
Speaking to reporters after the event, Mr Wang lashed out against supermarkets that charge extra for plastic bags.
"I don't think (they should do that), because the cost is already built into their overheads," he said.
"The question is: Do you need these bags at home? I need the plastic bags at home because I need to bag my food waste. If you don't give it to me, I have to go and buy them, right? Do I need the bags? Can I use them at home? If your answer is yes, then, by all means, take it."
Wednesday, May 30, 2012
Sunday, May 27, 2012
What goes up, must come down
By Goh Eng Yeow
27/5/2012
Recently, a young friend asked me for advice on buying a new Housing Board flat.
I took one look at the price list and was amazed to find that even as a first-time HDB home buyer, he would have to fork out about $460,000 for a new four-room flat in a mature estate. A five-room Housing Board flat would cost even more.
My instinctive reaction was to ask him to settle for a smaller unit - a three-room Housing Board flat, if he could - so as not to overstretch his finances.
Background story
Mind the swings
In good times, investors tend to chase after assets till they hit prices well beyond reason, but when a financial calamity occurs, prices tend to be depressed to unreasonable levels. If a prudent investor is mindful of such oscillations between the extremes, whether he is buying a house or investing in the stock market, he is likely to reap outsized gains.
There was another reason for my caution. Over the past 25 years of watching the stock market, I had seen several big swings in asset prices. Markets move in cycles - whether they involve assets as disparate as equities, real estate or motor vehicles.
This leads me to believe that if my friend settles for a more affordable flat and incurs a smaller monthly mortgage instalment, the money he saves can be used to finance the purchase of a bigger apartment, if there is a subsequent market downturn.
And that is the point of this column. In good times, investors tend to chase after assets till they hit prices well beyond reason, but when a financial calamity occurs, prices tend to be depressed to unreasonable levels.
If a prudent investor is mindful of such oscillations between the extremes, whether he is buying a house or investing in the stock market, he is likely to reap outsized gains.
One good example is the equities market. The beguiling calm in the first quarter lulled many traders to believe that good times were back again, as stock prices rose sharply across the globe.
But the turmoil that has again dogged the market in the past three weeks is a grim reminder of how rapidly things can change in the world of investing.
In an article headlined How Quickly They Forget two years ago, Mr Howard Marks, a very successful fund manager and the chairman of United States- based Oaktree Capital Management, observed that the shortness of investors' memories contributed to the big swings in asset prices.
'Things that investors would not touch in the depths of the financial crisis in late 2008 now strike them as good buys at twice the price. The swing of this pendulum recurs regularly, and creates some of the greatest opportunities to lose or gain,' he wrote.
And he had this advice to offer those hoping to profit from such market anomalies: Past patterns tend to recur. If you ignore that fact, you are likely to fall prey to those patterns, rather than benefit from them. But when markets get cooking, the lessons of the past are readily dismissed.
One reason investors tend to forget unpleasant investment experiences so quickly is the very short duration of recent financial disasters.
Mr Marks said: 'When the stock market declined for three straight years from 2000 to 2002, it had been almost 70 years since that had last happened in the Great Depression. Clearly, very few investors who were old enough to experience the first such episode were around for the second.'
A similar observation can be made of the 2008 global financial crisis that triggered a 50 per cent plunge in stock prices across the globe.
The bearishness lasted barely more than a year, before it gave way to the great V-shaped recovery the following year that enabled markets to recover much of their losses.
Then there is the uphill battle to fight against human greed.
'Memories of crises tell us to apply prudence, patience, moderation and conservatism. But these things seem decidedly outdated when the market is in a bull phase, and practising these virtues appears to yield nothing but opportunity costs,' said Mr Marks.
The ups and downs of the real estate market offer a good example of his observation of the amnesia suffered by investors during past bubbles and busts, and their causes.
During the 1970s, property prices spiked due to the high inflation that was triggered worldwide by soaring oil prices. It then suffered a spectacular collapse in 1981, as then US central bank boss Paul Volcker raised US interest rates sharply to curb inflation.
The real estate market stayed in the doldrums for nearly a decade, when Mr Volcker's successor, Mr Alan Greenspan, unleashed a fresh flood of liquidity to try to nudge the US economy out of a recession.
The resulting deluge of easy money fuelled one of Singapore's biggest stock market bull runs in history and a sharp run-up in property prices. Both assets then suffered a big crash with the onset of the Asian financial crisis in 1998.
Although both the stock and real estate markets staged a recovery the following year, the deflationary pressure unleashed by the dot.com bust in 2000 caused them to plummet again for the next three years.
Like the earlier 1970s real estate rally, the recent run-up in property prices had been partly fuelled by the ultra-loose monetary policies practised by Mr Greenspan's successor, Mr Ben Bernanke, as US$2.3 trillion (S$2.9 trillion) of fresh money was printed to nurse the sick global economy back to health after Lehman Brothers' demise in 2008.
It harkens back to Mr Marks' observation that many of the participants in the current property rally are too young to remember the previous boom-and-bust cycles in the real estate market.
And if the script stays true to form, sure as night follows day, prices may fall, as economic fundamentals reassert themselves. It pays to be patient.
engyeow@sph.com.sg
Greek tragedy: Don’t cry, time to buy
By Aaron Low
27/5/2012
If there has been one constant worry on the minds of most investors over the past two years, it is the ongoing euro zone crisis.
It all started with Greece asking for a bailout in the middle of 2010 to pay its mountain of public debt, and has lurched from one crisis to another, keeping markets volatile in the process.
Next month, the euro mess could come to a head when the Greeks go to the polls again to elect a new government, the second round of elections in just months.
Some analysts worry that this could spark another chain reaction of sovereign defaults in various debt-ridden euro zone nations, leading to another financial crisis similar to the one back in 2008.
Others believe that those fears are overstated and that policymakers can manage the situation.
Markets will be affected but does this mean that investors should bail out of their positions now? Or are there opportunities in the making?
A Lehman Brothers moment?
Not for the first time in the ongoing saga, politics rather than economics will be the main factor driving markets.
When the Greeks go to the polls on June 17, the biggest question that analysts are asking is whether Greece will vote to stay in the euro zone or leave the monetary union.
The biggest problem is that no one, both within the European leadership and outside, seems to have a firm idea of what might happen, said Mr Mark Matthews, the head of research Asia at private bank Julius Baer.
'Leaders have been sending out mixed signals that do little to settle markets, or give clarity to what might happen,' he said at a recent seminar.
If the Greeks vote in a party which favours renegotiating the terms of the bailout package they have reached with international creditors, the likelihood of their leaving the euro zone will be high.
This could lead to contagion affecting other heavily indebted European countries, especially the large economies of Spain and Italy.
Essentially, investors could dump the bonds of these countries, sending bond yields up, and leaving these countries with even less means to pay off their debt.
A whole host of other complex financial instruments, such as credit default swaps, could be triggered, affecting financial institutions and insurance companies.
In short, there could be a high risk of a 'Lehman Brothers moment' if Greece's exit turns disorderly, said Mr Gerard Teo, head of strategy and currency at Fullerton Fund Management.
Back in 2008, investment bank Lehman Brothers collapsed, leading to the global financial crisis.
On the other hand, if the pro euro zone parties secure a majority in the Greek Parliament, there could be a bounce in the markets, said OCBC's head of wealth management, Mr Wyson Lim.
'However, this may only be a temporary reprieve as the problems in Europe are deep-seated and complicated and will take years to resolve.'
Indeed, even if the Greek problem is resolved, question marks still linger over the larger economies of Spain and Italy and their ability to pay their mounting debts.
Opportunities sprouting
Given the risk of another meltdown in the markets, not many analysts would advise investors to pour money into equities.
But the time to be brave could be right now, just when fear is rising, say some fund managers.
Mr Hugh Young, managing director of Aberdeen Asset Management Asia, said that this could be a good time to sink some cash into the markets, provided the investor has a long-term horizon.
Similarly, Mr Tim Stevenson, Henderson Horizon Pan European Equity fund manager, notes that valuations of European equity markets are at 30-year lows.
In fact, he believes in investing in European firms, quality companies that will be able to ride out the political crisis threatening to engulf the entire region.
But if walking into the lion's den is too frightening, then other markets also offer potential opportunities.
The Chinese stock market has been in the doldrums for the past two years and has underperformed its Asian peers.
But analysts are now saying that the beating it has taken of late makes that market one of the cheapest out there.
And although its economy has slowed down, analysts are now paying attention to whether Chinese policymakers will embark on another round of stimulus to prevent the economy slowing down too much. This could provide a fillip for the stock market.
Investment banks such as Morgan Stanley, for instance, believe that the 'bear phase for equities has ended', especially for mainland Chinese and Hong Kong stocks.
Morgan Stanley is expecting the Hang Seng Index to rise to 23,600 by the end of the year, from the current 18,608.05 - a 26 per cent rise.
In a note to investors, Phillip Securities Research also said that it believes the markets could experience a short-term bounce since markets have been oversold in recent weeks.
Another market to watch is the United States.
While economic data out of the US has not been great in recent weeks, Mr Matthews believes that the economy, as a whole, is on a stronger footing.
Manufacturing is continuing to expand, spending has held steady and even the housing market seems to have turned the corner.
The big question is whether the economy can create enough jobs to reduce unemployment further, said Mr Matthews.
Citing an academic report, he said that previously, when the economy had recovered from a recession, employment tended to recover in a V- or even U-shaped pattern.
This time, US employment has followed an L-shape instead and has not shown signs of recovering any time soon.
Still, he believes that US corporates remain, by far, the strongest and most innovative firms in the world and he is backing them to continue growing profits.
He is recommending a mix of both US value and growth stocks, such as drug firm Merck and tech firms Apple and Google.
The Great Singapore Sale?
There could also be bargains to be picked up right here in Singapore.
Mr Kevin Scully, executive chairman of equities research firm NRA Capital, said that stocks as an asset class, based on current earnings forecasts, are cheap.
'There is no need to panic when markets fall. View it as a buying opportunity - take the time now to identify which stocks and what levels you want to buy and wait patiently,' he said.
'But if you cannot stomach the volatility, then shift about 50 per cent of your portfolio into defensive yield plays.'
Mr Herald van der Linde, HSBC head of equity strategy, Asia-Pacific, said that in times of great volatility, the best thing is to return to the fundamentals of stock investing.
'Buy only when you see value; be patient and don't rush in,' he said.
aaronl@sph.com.sg
27/5/2012
If there has been one constant worry on the minds of most investors over the past two years, it is the ongoing euro zone crisis.
It all started with Greece asking for a bailout in the middle of 2010 to pay its mountain of public debt, and has lurched from one crisis to another, keeping markets volatile in the process.
Next month, the euro mess could come to a head when the Greeks go to the polls again to elect a new government, the second round of elections in just months.
Some analysts worry that this could spark another chain reaction of sovereign defaults in various debt-ridden euro zone nations, leading to another financial crisis similar to the one back in 2008.
Others believe that those fears are overstated and that policymakers can manage the situation.
Markets will be affected but does this mean that investors should bail out of their positions now? Or are there opportunities in the making?
A Lehman Brothers moment?
Not for the first time in the ongoing saga, politics rather than economics will be the main factor driving markets.
When the Greeks go to the polls on June 17, the biggest question that analysts are asking is whether Greece will vote to stay in the euro zone or leave the monetary union.
The biggest problem is that no one, both within the European leadership and outside, seems to have a firm idea of what might happen, said Mr Mark Matthews, the head of research Asia at private bank Julius Baer.
'Leaders have been sending out mixed signals that do little to settle markets, or give clarity to what might happen,' he said at a recent seminar.
If the Greeks vote in a party which favours renegotiating the terms of the bailout package they have reached with international creditors, the likelihood of their leaving the euro zone will be high.
This could lead to contagion affecting other heavily indebted European countries, especially the large economies of Spain and Italy.
Essentially, investors could dump the bonds of these countries, sending bond yields up, and leaving these countries with even less means to pay off their debt.
A whole host of other complex financial instruments, such as credit default swaps, could be triggered, affecting financial institutions and insurance companies.
In short, there could be a high risk of a 'Lehman Brothers moment' if Greece's exit turns disorderly, said Mr Gerard Teo, head of strategy and currency at Fullerton Fund Management.
Back in 2008, investment bank Lehman Brothers collapsed, leading to the global financial crisis.
On the other hand, if the pro euro zone parties secure a majority in the Greek Parliament, there could be a bounce in the markets, said OCBC's head of wealth management, Mr Wyson Lim.
'However, this may only be a temporary reprieve as the problems in Europe are deep-seated and complicated and will take years to resolve.'
Indeed, even if the Greek problem is resolved, question marks still linger over the larger economies of Spain and Italy and their ability to pay their mounting debts.
Opportunities sprouting
Given the risk of another meltdown in the markets, not many analysts would advise investors to pour money into equities.
But the time to be brave could be right now, just when fear is rising, say some fund managers.
Mr Hugh Young, managing director of Aberdeen Asset Management Asia, said that this could be a good time to sink some cash into the markets, provided the investor has a long-term horizon.
Similarly, Mr Tim Stevenson, Henderson Horizon Pan European Equity fund manager, notes that valuations of European equity markets are at 30-year lows.
In fact, he believes in investing in European firms, quality companies that will be able to ride out the political crisis threatening to engulf the entire region.
But if walking into the lion's den is too frightening, then other markets also offer potential opportunities.
The Chinese stock market has been in the doldrums for the past two years and has underperformed its Asian peers.
But analysts are now saying that the beating it has taken of late makes that market one of the cheapest out there.
And although its economy has slowed down, analysts are now paying attention to whether Chinese policymakers will embark on another round of stimulus to prevent the economy slowing down too much. This could provide a fillip for the stock market.
Investment banks such as Morgan Stanley, for instance, believe that the 'bear phase for equities has ended', especially for mainland Chinese and Hong Kong stocks.
Morgan Stanley is expecting the Hang Seng Index to rise to 23,600 by the end of the year, from the current 18,608.05 - a 26 per cent rise.
In a note to investors, Phillip Securities Research also said that it believes the markets could experience a short-term bounce since markets have been oversold in recent weeks.
Another market to watch is the United States.
While economic data out of the US has not been great in recent weeks, Mr Matthews believes that the economy, as a whole, is on a stronger footing.
Manufacturing is continuing to expand, spending has held steady and even the housing market seems to have turned the corner.
The big question is whether the economy can create enough jobs to reduce unemployment further, said Mr Matthews.
Citing an academic report, he said that previously, when the economy had recovered from a recession, employment tended to recover in a V- or even U-shaped pattern.
This time, US employment has followed an L-shape instead and has not shown signs of recovering any time soon.
Still, he believes that US corporates remain, by far, the strongest and most innovative firms in the world and he is backing them to continue growing profits.
He is recommending a mix of both US value and growth stocks, such as drug firm Merck and tech firms Apple and Google.
The Great Singapore Sale?
There could also be bargains to be picked up right here in Singapore.
Mr Kevin Scully, executive chairman of equities research firm NRA Capital, said that stocks as an asset class, based on current earnings forecasts, are cheap.
'There is no need to panic when markets fall. View it as a buying opportunity - take the time now to identify which stocks and what levels you want to buy and wait patiently,' he said.
'But if you cannot stomach the volatility, then shift about 50 per cent of your portfolio into defensive yield plays.'
Mr Herald van der Linde, HSBC head of equity strategy, Asia-Pacific, said that in times of great volatility, the best thing is to return to the fundamentals of stock investing.
'Buy only when you see value; be patient and don't rush in,' he said.
aaronl@sph.com.sg
Friday, May 25, 2012
Five days in a learning nation
25 May 2012
Andreas Schleicher
I had always been interested in Asia's success story of Singapore, that transformed itself from a developing country to a modern industrial economy in one generation. Last year, I had the opportunity of a visiting professorship at Singapore's National Institute of Education (NIE) to learn more about this country.
If I had to summarise what I learned in one sentence, this is a story about political coherence and leadership as well as alignment between policy and practice; about setting ambitious standards in everything you do; about focusing on building teacher and leadership capacity to deliver vision and strategy at the school level; and about a culture of continuous improvement and future orientation that benchmarks educational practices against the best in the world.
At the institutional level, both policy coherence and fidelity of implementation are brought about by a strategic relationship between the Ministry of Education, the NIE and the schools.
Those are not just words. The reports I received from policymakers, researchers and teachers were entirely consistent, even where they represented different perspectives.
MEET-UPS WITH THE MINISTER
The NIE's dynamic director Lee Sing Kong meets the minister on a weekly basis. NIE professors are regularly involved in ministry discussions and decisions, so it is easy for the NIE's work to be aligned with ministry policies, and school principals learn about major reform proposals directly from the minister, rather than through the media.
Teacher education programmes are designed with the teacher in mind, rather than to suit the interests of academic departments. Teachers typically go into the field with a first degree, the master's programme serves to frame the practical experience gained in schools within a coherent theoretical underpinning later in mid-career - and I met plenty of teachers who had taken that up and continue their education while in the profession.
In recognising the need for teachers to keep up with the rapid changes occurring in the world and to be able to constantly improve their practice, every teacher is entitled to 100 hours of professional development per year. Teacher networks and professional learning communities encourage peer-to-peer learning, and the Academy of Singapore Teachers was opened in September 2010 to further encourage teachers to continuously share best practices.
WHY SINGAPORE IS NOT LIKE THE US
The usual complaint that teacher education does not provide sufficient opportunity for recruits to experience real students in real classrooms in their initial education is not unknown in Singapore.
It is simply difficult, disruptive and expensive to get an annual cohort of 2,000 teacher recruits into classrooms. So what to do? Do like Stanford and establish the world's premier teacher education institution with clinical experience for a hundred students per year, and let the rest of the country sink?
Singapore is not the United States, where teacher policy is a function of myriad decisions made by the local authorities who often have no idea how their decisions are actually affecting the quality of the teaching profession.
So Singapore has gone the other way round - on top of school practicum attachments of 10 to 22 weeks, the NIE is bringing classrooms digitally into pre-service education, with technology enabling real-time access to a selection of the country's classrooms, in ways that do not distract schools from their core business and, at the same time, provide student-teachers with insights into classroom experience in many schools, rather than have a few idiosyncratic experiences only.
The NIE also carries out an amazing range of classroom-oriented research to help teachers personalise learning experiences, deal with increasing diversity in their classrooms and differences in learning styles, and keep up with innovations in curricula, pedagogy and digital resources.
TALENT NURTURED, NOT LEFT TO CHANCE
It is also striking to see how teaching talent is identified and nurtured, rather than being left to chance.
Like all government employees and many other professions in Singapore, the teachers' performance is appraised annually by a board and against 13 different competencies. These are not just about academic performance but include teachers' contribution to the academic and character development of the students, their collaboration with parents and community groups, and their contribution to their colleagues and the school as a whole.
It was intriguing to see how teachers did not seem to view this as a top-down accountability system but as an instrument for improvement and career development.
Teachers who do outstanding work receive a bonus from the school's bonus pool. After three years of teaching, teachers are assessed annually to see which of three career paths would best suit them - master teacher, specialist in curriculum or research or school leader. Importantly, the individual appraisal system sits within the context of great attention to the school's overall plan for educational excellence.
Data from the Organisation for Economic Co-operation and Development's Programme for International Student Assessment (PISA) show that schools in Singapore have comparatively limited leeway in making hiring decisions. But I learned that the principal of the school to which teacher-students are attached will sit on the recruitment panel and weigh in on decisions about the recruitment of the people they could end up with - well aware that wrong recruitment decisions can result in 40 years of poor teaching.
So it is not all just about your school but about the success of the system.
THE IMPRESSIVE ITE
I could see how all of this plays out in practice in Qifa Primary School. It was the experience you would expect in Singapore, a charismatic school leader, an engaged team of teachers with a critical and collaborative mindset, and disciplined and yet cheerful students.
But what impressed me most was a visit to one of Singapore's three Institutes of Technical Education (ITE), which cater for the bottom quarter of school performers. I had long wanted to see how the country deals with these students.
I was received in the school's restaurant which, entirely managed and run by students, almost looks like an upgraded Lau Pa Sat with air-conditioning, serving dishes from a dozen countries and cultures, a symbol of a country that does not see culture as an obstacle but seeks to capitalise on its diversity.
I visited a classroom where a visiting Australian chef was captivating a group of students with an interactive presentation on the latest research on preparing meat, in a first-class learning environment equipped with up-to-date technology. The facilities and amenities of the ITE were easily comparable to those of modern universities anywhere else.
This is a country that invests the same amount of public money into every vocational student as the high school student going to its most prestigious university, that understands that the physical learning environment can shape the image of an institution, and that prioritises the quality of teaching over the size of classes.
And the ministry provides the ITEs with full budgetary autonomy over a 10-year budget envelope to facilitate long-term strategic planning and investment.
MORE THAN ONE ROUTE TO SUCCESS
Clearly, Singapore seeks to break the East Asian mould where academic achievement is revered as the only route to success, recognising that students learn differently and differently at different stages in their lives.
Once seen as a last resort, Singapore's ITE College West is now a place of choice for students, with 90 per cent of graduates finding jobs in their chosen field, up from 60 per cent decades ago. The ITE also sees a sizeable number of students who make it from the ITE to the polytechnic to the university and to anywhere in life.
Principal Yek Tiew Ming explained how the ITE carefully follows its graduates for a decade to learn from their experience and success, and regularly brings successful alumni back to show its current students that the sky is the limit to achievement.
The ITEs also provide good examples for building synergies between public provision and the business sector. Each technical field in the ITEs is advised by industries in that sector to keep it current with changing demands and new technologies.
New programmes can be built for multinational companies looking to locate in Singapore.
All this has changed the way in which political leaders and educators view those students, no longer considering them as failures but as experiential learners. And I was impressed by the students of the ITE as much as by its principal and teachers.
LESSONS FOR THE WORLD
I had taken the outgoing flight with a Western airline and the returning flight to Paris with Singapore Airlines. You fly with the same plane with the same technology, you eat similar food, but you experience how much the sense of responsibility, dedication and diligence of the people in charge can make a difference to your experience as a customer.
There are lessons the world can learn from Singapore.
To those who believe that systemic change in education is not possible, Singapore has shown several times over how this can be achieved. To become and remain high-performing, countries need a policy infrastructure that drives performance and builds the capacity for educators to deliver it in schools. Singapore has developed both.
Where Singapore is today is the result of several decades of judicious policy and effective implementation. On the spectrum of national reform models, Singapore's is both comprehensive - the goal has been to move the whole system - and public policy-driven. I was struck most by the following features.
- Meritocracy I heard not just from policymakers or educators, but also from students of all ethnic backgrounds and all ranges of ability, that education is the route to advancement and hard work and effort eventually pays off.
The Government has put in place a wide range of educational and social policies to advance this goal, with early intervention and multiple pathways to education and career. The success of the Government's economic and educational policies has brought about immense social mobility that has created a shared sense of national mission and made cultural support for education a near-universal value.
- Vision, leadership and competency Leaders with a bold long-term vision of the role of education in a society and economy are essential for creating educational excellence. I was consistently impressed with the people I met at both the Ministry of Education and the Ministry of Manpower. These Ministries are staffed by knowledgeable, pragmatic individuals, trained at some of the best universities in the world.
They function in a culture of continuous improvement, constantly assessing what is and is not working using both data and practitioner experience from around the world. I was speaking with Minister Heng Swee Keat about our Skills Strategy, only to realise that he had already studied most of my slides.
They also respect and are respected by professionals in the NIE as in the schools. The close collaboration between policy, research and practice provides a guiding coalition that keeps the vision moving forward and dynamic, expecting education to change as conditions change rather than being mired in the past.
- Coherence In Singapore, whenever a policy is developed or changed, there seems enormous attention to the details of implementation - from the Ministry of Education, to the National Institute of Education, cluster superintendents, principals and teachers. The result is a remarkable fidelity of implementation which you see in the consistency of the reports from different stakeholders.
- Clear goals, rigorous standards and high-stakes gateways The academic standards set by Singapore's Primary School Leaving Examination and O- and A-levels are as high as anywhere in the world, and that is also what you see from their results in PISA.
Students, teachers and principals all work very hard towards important gateways. Rigour, coherence and focus are the watchwords. Serious attention to curriculum development has produced strong programmes in maths, science, technical education and languages and ensured that teachers are well-trained to teach them. Having been very successful as a knowledge transmission education system, Singapore is now working on curriculum, pedagogy and assessments that will lead to a greater focus on high-level, complex skills.
- High-quality teachers and principals The system rests on active recruitment of talent, accompanied by coherent training and serious and continuing support that promote teacher growth, recognition, opportunity and well-being. And Singapore looks ahead, realising that, as the economy continues to grow and change, it will become harder to recruit the kind of top-level people into teaching that are needed to support 21st-century learning.
- Intelligent accountability Singapore runs on performance management. To maintain the performance of teachers and principals, serious attention is paid to setting annual goals, to garnering the needed support to meet them and to assessing whether they have been met.
Data on student performance are included, but so too are a range of other measures, such as contribution to school and community, and judgments by a number of senior practitioners. Reward and recognition systems include honours and salary bonuses. Individual appraisals take place within the context of school excellence plans.
While no country believes it has got accountability exactly right, Singapore's system uses a wide range of indicators and involves a wide range of professionals in making judgments about the performance of adults in the system.
BUT HOW TO UNLEASH GREATNESS?
So is there nothing that Singapore can learn from the world? Actually, there are a number a points.
You can mandate good performance, but you need to unleash greatness. Finland provides an example for how you can shift the focus from a regulating towards an enabling policy environment. Perhaps it was no surprise then that, when I met Minister of State Lawrence Wong for lunch, he had just returned from a visit to Finland.
Singapore's educators realise that the skills that are easiest to teach and easiest to test, are also the skills that are easiest to digitise, automate and outsource - and that value is less and less created vertically through command and control, and increasingly so horizontally by whom you connect and work with.
There is much talk about educational success being no longer about reproducing content knowledge, and efforts initiated to develop imaginative skills to connect the dots and to anticipate where the next invention will come from; about ways of working, including communication and collaboration; and about the tools for working, including the capacity to recognise and exploit the potential of new technologies.
And more than that, the centre of the current discussion is now on ethics, values and the capacity of students to live in a multi-faceted world as active and engaged citizens.
But Singapore's educators, like educators elsewhere, struggle with finding appropriate answers to what students should learn, the ways in which they can learn these broader competences and how teaching and schooling needs to change to achieve this.
AT A SOCIAL DISADVANTAGE
Despite building many bridges and ladders across the system, PISA shows how social background still creates important barriers for student success.
Like others, Singapore finds that the emphasis on meritocracy alone provides no guarantee for equity, and that it takes effective systems of support to moderate the impact of social background on student and school outcomes, and to identify and foster the extraordinary talents of ordinary students.
Educators are inspired by the life-changing opportunities created at the Northlight School. There is also considerable interest in Shanghai's success with attracting the most effective school principals to the toughest schools and the most talented teachers to the most challenging classrooms; as well as in Ontario's approach to creating awareness of and addressing social disadvantage.
While Singapore does so well in allocating public resources to maximise value for money, parents are spending significant resources on private tutoring. When measured in PISA metrics, private tutoring actually adds very little in value to the high-quality education in Singaporean schools - but it does, apart from the money, take up a disproportionate amount of student learning time.
Singapore would make much better use of the country's economic and human resources by accepting, rather than ignoring, the demand for such more personalised learning; and perhaps building it into the regular school days of public schools, as countries like Denmark or Finland have successfully done.
So, all in all, while there is a lot the world can learn from Singapore, there remain lessons too which Singapore can continue to learn from the world.
Andreas Schleicher is the deputy director for education and special advisor on education policy to the Organisation for Economic Co-operation and Development's Secretary-General. This article first appeared as a blog post, 'Singapore: Five days in thinking schools and a learning nation', at the OECD webpage EducationToday.
Andreas Schleicher
I had always been interested in Asia's success story of Singapore, that transformed itself from a developing country to a modern industrial economy in one generation. Last year, I had the opportunity of a visiting professorship at Singapore's National Institute of Education (NIE) to learn more about this country.
If I had to summarise what I learned in one sentence, this is a story about political coherence and leadership as well as alignment between policy and practice; about setting ambitious standards in everything you do; about focusing on building teacher and leadership capacity to deliver vision and strategy at the school level; and about a culture of continuous improvement and future orientation that benchmarks educational practices against the best in the world.
At the institutional level, both policy coherence and fidelity of implementation are brought about by a strategic relationship between the Ministry of Education, the NIE and the schools.
Those are not just words. The reports I received from policymakers, researchers and teachers were entirely consistent, even where they represented different perspectives.
MEET-UPS WITH THE MINISTER
The NIE's dynamic director Lee Sing Kong meets the minister on a weekly basis. NIE professors are regularly involved in ministry discussions and decisions, so it is easy for the NIE's work to be aligned with ministry policies, and school principals learn about major reform proposals directly from the minister, rather than through the media.
Teacher education programmes are designed with the teacher in mind, rather than to suit the interests of academic departments. Teachers typically go into the field with a first degree, the master's programme serves to frame the practical experience gained in schools within a coherent theoretical underpinning later in mid-career - and I met plenty of teachers who had taken that up and continue their education while in the profession.
In recognising the need for teachers to keep up with the rapid changes occurring in the world and to be able to constantly improve their practice, every teacher is entitled to 100 hours of professional development per year. Teacher networks and professional learning communities encourage peer-to-peer learning, and the Academy of Singapore Teachers was opened in September 2010 to further encourage teachers to continuously share best practices.
WHY SINGAPORE IS NOT LIKE THE US
The usual complaint that teacher education does not provide sufficient opportunity for recruits to experience real students in real classrooms in their initial education is not unknown in Singapore.
It is simply difficult, disruptive and expensive to get an annual cohort of 2,000 teacher recruits into classrooms. So what to do? Do like Stanford and establish the world's premier teacher education institution with clinical experience for a hundred students per year, and let the rest of the country sink?
Singapore is not the United States, where teacher policy is a function of myriad decisions made by the local authorities who often have no idea how their decisions are actually affecting the quality of the teaching profession.
So Singapore has gone the other way round - on top of school practicum attachments of 10 to 22 weeks, the NIE is bringing classrooms digitally into pre-service education, with technology enabling real-time access to a selection of the country's classrooms, in ways that do not distract schools from their core business and, at the same time, provide student-teachers with insights into classroom experience in many schools, rather than have a few idiosyncratic experiences only.
The NIE also carries out an amazing range of classroom-oriented research to help teachers personalise learning experiences, deal with increasing diversity in their classrooms and differences in learning styles, and keep up with innovations in curricula, pedagogy and digital resources.
TALENT NURTURED, NOT LEFT TO CHANCE
It is also striking to see how teaching talent is identified and nurtured, rather than being left to chance.
Like all government employees and many other professions in Singapore, the teachers' performance is appraised annually by a board and against 13 different competencies. These are not just about academic performance but include teachers' contribution to the academic and character development of the students, their collaboration with parents and community groups, and their contribution to their colleagues and the school as a whole.
It was intriguing to see how teachers did not seem to view this as a top-down accountability system but as an instrument for improvement and career development.
Teachers who do outstanding work receive a bonus from the school's bonus pool. After three years of teaching, teachers are assessed annually to see which of three career paths would best suit them - master teacher, specialist in curriculum or research or school leader. Importantly, the individual appraisal system sits within the context of great attention to the school's overall plan for educational excellence.
Data from the Organisation for Economic Co-operation and Development's Programme for International Student Assessment (PISA) show that schools in Singapore have comparatively limited leeway in making hiring decisions. But I learned that the principal of the school to which teacher-students are attached will sit on the recruitment panel and weigh in on decisions about the recruitment of the people they could end up with - well aware that wrong recruitment decisions can result in 40 years of poor teaching.
So it is not all just about your school but about the success of the system.
THE IMPRESSIVE ITE
I could see how all of this plays out in practice in Qifa Primary School. It was the experience you would expect in Singapore, a charismatic school leader, an engaged team of teachers with a critical and collaborative mindset, and disciplined and yet cheerful students.
But what impressed me most was a visit to one of Singapore's three Institutes of Technical Education (ITE), which cater for the bottom quarter of school performers. I had long wanted to see how the country deals with these students.
I was received in the school's restaurant which, entirely managed and run by students, almost looks like an upgraded Lau Pa Sat with air-conditioning, serving dishes from a dozen countries and cultures, a symbol of a country that does not see culture as an obstacle but seeks to capitalise on its diversity.
I visited a classroom where a visiting Australian chef was captivating a group of students with an interactive presentation on the latest research on preparing meat, in a first-class learning environment equipped with up-to-date technology. The facilities and amenities of the ITE were easily comparable to those of modern universities anywhere else.
This is a country that invests the same amount of public money into every vocational student as the high school student going to its most prestigious university, that understands that the physical learning environment can shape the image of an institution, and that prioritises the quality of teaching over the size of classes.
And the ministry provides the ITEs with full budgetary autonomy over a 10-year budget envelope to facilitate long-term strategic planning and investment.
MORE THAN ONE ROUTE TO SUCCESS
Clearly, Singapore seeks to break the East Asian mould where academic achievement is revered as the only route to success, recognising that students learn differently and differently at different stages in their lives.
Once seen as a last resort, Singapore's ITE College West is now a place of choice for students, with 90 per cent of graduates finding jobs in their chosen field, up from 60 per cent decades ago. The ITE also sees a sizeable number of students who make it from the ITE to the polytechnic to the university and to anywhere in life.
Principal Yek Tiew Ming explained how the ITE carefully follows its graduates for a decade to learn from their experience and success, and regularly brings successful alumni back to show its current students that the sky is the limit to achievement.
The ITEs also provide good examples for building synergies between public provision and the business sector. Each technical field in the ITEs is advised by industries in that sector to keep it current with changing demands and new technologies.
New programmes can be built for multinational companies looking to locate in Singapore.
All this has changed the way in which political leaders and educators view those students, no longer considering them as failures but as experiential learners. And I was impressed by the students of the ITE as much as by its principal and teachers.
LESSONS FOR THE WORLD
I had taken the outgoing flight with a Western airline and the returning flight to Paris with Singapore Airlines. You fly with the same plane with the same technology, you eat similar food, but you experience how much the sense of responsibility, dedication and diligence of the people in charge can make a difference to your experience as a customer.
There are lessons the world can learn from Singapore.
To those who believe that systemic change in education is not possible, Singapore has shown several times over how this can be achieved. To become and remain high-performing, countries need a policy infrastructure that drives performance and builds the capacity for educators to deliver it in schools. Singapore has developed both.
Where Singapore is today is the result of several decades of judicious policy and effective implementation. On the spectrum of national reform models, Singapore's is both comprehensive - the goal has been to move the whole system - and public policy-driven. I was struck most by the following features.
- Meritocracy I heard not just from policymakers or educators, but also from students of all ethnic backgrounds and all ranges of ability, that education is the route to advancement and hard work and effort eventually pays off.
The Government has put in place a wide range of educational and social policies to advance this goal, with early intervention and multiple pathways to education and career. The success of the Government's economic and educational policies has brought about immense social mobility that has created a shared sense of national mission and made cultural support for education a near-universal value.
- Vision, leadership and competency Leaders with a bold long-term vision of the role of education in a society and economy are essential for creating educational excellence. I was consistently impressed with the people I met at both the Ministry of Education and the Ministry of Manpower. These Ministries are staffed by knowledgeable, pragmatic individuals, trained at some of the best universities in the world.
They function in a culture of continuous improvement, constantly assessing what is and is not working using both data and practitioner experience from around the world. I was speaking with Minister Heng Swee Keat about our Skills Strategy, only to realise that he had already studied most of my slides.
They also respect and are respected by professionals in the NIE as in the schools. The close collaboration between policy, research and practice provides a guiding coalition that keeps the vision moving forward and dynamic, expecting education to change as conditions change rather than being mired in the past.
- Coherence In Singapore, whenever a policy is developed or changed, there seems enormous attention to the details of implementation - from the Ministry of Education, to the National Institute of Education, cluster superintendents, principals and teachers. The result is a remarkable fidelity of implementation which you see in the consistency of the reports from different stakeholders.
- Clear goals, rigorous standards and high-stakes gateways The academic standards set by Singapore's Primary School Leaving Examination and O- and A-levels are as high as anywhere in the world, and that is also what you see from their results in PISA.
Students, teachers and principals all work very hard towards important gateways. Rigour, coherence and focus are the watchwords. Serious attention to curriculum development has produced strong programmes in maths, science, technical education and languages and ensured that teachers are well-trained to teach them. Having been very successful as a knowledge transmission education system, Singapore is now working on curriculum, pedagogy and assessments that will lead to a greater focus on high-level, complex skills.
- High-quality teachers and principals The system rests on active recruitment of talent, accompanied by coherent training and serious and continuing support that promote teacher growth, recognition, opportunity and well-being. And Singapore looks ahead, realising that, as the economy continues to grow and change, it will become harder to recruit the kind of top-level people into teaching that are needed to support 21st-century learning.
- Intelligent accountability Singapore runs on performance management. To maintain the performance of teachers and principals, serious attention is paid to setting annual goals, to garnering the needed support to meet them and to assessing whether they have been met.
Data on student performance are included, but so too are a range of other measures, such as contribution to school and community, and judgments by a number of senior practitioners. Reward and recognition systems include honours and salary bonuses. Individual appraisals take place within the context of school excellence plans.
While no country believes it has got accountability exactly right, Singapore's system uses a wide range of indicators and involves a wide range of professionals in making judgments about the performance of adults in the system.
BUT HOW TO UNLEASH GREATNESS?
So is there nothing that Singapore can learn from the world? Actually, there are a number a points.
You can mandate good performance, but you need to unleash greatness. Finland provides an example for how you can shift the focus from a regulating towards an enabling policy environment. Perhaps it was no surprise then that, when I met Minister of State Lawrence Wong for lunch, he had just returned from a visit to Finland.
Singapore's educators realise that the skills that are easiest to teach and easiest to test, are also the skills that are easiest to digitise, automate and outsource - and that value is less and less created vertically through command and control, and increasingly so horizontally by whom you connect and work with.
There is much talk about educational success being no longer about reproducing content knowledge, and efforts initiated to develop imaginative skills to connect the dots and to anticipate where the next invention will come from; about ways of working, including communication and collaboration; and about the tools for working, including the capacity to recognise and exploit the potential of new technologies.
And more than that, the centre of the current discussion is now on ethics, values and the capacity of students to live in a multi-faceted world as active and engaged citizens.
But Singapore's educators, like educators elsewhere, struggle with finding appropriate answers to what students should learn, the ways in which they can learn these broader competences and how teaching and schooling needs to change to achieve this.
AT A SOCIAL DISADVANTAGE
Despite building many bridges and ladders across the system, PISA shows how social background still creates important barriers for student success.
Like others, Singapore finds that the emphasis on meritocracy alone provides no guarantee for equity, and that it takes effective systems of support to moderate the impact of social background on student and school outcomes, and to identify and foster the extraordinary talents of ordinary students.
Educators are inspired by the life-changing opportunities created at the Northlight School. There is also considerable interest in Shanghai's success with attracting the most effective school principals to the toughest schools and the most talented teachers to the most challenging classrooms; as well as in Ontario's approach to creating awareness of and addressing social disadvantage.
While Singapore does so well in allocating public resources to maximise value for money, parents are spending significant resources on private tutoring. When measured in PISA metrics, private tutoring actually adds very little in value to the high-quality education in Singaporean schools - but it does, apart from the money, take up a disproportionate amount of student learning time.
Singapore would make much better use of the country's economic and human resources by accepting, rather than ignoring, the demand for such more personalised learning; and perhaps building it into the regular school days of public schools, as countries like Denmark or Finland have successfully done.
So, all in all, while there is a lot the world can learn from Singapore, there remain lessons too which Singapore can continue to learn from the world.
Andreas Schleicher is the deputy director for education and special advisor on education policy to the Organisation for Economic Co-operation and Development's Secretary-General. This article first appeared as a blog post, 'Singapore: Five days in thinking schools and a learning nation', at the OECD webpage EducationToday.
Perth's real estate boom
25 May 2012
John Lindeman
Perth, the capital of Western Australia, is benefiting from one of the biggest mining bonanzas in Australia's history and housing prices there are set to boom.
Situated nearly as far from Singapore as it is from Sydney, Perth is the fourth-largest city in Australia with a population of 1.7 million. It has the highest population growth rate of all Australian capital cities as a result of the wealth from the mining boom in recent years.
The industrial expansion in China, the world's second-largest economy, is generating a huge demand for high-grade iron ore and Western Australia has more than 90 per cent of Australia's total identified resources, most of it in the north of the state.
Large-scale iron ore mining began in 2004 and, within two years, housing prices in Perth doubled. Since then, rents have been rising steadily as there is still a huge shortage of homes.
Perth's housing shortage is due to a lack of skilled construction workers. Mining companies offer high wages to entice builders, carpenters and other construction tradesmen away from Perth to move to Western Australia's northern mining towns and ports. As a result, not enough are left behind to build new dwellings that the city's rapidly growing population needs.
The people of Perth receive other benefits to compensate for the housing shortage - the royalties from iron ore exports flow through the entire community and make Perth the most affluent city in Australia.
Average incomes are the highest in the country and many of the international mining companies have offices in Perth which provide excellent employment prospects. Perth, the administrative centre for an area that covers nearly one third of the continent, has consistently achieved an unemployment rate lower than other Australian capital cities.
Rents in the mining boom towns and ports in the north are becoming prohibitive. No mining company wants to pay rental subsidies that can cost over a thousand dollars per employee weekly, so they construct temporary camps near their mines and fly the workers in and out at rostered changeovers.
The mining families live in Perth while the companies subsidise their rent and pay the costs of flying workers to and from the mining towns and ports in the north. This practice is growing rapidly and rents have been rapidly rising in many of Perth's inner suburban areas as a result.
There are many reasons why Singaporeans should consider investing in Perth's housing market.
First, Australian housing prices had demonstrated resilience during the global credit crisis, surviving the sub-prime market crash without any fall in prices. Overall prices are now higher than they were before 2008. Second, Perth's housing shortage is becoming worse, leading to high price growth and rent increases of more than 10 per cent in the last year.
Third, the types of accommodation most sought after by renters in Perth are precisely those most suited to Singapore investors - new and off-the-plan units in desirable suburbs located near the airport, along the transport corridor to the CBD, along the Swan River and near the popular entertainment precincts of Perth.
Perth has the brightest future among the capital cities in Australia and property investors stand to reap the benefits.
John Lindeman is chief property consultant at Australian housing market consultancy, Property Power Partners. He is keynote speaker at the Australian Property Symposium 2012 to be held on June 23. For details, visit www.propertysymposium.com.
John Lindeman
Perth, the capital of Western Australia, is benefiting from one of the biggest mining bonanzas in Australia's history and housing prices there are set to boom.
Situated nearly as far from Singapore as it is from Sydney, Perth is the fourth-largest city in Australia with a population of 1.7 million. It has the highest population growth rate of all Australian capital cities as a result of the wealth from the mining boom in recent years.
The industrial expansion in China, the world's second-largest economy, is generating a huge demand for high-grade iron ore and Western Australia has more than 90 per cent of Australia's total identified resources, most of it in the north of the state.
Large-scale iron ore mining began in 2004 and, within two years, housing prices in Perth doubled. Since then, rents have been rising steadily as there is still a huge shortage of homes.
Perth's housing shortage is due to a lack of skilled construction workers. Mining companies offer high wages to entice builders, carpenters and other construction tradesmen away from Perth to move to Western Australia's northern mining towns and ports. As a result, not enough are left behind to build new dwellings that the city's rapidly growing population needs.
The people of Perth receive other benefits to compensate for the housing shortage - the royalties from iron ore exports flow through the entire community and make Perth the most affluent city in Australia.
Average incomes are the highest in the country and many of the international mining companies have offices in Perth which provide excellent employment prospects. Perth, the administrative centre for an area that covers nearly one third of the continent, has consistently achieved an unemployment rate lower than other Australian capital cities.
Rents in the mining boom towns and ports in the north are becoming prohibitive. No mining company wants to pay rental subsidies that can cost over a thousand dollars per employee weekly, so they construct temporary camps near their mines and fly the workers in and out at rostered changeovers.
The mining families live in Perth while the companies subsidise their rent and pay the costs of flying workers to and from the mining towns and ports in the north. This practice is growing rapidly and rents have been rapidly rising in many of Perth's inner suburban areas as a result.
There are many reasons why Singaporeans should consider investing in Perth's housing market.
First, Australian housing prices had demonstrated resilience during the global credit crisis, surviving the sub-prime market crash without any fall in prices. Overall prices are now higher than they were before 2008. Second, Perth's housing shortage is becoming worse, leading to high price growth and rent increases of more than 10 per cent in the last year.
Third, the types of accommodation most sought after by renters in Perth are precisely those most suited to Singapore investors - new and off-the-plan units in desirable suburbs located near the airport, along the transport corridor to the CBD, along the Swan River and near the popular entertainment precincts of Perth.
Perth has the brightest future among the capital cities in Australia and property investors stand to reap the benefits.
John Lindeman is chief property consultant at Australian housing market consultancy, Property Power Partners. He is keynote speaker at the Australian Property Symposium 2012 to be held on June 23. For details, visit www.propertysymposium.com.
Tuesday, May 22, 2012
Myths of Wall St glamour
22 May 2012
William D Cohan
Ever since March, when The New York Times decided to make a cause celebre out of the resignation of Mr Greg Smith, a vice-president at Goldman Sachs Group, a cottage industry of first-person Wall Street departure stories has sprung up across the print media and blogosphere.
For instance, The Guardian in London has run a series of 60 columns - titled "Voices of Finance" - that give current and former Wall Street bankers and traders a chance to anonymously describe what their jobs are really like or why they decided to leave.
One London-based equity derivatives salesman, who had a job similar to Mr Smith's but not at Goldman Sachs, wrote on the Guardian blog that doing the right thing on Wall Street is a directive that must come from the top.
"For me," he wrote, "it goes back to the values in an organisation. If you could sell your product for double the price, would you do it? I would say, in business, that's legitimate, provided your clients have adequate information."
He continued: "This is an important rule with structured derivatives that clients ignore at their peril. You have got to read the small print. You need to bring in a lawyer who explains it to you before you buy these things - otherwise there is information asymmetry."
These anonymous postings are valuable insomuch as they give a reader a healthy dose of the flavour of what it is like to work on Wall Street. But they can't hold a candle to a full-throated, no-holds-barred repudiation of an industry that is expert at seducing the world's best and brightest with promises of glamour and riches.
BANKING'S BLACK HOLE
Such is the power of the prose of former banker Stephen Ridley, who survived as a junior investment banker at a "top tier" European investment bank for all of 16 months before throwing in the towel on his finance career in October last year.
Having since been reconstituted as a singer/songwriter and pianist - and a damn fine one at that - in the mould of Coldplay's Chris Martin, Mr Ridley decided last month to go public with his tale of investment-banking woe. He tells a powerful story that anyone considering a Wall Street career would do well to read before falling into the investment-banking black hole.
Mr Ridley writes that he graduated from a top British university - he doesn't say which one - in 2010 with a degree in philosophy, politics and economics. The summer before graduation, he interned in the "European" bank he joined a year later (despite knowing first-hand from his internship just how "brutal" the life of an investment banker was).
His sole motivation was to make as much money as possible. He assumed having a lot of money would make him happy and earn him the respect of the people around him.
"I wanted to be a somebody in the eyes of myself and others," he wrote on the blog Wall Street Oasis. "But most of all, I wanted money. Why? Because money is freedom. Money means I can wear what I want, live where I want, go where I want, eat what I want, be who I want. Money would make me happy. Right?"
Wrong.
Mr Ridley explains: "In fact, money didn't seem to make any of the bankers happy. Not one person in the roughly 200 I got to know in banking were happy. Yet all earned multiples of the national average salary."
He then explained why he was so unhappy.
"Like everyone there, I worked my ass to the bone, working mind-numbingly boring work," he continued. "Fifteen-hour days were a minimum, 16 to 17 were normal, 20-plus were frequent and once or twice a month there would be the dreaded all-nighter. I worked around two out of every four weekends in some form. I was never free, I always had my Blackberry with me, and thus I could never truly detach myself from the job."
JUST STAYING AWAKE
What about the perks, the lavish lifestyle?
"These are the objective facts, contrary to what any 'baller' wants to tell you," writes Mr Ridley. "The only models were Excel models, the only bottles were Coca-Cola, which I drank a lot of to stay awake."
Once he realised that he was happier "backpacking around South America on a shoestring" than he was in the supposedly glamorous world of investment banking, he gave it up to pursue his passion for singing.
Given the shrinking investment-banking pie and dramatic changes to the way the industry is going to be regulated, we have come to an important, paradigm-shifting moment for Wall Street.
As Mr Ridley, and many others, have discovered, Wall Street is no longer a fun - or necessarily lucrative - place to work.
And guess what? This is the best news to come around in a generation. Now, instead of being sucked into Wall Street by default or after digesting a fantasy about fame and untold riches, maybe our best and brightest graduates will pursue their passions. If they do, we will all be better off.
As Mr Ridley says: "Life is short - you're young, you're old, you're dead. React to that knowledge. You have nothing to lose!" BLOOMBERG
William D Cohan, a former investment banker and the author of Money and Power: How Goldman Sachs Came to Rule the World, is a Bloomberg View columnist.
William D Cohan
Ever since March, when The New York Times decided to make a cause celebre out of the resignation of Mr Greg Smith, a vice-president at Goldman Sachs Group, a cottage industry of first-person Wall Street departure stories has sprung up across the print media and blogosphere.
For instance, The Guardian in London has run a series of 60 columns - titled "Voices of Finance" - that give current and former Wall Street bankers and traders a chance to anonymously describe what their jobs are really like or why they decided to leave.
One London-based equity derivatives salesman, who had a job similar to Mr Smith's but not at Goldman Sachs, wrote on the Guardian blog that doing the right thing on Wall Street is a directive that must come from the top.
"For me," he wrote, "it goes back to the values in an organisation. If you could sell your product for double the price, would you do it? I would say, in business, that's legitimate, provided your clients have adequate information."
He continued: "This is an important rule with structured derivatives that clients ignore at their peril. You have got to read the small print. You need to bring in a lawyer who explains it to you before you buy these things - otherwise there is information asymmetry."
These anonymous postings are valuable insomuch as they give a reader a healthy dose of the flavour of what it is like to work on Wall Street. But they can't hold a candle to a full-throated, no-holds-barred repudiation of an industry that is expert at seducing the world's best and brightest with promises of glamour and riches.
BANKING'S BLACK HOLE
Such is the power of the prose of former banker Stephen Ridley, who survived as a junior investment banker at a "top tier" European investment bank for all of 16 months before throwing in the towel on his finance career in October last year.
Having since been reconstituted as a singer/songwriter and pianist - and a damn fine one at that - in the mould of Coldplay's Chris Martin, Mr Ridley decided last month to go public with his tale of investment-banking woe. He tells a powerful story that anyone considering a Wall Street career would do well to read before falling into the investment-banking black hole.
Mr Ridley writes that he graduated from a top British university - he doesn't say which one - in 2010 with a degree in philosophy, politics and economics. The summer before graduation, he interned in the "European" bank he joined a year later (despite knowing first-hand from his internship just how "brutal" the life of an investment banker was).
His sole motivation was to make as much money as possible. He assumed having a lot of money would make him happy and earn him the respect of the people around him.
"I wanted to be a somebody in the eyes of myself and others," he wrote on the blog Wall Street Oasis. "But most of all, I wanted money. Why? Because money is freedom. Money means I can wear what I want, live where I want, go where I want, eat what I want, be who I want. Money would make me happy. Right?"
Wrong.
Mr Ridley explains: "In fact, money didn't seem to make any of the bankers happy. Not one person in the roughly 200 I got to know in banking were happy. Yet all earned multiples of the national average salary."
He then explained why he was so unhappy.
"Like everyone there, I worked my ass to the bone, working mind-numbingly boring work," he continued. "Fifteen-hour days were a minimum, 16 to 17 were normal, 20-plus were frequent and once or twice a month there would be the dreaded all-nighter. I worked around two out of every four weekends in some form. I was never free, I always had my Blackberry with me, and thus I could never truly detach myself from the job."
JUST STAYING AWAKE
What about the perks, the lavish lifestyle?
"These are the objective facts, contrary to what any 'baller' wants to tell you," writes Mr Ridley. "The only models were Excel models, the only bottles were Coca-Cola, which I drank a lot of to stay awake."
Once he realised that he was happier "backpacking around South America on a shoestring" than he was in the supposedly glamorous world of investment banking, he gave it up to pursue his passion for singing.
Given the shrinking investment-banking pie and dramatic changes to the way the industry is going to be regulated, we have come to an important, paradigm-shifting moment for Wall Street.
As Mr Ridley, and many others, have discovered, Wall Street is no longer a fun - or necessarily lucrative - place to work.
And guess what? This is the best news to come around in a generation. Now, instead of being sucked into Wall Street by default or after digesting a fantasy about fame and untold riches, maybe our best and brightest graduates will pursue their passions. If they do, we will all be better off.
As Mr Ridley says: "Life is short - you're young, you're old, you're dead. React to that knowledge. You have nothing to lose!" BLOOMBERG
William D Cohan, a former investment banker and the author of Money and Power: How Goldman Sachs Came to Rule the World, is a Bloomberg View columnist.
Monday, May 21, 2012
Greece must exit
21 May 2012
Nouriel Roubini
The Greek euro tragedy is reaching its final act: It is clear that either this year or next, Greece is highly likely to default on its debt and exit the euro zone.
Postponing the exit after the June election with a new government committed to a variant of the same failed policies (recessionary austerity and structural reforms) will not restore growth and competitiveness.
Greece is stuck in a vicious cycle of insolvency, lost competitiveness, external deficits and ever-deepening depression.
The only way to stop it is to begin an orderly default and exit, coordinated and financed by the European Central Bank (ECB), the European Union and the International Monetary Fund (IMF) - the three organisations collectively known as the Troika - that minimises collateral damage to Greece and the rest of the euro zone.
Greece's recent financing package, overseen by the Troika, gave the country much less debt relief than it needed.
But, even with significantly more public-debt relief, Greece could not return to growth without rapidly restoring competitiveness. And, without a return to growth, its debt burden will remain unsustainable. But all of the options that might restore competitiveness require real currency depreciation.
A TRAUMATIC PROCESS, BUT...
The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy. A rapid reduction in unit labour costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely.
It took Germany 10 years to restore its competitiveness this way; Greece cannot remain in a depression for a decade.
Likewise, a rapid deflation in prices and wages, known as an "internal devaluation", would lead to five years of ever-deepening depression.
If none of those three options is feasible, then the only path left is to leave the euro zone. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.
Of course, the process would be traumatic - and not just for Greece. The most significant problem would be capital losses for core euro zone financial institutions.
Overnight, the foreign euro liabilities of Greece's government, banks and companies would surge. Yet these problems can be overcome.
Argentina did so in 2001, when it "pesofied" its dollar debts. The United States did something similar in 1933, when it depreciated the dollar by 69 per cent and abandoned the gold standard. A similar "drachmatisation" of euro debts would be necessary and unavoidable.
Losses that euro zone banks would suffer would be manageable if the banks were properly and aggressively recapitalised.
Avoiding a post-exit implosion of the Greek banking system, however, might require temporary measures, such as bank holidays and capital controls, to prevent a disorderly run on deposits.
The European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) should carry out the necessary recapitalisation of the Greek banks via direct capital injections.
European taxpayers would effectively take over the Greek banking system, but this would be partial compensation for the losses imposed on creditors by drachmatisation.
EXIT WOULD RESTORE GROWTH
Greece would also have to restructure and reduce its public debt again. The Troika's claims on Greece need not be reduced in face value, but their maturity would have to be lengthened by another decade, and the interest on it reduced.
Further haircuts on private claims would also be needed, starting with a moratorium on interest payments. Some argue that Greece's real GDP would be much lower in an exit scenario than it would be during the hard slog of deflation.
But that is logically flawed: Even with deflation, real purchasing power would fall and the real value of debts would rise (debt deflation), as the real depreciation occurs.
More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade-long depression. And trade losses imposed on the euro zone by the drachma depreciation would be modest, given that Greece accounts for only 2 per cent of euro zone GDP.
Reintroducing the drachma risks exchange-rate depreciation in excess of what is necessary to restore competitiveness, which would be inflationary and impose greater losses on drachmatised external debts.
To minimise that risk, the Troika reserves currently devoted to the Greek bailout should be used to limit exchange-rate overshooting; capital controls would help, too.
DIRECT CAPITAL INJECTIONS NEEDED
Those who claim that contagion from a Greek exit would drag others into the crisis are also in denial. Other peripheral countries already have Greek-style problems of debt sustainability and eroded competitiveness.
Portugal, for example, may eventually have to restructure its debt and exit the euro. Illiquid but potentially-solvent economies, such as Italy and Spain, will need support from Europe regardless of whether Greece exits; indeed, without such liquidity support, a self-fulfilling run on Italian and Spanish public debt is likely.
The substantial new official resources of the IMF and ESM - and ECB liquidity - could then be used to ring-fence these countries, and banks elsewhere in the euro zone's troubled periphery.
Regardless of what Greece does, euro zone banks now need to be rapidly recapitalised, which requires a new EU-wide programme of direct capital injections.
The experience of Iceland and many emerging markets over the past 20 years shows that nominal depreciation and orderly restructuring and reduction of foreign debts can restore debt sustainability, competitiveness, and growth.
As in these cases, the collateral damage to Greece of a euro exit will be significant, but it can be contained.
Like a doomed marriage, it is better to have rules for the inevitable divorce that make separation less costly to both sides.
Make no mistake: An orderly euro exit by Greece implies significant economic pain. But watching the slow, disorderly implosion of the Greek economy and society would be much worse.
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
The Greek euro tragedy is reaching its final act: It is clear that either this year or next, Greece is highly likely to default on its debt and exit the euro zone.
Postponing the exit after the June election with a new government committed to a variant of the same failed policies (recessionary austerity and structural reforms) will not restore growth and competitiveness.
Greece is stuck in a vicious cycle of insolvency, lost competitiveness, external deficits and ever-deepening depression.
The only way to stop it is to begin an orderly default and exit, coordinated and financed by the European Central Bank (ECB), the European Union and the International Monetary Fund (IMF) - the three organisations collectively known as the Troika - that minimises collateral damage to Greece and the rest of the euro zone.
Greece's recent financing package, overseen by the Troika, gave the country much less debt relief than it needed.
But, even with significantly more public-debt relief, Greece could not return to growth without rapidly restoring competitiveness. And, without a return to growth, its debt burden will remain unsustainable. But all of the options that might restore competitiveness require real currency depreciation.
A TRAUMATIC PROCESS, BUT...
The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy. A rapid reduction in unit labour costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely.
It took Germany 10 years to restore its competitiveness this way; Greece cannot remain in a depression for a decade.
Likewise, a rapid deflation in prices and wages, known as an "internal devaluation", would lead to five years of ever-deepening depression.
If none of those three options is feasible, then the only path left is to leave the euro zone. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.
Of course, the process would be traumatic - and not just for Greece. The most significant problem would be capital losses for core euro zone financial institutions.
Overnight, the foreign euro liabilities of Greece's government, banks and companies would surge. Yet these problems can be overcome.
Argentina did so in 2001, when it "pesofied" its dollar debts. The United States did something similar in 1933, when it depreciated the dollar by 69 per cent and abandoned the gold standard. A similar "drachmatisation" of euro debts would be necessary and unavoidable.
Losses that euro zone banks would suffer would be manageable if the banks were properly and aggressively recapitalised.
Avoiding a post-exit implosion of the Greek banking system, however, might require temporary measures, such as bank holidays and capital controls, to prevent a disorderly run on deposits.
The European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) should carry out the necessary recapitalisation of the Greek banks via direct capital injections.
European taxpayers would effectively take over the Greek banking system, but this would be partial compensation for the losses imposed on creditors by drachmatisation.
EXIT WOULD RESTORE GROWTH
Greece would also have to restructure and reduce its public debt again. The Troika's claims on Greece need not be reduced in face value, but their maturity would have to be lengthened by another decade, and the interest on it reduced.
Further haircuts on private claims would also be needed, starting with a moratorium on interest payments. Some argue that Greece's real GDP would be much lower in an exit scenario than it would be during the hard slog of deflation.
But that is logically flawed: Even with deflation, real purchasing power would fall and the real value of debts would rise (debt deflation), as the real depreciation occurs.
More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade-long depression. And trade losses imposed on the euro zone by the drachma depreciation would be modest, given that Greece accounts for only 2 per cent of euro zone GDP.
Reintroducing the drachma risks exchange-rate depreciation in excess of what is necessary to restore competitiveness, which would be inflationary and impose greater losses on drachmatised external debts.
To minimise that risk, the Troika reserves currently devoted to the Greek bailout should be used to limit exchange-rate overshooting; capital controls would help, too.
DIRECT CAPITAL INJECTIONS NEEDED
Those who claim that contagion from a Greek exit would drag others into the crisis are also in denial. Other peripheral countries already have Greek-style problems of debt sustainability and eroded competitiveness.
Portugal, for example, may eventually have to restructure its debt and exit the euro. Illiquid but potentially-solvent economies, such as Italy and Spain, will need support from Europe regardless of whether Greece exits; indeed, without such liquidity support, a self-fulfilling run on Italian and Spanish public debt is likely.
The substantial new official resources of the IMF and ESM - and ECB liquidity - could then be used to ring-fence these countries, and banks elsewhere in the euro zone's troubled periphery.
Regardless of what Greece does, euro zone banks now need to be rapidly recapitalised, which requires a new EU-wide programme of direct capital injections.
The experience of Iceland and many emerging markets over the past 20 years shows that nominal depreciation and orderly restructuring and reduction of foreign debts can restore debt sustainability, competitiveness, and growth.
As in these cases, the collateral damage to Greece of a euro exit will be significant, but it can be contained.
Like a doomed marriage, it is better to have rules for the inevitable divorce that make separation less costly to both sides.
Make no mistake: An orderly euro exit by Greece implies significant economic pain. But watching the slow, disorderly implosion of the Greek economy and society would be much worse.
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.
Saturday, May 19, 2012
Moving with the ups and downs of stocks
If asset prices have fallen below fair values, it’s OK to buy even as prices are continuing to sink. The rebound will come
19 May 2012 14:39
By Teh Hooi Ling
Senior correspondent
A FRIEND who has been working on a stock trading software program noted that when stock markets go up, they take the escalator. The ascent is gradual. But when they come down, they take the lift. It is sharp and time taken is short.
At the time when I spoke to him, in mid-April, he said he had made a return of 4 per cent on his total capital for the year. Not all his capital was in the market. Time was needed to deploy his funds.
At that point, of course he had underperformed the general market. The Straits Times Index (STI) was up by some 11 per cent up to that point. The S&P 500 also put on about 10 per cent for the year up till then.
But then he added that when the market turns down, he will outperform the market by a ratio of 3-to-1. I asked why. “Now, if you look at the stocks, those which went up, went up by one to 2 per cent. But those which came down, came down by 6 per cent.”
Indeed the market has turned, and has turned quite sharply. The last I checked with him, that was last weekend, he said the return from his short positions was about 4 per cent since the start of May. In other words, he made 4 per cent in about two weeks on his shorts as opposed to 4 per cent on his long positions over two months. Given how the market has done this week, the gains from his short positions must have been bigger by now.
And so it is the case, if we look back at the performance of the STI. The market usually takes a longer time to climb up, and it usually topples down rather fast.
For example, the STI climbed from 1,400 points to 2,400 points between 1992 and 1996. That’s a five-year period. From 2,400, it fell to 800 points by the third quarter of 1999, in three years or so.
Between 2003 and 2007, the STI ascended from 1,200 to 3,800 points. But over the next 11/2 years, it gave back nearly all that it made in the prior 41/2 years. It tumbled from 3,800 points to 1,500 points.
But the good thing is, the sharper the decline, usually the faster the rebound too. The STI clawed back all its losses within one year in 1999.
Having said that, the Singapore market has yet to regain the peak it reached in 2007. As at today, it is still some 28 per cent below the near 3,900 level it reached in early October 2007.
Perhaps this perfectly illustrates the point made by Ben Inker, head of asset allocation in GMO.
The risk of an asset, he reminded investors, rises with its valuation. Stocks at fair value are less risky than stocks trading 30 per cent above fair value because the expensive stocks give you the risk of loss associated with falling back to fair value.
That “valuation” risk leads to losses that should not be expected to reverse themselves anytime soon.
Meanwhile, a cheap stock can certainly go down in price, but when it does, one can expect either high compound returns from there, which makes one’s money back steadily, or a reasonable sharp recovery when the conditions that drove prices down dissipate, which will make your money back quickly.
“The loss is therefore temporary, although it may seem unpleasant while it is occurring. When an expensive asset falls back to fair value, subsequent return should only be assumed to be normal, which means that the loss of wealth versus expectations is permanent.”
In hindsight, we could say that back in 2007, stock prices were overvalued. As a result, we have yet to see prices climb back to those lofty levels.
So where are we today in terms of valuation? Stocks are expensive relative to GMO’s estimate of long-term fair value, said Mr Inker. “The trouble is, so are bonds and cash.
“If everything was guaranteed to revert to the mean over seven years, we would hold equity-heavy portfolios, because the gap between stocks and either bonds or cash is wider than normal.”
But he added that GMO is not certain that it will take seven years. And because cash and (most) bonds have a shorter duration with regard to changes in their discount rate than stocks do, fast reversion would lead to smaller losses for them than for equities. As a result, GMO is holding a portfolio lighter on equities than the seven-year forecast would otherwise suggest.
As things stand now, the fast reversion scenario seems to be playing out. In which case, values will emerge faster in the equities market.
But deciding when to pull the trigger is a tricky question.
Keynes famously said that: “The market can stay irrational longer than the investor can stay solvent.” And as Jeremy Grantham, one of the founders of GMO put it, for fund managers, the quote would be: “The market can stay irrational longer than the client can stay patient.”
Three conditions
Many a times, we are too early – selling out too soon, and watch with regret as prices continue to rise. Or, we are too early to pick up stocks and are gripped by horrors as the prices continue to sink further.
According to Mr Grantham, one apparently can survive betting against bull market irrationality if you meet three conditions. First, you must allow a generous Ben Graham-like “margin of safety” and wait for a real outlier before you make a big bet. Second, you must try to stay reasonably diversified. Third, you must never use leverage.
“In my personal opinion (and with the benefit of hindsight), although we in asset allocation felt exceptionally and painfully patient at the time, we did not in the past always hold our fire long enough or be patient enough,” said Mr Grantham in his latest quarterly letter to investors. “It is the classic failing of value managers (and poker players for that matter) to get impatient and bet too hard too soon.”
For both the tech bubble, and the enormous bubble in the Japanese market, GMO was two to three years early in its calls in both cases.
Meanwhile, getting the timing right in a short call is even more crucial. One’s loss is limitless if the market continues to go against you. Which is why many wait for markets to turn first before putting in their positions. There is merit in trading the momentum given the herd mentality of professional fund managers and retail investors alike.
So in essence, my take is: If asset prices have fallen below their fair values, it is OK to buy even as prices are continuing to sink. The rebound will come.
In a bull market, allow for a significant margin above the fair value before selling out completely. Again, selling can be in batches.
But when it comes to shorting, it is safest to wait for a distinct turn in sentiment before putting in the trades.
Of course, these rules sound simple enough on paper. And investing is simple: Buy when it is cheap, sell when it is expensive. But as Mr Grantham puts it, it is simple to see what is necessary, but it is not always easy to be willing or able to do what is necessary.
The writer is a CFA charterholder
19 May 2012 14:39
By Teh Hooi Ling
Senior correspondent
A FRIEND who has been working on a stock trading software program noted that when stock markets go up, they take the escalator. The ascent is gradual. But when they come down, they take the lift. It is sharp and time taken is short.
At the time when I spoke to him, in mid-April, he said he had made a return of 4 per cent on his total capital for the year. Not all his capital was in the market. Time was needed to deploy his funds.
At that point, of course he had underperformed the general market. The Straits Times Index (STI) was up by some 11 per cent up to that point. The S&P 500 also put on about 10 per cent for the year up till then.
But then he added that when the market turns down, he will outperform the market by a ratio of 3-to-1. I asked why. “Now, if you look at the stocks, those which went up, went up by one to 2 per cent. But those which came down, came down by 6 per cent.”
Indeed the market has turned, and has turned quite sharply. The last I checked with him, that was last weekend, he said the return from his short positions was about 4 per cent since the start of May. In other words, he made 4 per cent in about two weeks on his shorts as opposed to 4 per cent on his long positions over two months. Given how the market has done this week, the gains from his short positions must have been bigger by now.
And so it is the case, if we look back at the performance of the STI. The market usually takes a longer time to climb up, and it usually topples down rather fast.
For example, the STI climbed from 1,400 points to 2,400 points between 1992 and 1996. That’s a five-year period. From 2,400, it fell to 800 points by the third quarter of 1999, in three years or so.
Between 2003 and 2007, the STI ascended from 1,200 to 3,800 points. But over the next 11/2 years, it gave back nearly all that it made in the prior 41/2 years. It tumbled from 3,800 points to 1,500 points.
But the good thing is, the sharper the decline, usually the faster the rebound too. The STI clawed back all its losses within one year in 1999.
Having said that, the Singapore market has yet to regain the peak it reached in 2007. As at today, it is still some 28 per cent below the near 3,900 level it reached in early October 2007.
Perhaps this perfectly illustrates the point made by Ben Inker, head of asset allocation in GMO.
The risk of an asset, he reminded investors, rises with its valuation. Stocks at fair value are less risky than stocks trading 30 per cent above fair value because the expensive stocks give you the risk of loss associated with falling back to fair value.
That “valuation” risk leads to losses that should not be expected to reverse themselves anytime soon.
Meanwhile, a cheap stock can certainly go down in price, but when it does, one can expect either high compound returns from there, which makes one’s money back steadily, or a reasonable sharp recovery when the conditions that drove prices down dissipate, which will make your money back quickly.
“The loss is therefore temporary, although it may seem unpleasant while it is occurring. When an expensive asset falls back to fair value, subsequent return should only be assumed to be normal, which means that the loss of wealth versus expectations is permanent.”
In hindsight, we could say that back in 2007, stock prices were overvalued. As a result, we have yet to see prices climb back to those lofty levels.
So where are we today in terms of valuation? Stocks are expensive relative to GMO’s estimate of long-term fair value, said Mr Inker. “The trouble is, so are bonds and cash.
“If everything was guaranteed to revert to the mean over seven years, we would hold equity-heavy portfolios, because the gap between stocks and either bonds or cash is wider than normal.”
But he added that GMO is not certain that it will take seven years. And because cash and (most) bonds have a shorter duration with regard to changes in their discount rate than stocks do, fast reversion would lead to smaller losses for them than for equities. As a result, GMO is holding a portfolio lighter on equities than the seven-year forecast would otherwise suggest.
As things stand now, the fast reversion scenario seems to be playing out. In which case, values will emerge faster in the equities market.
But deciding when to pull the trigger is a tricky question.
Keynes famously said that: “The market can stay irrational longer than the investor can stay solvent.” And as Jeremy Grantham, one of the founders of GMO put it, for fund managers, the quote would be: “The market can stay irrational longer than the client can stay patient.”
Three conditions
Many a times, we are too early – selling out too soon, and watch with regret as prices continue to rise. Or, we are too early to pick up stocks and are gripped by horrors as the prices continue to sink further.
According to Mr Grantham, one apparently can survive betting against bull market irrationality if you meet three conditions. First, you must allow a generous Ben Graham-like “margin of safety” and wait for a real outlier before you make a big bet. Second, you must try to stay reasonably diversified. Third, you must never use leverage.
“In my personal opinion (and with the benefit of hindsight), although we in asset allocation felt exceptionally and painfully patient at the time, we did not in the past always hold our fire long enough or be patient enough,” said Mr Grantham in his latest quarterly letter to investors. “It is the classic failing of value managers (and poker players for that matter) to get impatient and bet too hard too soon.”
For both the tech bubble, and the enormous bubble in the Japanese market, GMO was two to three years early in its calls in both cases.
Meanwhile, getting the timing right in a short call is even more crucial. One’s loss is limitless if the market continues to go against you. Which is why many wait for markets to turn first before putting in their positions. There is merit in trading the momentum given the herd mentality of professional fund managers and retail investors alike.
So in essence, my take is: If asset prices have fallen below their fair values, it is OK to buy even as prices are continuing to sink. The rebound will come.
In a bull market, allow for a significant margin above the fair value before selling out completely. Again, selling can be in batches.
But when it comes to shorting, it is safest to wait for a distinct turn in sentiment before putting in the trades.
Of course, these rules sound simple enough on paper. And investing is simple: Buy when it is cheap, sell when it is expensive. But as Mr Grantham puts it, it is simple to see what is necessary, but it is not always easy to be willing or able to do what is necessary.
The writer is a CFA charterholder
Friday, May 18, 2012
Economist Yeoh: Are we ready for the future?
Friday, May 18, 2012
THE LONG INTERVIEW YEOH LAM KEONG - Are we ready for the future?
Singapore's social policies are not future-ready, says former GIC economist. He talks to Susan Long about his new cause in life
Straits Times, Published on May 18, 2012
By Susan Long
WHEN Mr Yeoh Lam Keong quit his job as chief economist of the Government of Singapore Investment Corporation last June, his colleagues presented him with a T-shirt which read: 'Buddha says: Stop wanting stupid sh1t.'
It's a message that suits the 54-year-old to a T.
He lives in a Housing Board flat, takes public transport, and eschews holiday resorts with air- conditioning. 'I don't consider it spartan, it's cosier and aesthetically more pleasing,' he says.
He has not moved from the Marine Terrace flat he bought in 1987 because he wants his children to grow up in an HDB setting. 'So they have a choice. They don't have to live in private housing, they can go and live in a three-room flat in Sengkang if they need to and be totally comfortable,' he says.
To his mind, he is not under- consuming. 'Others are over-consuming. Most of us have enough resources to live comfortably, yet we kill ourselves to drive a Lotus, instead of an ordinary car.
'We end up killing the environment and stressing each other out. Perhaps, as Lord Robert Skidelski, professor emeritus of political economy at Warwick University said, mass consumption capitalism has outlived its usefulness.'
Social awakening
MR YEOH grew up in a bungalow along Bukit Timah Road. He was the eldest of four children born to an orthopaedic surgeon and doctor-turned-housewife. His three siblings include Ms Yeoh Chee Yan, permanent secretary for Education.
His social awakening happened five years ago, when he was roped in to help analyse Ministry of Community Development, Youth and Sports data on poverty. As he examined the grim figures, he realised serious structural problems were creating a growing underbelly of poverty in Singapore.
Before long, he found a face to the problem.
While watching football with his son in a coffeeshop one evening, he chatted with a neighbour from a nearby rental block, and found out that the latter, after working as a cleaner for 10 years, earned $700 a month.
Mr Yeoh ventured in Mandarin: 'That's really tight, I don't suppose you have kids?' The guy's response: 'You mad, ah?'
His son, then 11, soon became aware of the substance of the conversation - that there were people too poor to have children. Later that night, he asked his father: 'Pa, do you think the Prime Minister knows about people like him?'
Mr Yeoh said: 'I hope so.' His son prodded: 'I think someone should tell him.'
Before long, father and son had added to their coterie of coffeeshop companions an odd-job labourer, who had been unemployed for 10 years because of a history of mental illness. The man had not eaten properly, surviving on a giant vat of green bean soup for days.
Mr Yeoh offered to go with him to see their Member of Parliament. But the man refused, fearing social workers 'will bother my brothers and sisters'.
'It became clear to me that the so-called social safety net was both undignified and insufficient. It was undignified where sufficient, or plain insufficient.
'He didn't want to be ashamed before family, or for government officials to bug his family to look after him, which he himself would not do,' says Mr Yeoh, citing a 2009 Lien Foundation survey which showed that being a burden to family and friends was the top death-related fear of Singaporeans, followed by medical costs.
Early influences
HE CREDITS his Anglo-Chinese School mate and Deputy Prime Minister Tharman Shanmugaratnam for first stimulating his social conscience.
He was all set on becoming a naturalist - and studying marine biology - but was persuaded by Mr Tharman that economics was more 'socially useful' . They both applied to the London School of Economics and were accepted.
In London, Mr Tharman encouraged his interest in the underprivileged, social issues and student activism. Mr Yeoh returned to Singapore in 1983, and worked at the Skills Development Fund in the Economic Development Board for two years, then left to become a senior economist at the Monetary Authority of Singapore.
He was soon seconded to help start up the Economics and Strategy Department at GIC and ended up staying a total of 26 years because the work was so riveting.
GIC, he says, taught him all about 'real-world economics, politics, markets, people, policymakers, under the most extreme stress'. Six major financial crises unfolded during the time he was there. 'It was a huge education in economic policy analysis, what could go right and wrong.'
The department he headed at GIC became infamous for its high-quality analysis, independence and daring to challenge convention, say Mr Yeoh's colleagues.
GIC's chief economist Leslie Teo says: 'Lam Keong was never afraid to speak his mind even if his views were not popular or politically correct; he was not afraid to explore new and unconventional ideas. He always stood apart from the prevailing culture of the industry - big money, flashy, top of the world - by his concern for the average person and his simple tastes.'
He worked under Mr Lim Siong Guan, group president of GIC, whom he says drummed into him the importance of being ready to meet the future.
'He taught me that being future-ready is being strategically on top of the most important relevant long-term trends even before they became conventional wisdom,' he says.
'Because catching up is the worst position to be in, you are chased and dragged and not the master of your own destiny. You become like Nokia, or Blackberry, as opposed to Apple.'
One of his top worries for Singapore today is whether its social policies are future-ready.
He worries that the old social compact is eroding, because the delivery of public services in social security, housing, health care, education and infrastructure is fraying at the edges, and excessive immigration has crowded out quality in such services.
'It's not ready for the world that faces us now; a world where median wages are stagnating, inequality is rising sharply, our population ageing, our maturing economy is growing much more slowly. And it's not going to be ready for the decades ahead, or maybe even the next five years,' he vexes.
Time for social reform
HE FEELS that now is the time for the Government to embark on large-scale social reform because it can.
Singapore is in a 'uniquely privileged' position to make these changes, he says. 'We have extremely low taxes, such that we can afford to raise them somewhat and still remain very tax- competitive, and we are unnecessarily conservative in our budgetary accounting, even by International Monetary Fund standards.'
He notes that the Government's spending, as a share of GDP, of around 17 per cent is among the lowest in the developed world, compared to 35-40 per cent in most OECD countries and 25-30 per cent in other advanced Asian economies.
'Our current levels of spending are low even by our own historical standards of up to 25 per cent of GDP seen in the mid-1980s and early 1990s. These are levels of a public spending we can afford to return to while maintaining competitiveness and long-term fiscal sustainability,' he says.
He applauds the Government's pledge announced by Health Minister Gan Kim Yong to double health-care expenditure from $4 billion to $8 billion in 2017, which will raise it from 1.5 per cent to 2.2 per cent of GDP. However, he points out, Taiwan was already spending 3.5 to 4 per cent of GDP on health care in 2001.
Notwithstanding the superiority of quality and efficiency of Singapore's health care, he asks: 'Is it enough for Singapore, which is steadily ageing, to spend half of Taiwan's 2001 budget in 2017?'
He adds that Mr Gan, to his credit, has assured that no Singaporean will be denied medical care if he or she needs it. 'But rather than say it, why not design policy for someone to afford it, rather than have him deplete his own savings and his family's Medisave accounts first?
'The most important reform needed, which is still missing, is that we still do not have universal financial access to medical care for all citizens, which is politically unacceptable in most democratic developed countries.'
Citing figures, Mr Yeoh notes that a relatively large proportion of health-care expenditure in Singapore is still funded out of pocket, with 55 per cent of spending financed by patients, with the rest borne by the state or insurance.
In comparison, patients in other developed Asian economies like Hong Kong, Taiwan, South Korea and Japan pay about 15 to 30 per cent out of pocket. The World Health Organisation's recommendation is 33 per cent and below.
He says the key driver of Singapore's success, going forward, will hinge on how substantively the government can overhaul social policies and win back voters.
The Government still enjoys strong credibility and trust, he says, though he fears that too is eroding, 'especially if they keep to their current course and the public continues to feel the level of provision of these basic needs is inadequate'.
'It will take a decade to build up a credible alternative government capability as the opposition, while making impressive strides, is starting from such a low base.'
He worries that if the government continues with piecemeal tweaks but does not restructure sufficiently to meet the future, 'it will be like a big company not doing enough to keep market share, like Nokia or Blackberry, which refused to go touch screen till it was too late'. Both are now eating the dust of Apple.
'A key business of government is strategy, says US statesman Zbigniew Brzezinski. Right now, we are forgoing strategy for tweaks. The trouble with tweaks is that you are not spending strategically and not making headway in things that matter, you are just reacting to pressure from the ground,' he says.
One example: The many rounds of cooling measures that have failed to arrest runaway housing prices.
Although most Singaporeans can afford $150,000 to buy a Build-To-Order flat in Sengkang, on a lower floor and facing a car park now, they worry that future HDB flats will be priced out of their children's reach, he says.
'They know that prices will converge towards resale and private residential prices which, at five to six times median annual household income, are extremely unaffordable. On current trends, how likely is it that HDB can keep prices at $150,000 if they price off market price plus costs?'
He thinks that HDB needs to abandon its 'market fundamentalist' pricing formula and revert to its original mission of meeting 'social needs'. For starters, he suggests pricing entry-level three- room flats at around two times household income in all locations - only for citizens - which he says would be 'in the spirit of HDB's original inspiration and success'.
But will these sweeping changes he suggests - radically increasing health and housing subsidies - depart too much from the ethos of cautious continuity and fiscal prudence that the People's Action Party has come to symbolise?
He disagrees: 'The original brand of the PAP, as I remember it, was pragmatically meeting the needs of the ordinary citizen and often exceeding expectations in doing so on a universal basis. And it did so from the 1950s to 1980s.
'Back then, their policies were revolutionary and ahead of time, because they anticipated and drove and mastered the future. I would love to see them recapture that original brand.'
Life after GIC
LAST June, Mr Yeoh left GIC to spend more time with his family, as well as outdoors, where he fishes, does ink sketches and pens poetry on nature. He intends to apply his economist training to 'social investigation' projects, especially on inequality and poverty.
He is a senior adjunct fellow at the Institute of Policy Studies at the Lee Kuan Yew School of Public Policy, a fellow of Civil Service College and an adviser to Singapore Management University's economics faculty.
He is married to Dr Lai Ah Eng, a senior research fellow at the Asian Research Institute. Their son Lai Hsin, 16, studies at Victoria School, and their daughter Lai Lin, 19, at Cambridge University.
The self-styled 'Engaged Buddhist' says his goal in life is 'to seek peace of mind, happiness and freedom from suffering, for all sentient beings'.
The person he most admires is Vietnamese Zen Buddhist monk and peace activist Thich Nhat Hanh, who helped rebuild bombed villages, set up schools and resettle homeless families during the Vietnam War.
'In his books, he describes movingly how he went about rebuilding villages each time they were bombed and destroyed. I am convinced you need these deep- seated values: compassion, reverence for life and its beauty and a sense of the eternal rather than just chasing money, power or fame.
Unless you have that spiritual foundation, it's very hard to stay sane or be truly effective.'
***
TOP WORRY
It's not ready for the world that faces us now; a world where median wages are stagnating, inequality is rising sharply, our population ageing, our maturing economy is growing much more slowly. And it's not going to be ready for the decades ahead, or maybe even the next five years.
- Mr Yeoh, on Singapore's social compact
VALUES TO LIVE BY
I am convinced you need these deep-seated values: compassion, reverence for life and its beauty and a sense of the eternal rather than just chasing money, power or fame.
- On how he chooses to live
THE LONG INTERVIEW YEOH LAM KEONG - Are we ready for the future?
Singapore's social policies are not future-ready, says former GIC economist. He talks to Susan Long about his new cause in life
Straits Times, Published on May 18, 2012
By Susan Long
WHEN Mr Yeoh Lam Keong quit his job as chief economist of the Government of Singapore Investment Corporation last June, his colleagues presented him with a T-shirt which read: 'Buddha says: Stop wanting stupid sh1t.'
It's a message that suits the 54-year-old to a T.
He lives in a Housing Board flat, takes public transport, and eschews holiday resorts with air- conditioning. 'I don't consider it spartan, it's cosier and aesthetically more pleasing,' he says.
He has not moved from the Marine Terrace flat he bought in 1987 because he wants his children to grow up in an HDB setting. 'So they have a choice. They don't have to live in private housing, they can go and live in a three-room flat in Sengkang if they need to and be totally comfortable,' he says.
To his mind, he is not under- consuming. 'Others are over-consuming. Most of us have enough resources to live comfortably, yet we kill ourselves to drive a Lotus, instead of an ordinary car.
'We end up killing the environment and stressing each other out. Perhaps, as Lord Robert Skidelski, professor emeritus of political economy at Warwick University said, mass consumption capitalism has outlived its usefulness.'
Social awakening
MR YEOH grew up in a bungalow along Bukit Timah Road. He was the eldest of four children born to an orthopaedic surgeon and doctor-turned-housewife. His three siblings include Ms Yeoh Chee Yan, permanent secretary for Education.
His social awakening happened five years ago, when he was roped in to help analyse Ministry of Community Development, Youth and Sports data on poverty. As he examined the grim figures, he realised serious structural problems were creating a growing underbelly of poverty in Singapore.
Before long, he found a face to the problem.
While watching football with his son in a coffeeshop one evening, he chatted with a neighbour from a nearby rental block, and found out that the latter, after working as a cleaner for 10 years, earned $700 a month.
Mr Yeoh ventured in Mandarin: 'That's really tight, I don't suppose you have kids?' The guy's response: 'You mad, ah?'
His son, then 11, soon became aware of the substance of the conversation - that there were people too poor to have children. Later that night, he asked his father: 'Pa, do you think the Prime Minister knows about people like him?'
Mr Yeoh said: 'I hope so.' His son prodded: 'I think someone should tell him.'
Before long, father and son had added to their coterie of coffeeshop companions an odd-job labourer, who had been unemployed for 10 years because of a history of mental illness. The man had not eaten properly, surviving on a giant vat of green bean soup for days.
Mr Yeoh offered to go with him to see their Member of Parliament. But the man refused, fearing social workers 'will bother my brothers and sisters'.
'It became clear to me that the so-called social safety net was both undignified and insufficient. It was undignified where sufficient, or plain insufficient.
'He didn't want to be ashamed before family, or for government officials to bug his family to look after him, which he himself would not do,' says Mr Yeoh, citing a 2009 Lien Foundation survey which showed that being a burden to family and friends was the top death-related fear of Singaporeans, followed by medical costs.
Early influences
HE CREDITS his Anglo-Chinese School mate and Deputy Prime Minister Tharman Shanmugaratnam for first stimulating his social conscience.
He was all set on becoming a naturalist - and studying marine biology - but was persuaded by Mr Tharman that economics was more 'socially useful' . They both applied to the London School of Economics and were accepted.
In London, Mr Tharman encouraged his interest in the underprivileged, social issues and student activism. Mr Yeoh returned to Singapore in 1983, and worked at the Skills Development Fund in the Economic Development Board for two years, then left to become a senior economist at the Monetary Authority of Singapore.
He was soon seconded to help start up the Economics and Strategy Department at GIC and ended up staying a total of 26 years because the work was so riveting.
GIC, he says, taught him all about 'real-world economics, politics, markets, people, policymakers, under the most extreme stress'. Six major financial crises unfolded during the time he was there. 'It was a huge education in economic policy analysis, what could go right and wrong.'
The department he headed at GIC became infamous for its high-quality analysis, independence and daring to challenge convention, say Mr Yeoh's colleagues.
GIC's chief economist Leslie Teo says: 'Lam Keong was never afraid to speak his mind even if his views were not popular or politically correct; he was not afraid to explore new and unconventional ideas. He always stood apart from the prevailing culture of the industry - big money, flashy, top of the world - by his concern for the average person and his simple tastes.'
He worked under Mr Lim Siong Guan, group president of GIC, whom he says drummed into him the importance of being ready to meet the future.
'He taught me that being future-ready is being strategically on top of the most important relevant long-term trends even before they became conventional wisdom,' he says.
'Because catching up is the worst position to be in, you are chased and dragged and not the master of your own destiny. You become like Nokia, or Blackberry, as opposed to Apple.'
One of his top worries for Singapore today is whether its social policies are future-ready.
He worries that the old social compact is eroding, because the delivery of public services in social security, housing, health care, education and infrastructure is fraying at the edges, and excessive immigration has crowded out quality in such services.
'It's not ready for the world that faces us now; a world where median wages are stagnating, inequality is rising sharply, our population ageing, our maturing economy is growing much more slowly. And it's not going to be ready for the decades ahead, or maybe even the next five years,' he vexes.
Time for social reform
HE FEELS that now is the time for the Government to embark on large-scale social reform because it can.
Singapore is in a 'uniquely privileged' position to make these changes, he says. 'We have extremely low taxes, such that we can afford to raise them somewhat and still remain very tax- competitive, and we are unnecessarily conservative in our budgetary accounting, even by International Monetary Fund standards.'
He notes that the Government's spending, as a share of GDP, of around 17 per cent is among the lowest in the developed world, compared to 35-40 per cent in most OECD countries and 25-30 per cent in other advanced Asian economies.
'Our current levels of spending are low even by our own historical standards of up to 25 per cent of GDP seen in the mid-1980s and early 1990s. These are levels of a public spending we can afford to return to while maintaining competitiveness and long-term fiscal sustainability,' he says.
He applauds the Government's pledge announced by Health Minister Gan Kim Yong to double health-care expenditure from $4 billion to $8 billion in 2017, which will raise it from 1.5 per cent to 2.2 per cent of GDP. However, he points out, Taiwan was already spending 3.5 to 4 per cent of GDP on health care in 2001.
Notwithstanding the superiority of quality and efficiency of Singapore's health care, he asks: 'Is it enough for Singapore, which is steadily ageing, to spend half of Taiwan's 2001 budget in 2017?'
He adds that Mr Gan, to his credit, has assured that no Singaporean will be denied medical care if he or she needs it. 'But rather than say it, why not design policy for someone to afford it, rather than have him deplete his own savings and his family's Medisave accounts first?
'The most important reform needed, which is still missing, is that we still do not have universal financial access to medical care for all citizens, which is politically unacceptable in most democratic developed countries.'
Citing figures, Mr Yeoh notes that a relatively large proportion of health-care expenditure in Singapore is still funded out of pocket, with 55 per cent of spending financed by patients, with the rest borne by the state or insurance.
In comparison, patients in other developed Asian economies like Hong Kong, Taiwan, South Korea and Japan pay about 15 to 30 per cent out of pocket. The World Health Organisation's recommendation is 33 per cent and below.
He says the key driver of Singapore's success, going forward, will hinge on how substantively the government can overhaul social policies and win back voters.
The Government still enjoys strong credibility and trust, he says, though he fears that too is eroding, 'especially if they keep to their current course and the public continues to feel the level of provision of these basic needs is inadequate'.
'It will take a decade to build up a credible alternative government capability as the opposition, while making impressive strides, is starting from such a low base.'
He worries that if the government continues with piecemeal tweaks but does not restructure sufficiently to meet the future, 'it will be like a big company not doing enough to keep market share, like Nokia or Blackberry, which refused to go touch screen till it was too late'. Both are now eating the dust of Apple.
'A key business of government is strategy, says US statesman Zbigniew Brzezinski. Right now, we are forgoing strategy for tweaks. The trouble with tweaks is that you are not spending strategically and not making headway in things that matter, you are just reacting to pressure from the ground,' he says.
One example: The many rounds of cooling measures that have failed to arrest runaway housing prices.
Although most Singaporeans can afford $150,000 to buy a Build-To-Order flat in Sengkang, on a lower floor and facing a car park now, they worry that future HDB flats will be priced out of their children's reach, he says.
'They know that prices will converge towards resale and private residential prices which, at five to six times median annual household income, are extremely unaffordable. On current trends, how likely is it that HDB can keep prices at $150,000 if they price off market price plus costs?'
He thinks that HDB needs to abandon its 'market fundamentalist' pricing formula and revert to its original mission of meeting 'social needs'. For starters, he suggests pricing entry-level three- room flats at around two times household income in all locations - only for citizens - which he says would be 'in the spirit of HDB's original inspiration and success'.
But will these sweeping changes he suggests - radically increasing health and housing subsidies - depart too much from the ethos of cautious continuity and fiscal prudence that the People's Action Party has come to symbolise?
He disagrees: 'The original brand of the PAP, as I remember it, was pragmatically meeting the needs of the ordinary citizen and often exceeding expectations in doing so on a universal basis. And it did so from the 1950s to 1980s.
'Back then, their policies were revolutionary and ahead of time, because they anticipated and drove and mastered the future. I would love to see them recapture that original brand.'
Life after GIC
LAST June, Mr Yeoh left GIC to spend more time with his family, as well as outdoors, where he fishes, does ink sketches and pens poetry on nature. He intends to apply his economist training to 'social investigation' projects, especially on inequality and poverty.
He is a senior adjunct fellow at the Institute of Policy Studies at the Lee Kuan Yew School of Public Policy, a fellow of Civil Service College and an adviser to Singapore Management University's economics faculty.
He is married to Dr Lai Ah Eng, a senior research fellow at the Asian Research Institute. Their son Lai Hsin, 16, studies at Victoria School, and their daughter Lai Lin, 19, at Cambridge University.
The self-styled 'Engaged Buddhist' says his goal in life is 'to seek peace of mind, happiness and freedom from suffering, for all sentient beings'.
The person he most admires is Vietnamese Zen Buddhist monk and peace activist Thich Nhat Hanh, who helped rebuild bombed villages, set up schools and resettle homeless families during the Vietnam War.
'In his books, he describes movingly how he went about rebuilding villages each time they were bombed and destroyed. I am convinced you need these deep- seated values: compassion, reverence for life and its beauty and a sense of the eternal rather than just chasing money, power or fame.
Unless you have that spiritual foundation, it's very hard to stay sane or be truly effective.'
***
TOP WORRY
It's not ready for the world that faces us now; a world where median wages are stagnating, inequality is rising sharply, our population ageing, our maturing economy is growing much more slowly. And it's not going to be ready for the decades ahead, or maybe even the next five years.
- Mr Yeoh, on Singapore's social compact
VALUES TO LIVE BY
I am convinced you need these deep-seated values: compassion, reverence for life and its beauty and a sense of the eternal rather than just chasing money, power or fame.
- On how he chooses to live
Euro crisis poses threat to S’pore
The Straits TimesAaron Low
18/5/2012
A 'DISORDERLY' default in Europe is now a possibility and holds grave dangers for the Singapore economy, the Government warned yesterday.
The increased risk that the European crisis will spin out of control is a key reason the Trade and Industry Ministry (MTI) is sticking to its growth forecast of between 1 and 3 per cent this year, despite positive signals from the economy in recent months.
The economy expanded by 1.6 per cent in the first quarter compared with the same period a year ago, driven by construction and services.
But while economic activity picked up in the first quarter, the MTI said the outlook for the rest of the year is cloudy as recovery in the global economy remains fragile and vulnerable.
The recovery in the United States, which seemed to be picking up earlier in the year, has started to lose steam and China's growth prospects have also fallen.
But the biggest risk is in Europe, where fears of Greece defaulting on its loans have sparked turmoil in financial markets.
MTI permanent secretary Ow Foong Pheng told a briefing yesterday that changes in the political landscape in the region 'endanger promised reforms and crisis measures'.
The French have a new President while the Greeks will head to the polls next month after elections on May 6 failed to deliver a government.
'The high level of uncertainty surrounding the euro zone's political climate and fiscal outlook will continue to weigh on the global economy. This will in turn dampen growth in Singapore's externally oriented sectors,' said Ms Ow.
The MTI added that a 'disorderly' default by euro zone members 'cannot be ruled out at this stage'. 'If it materialises, there will be considerable downside for the global economy and Singapore's externally oriented industries,' it said.
A disorderly default occurs when a country such as Greece does not pay its creditors on time.
'This then leads to investors dumping bonds of other European countries, such as Portugal and Italy. The fear is really over contagion,' said OCBC economist Selena Ling.
The MTI's warnings came despite first-quarter gross domestic product (GDP) figures which show that the economy, especially the domestic sectors, continued to show resilience.
Construction was the main driver of growth for the three months to March 31, growing 7.7 per cent over the same period last year. Services expanded 2.2 per cent, but manufacturing fell 1 per cent compared with last year.
Compared with the last three months of 2011, the economy actually grew by 10 per cent, suggesting that the pace of growth has picked up.
Non-oil domestic exports in April were up a surprisingly high 8.3 per cent, lifted by pharmaceuticals, which surged 38.4 per cent.
Barclays economist Leong Wai Ho noted that the MTI composite leading index, a forward-looking indicator of the health of the economy, rose 2.9 per cent.
'We believe growth has bottomed out and expect the economy to expand 4 per cent for the whole of 2012,' he said.
But Credit Suisse economist Robert Prior-Wandesforde said the strong export figures are largely due to exporters' belief in a 'false dawn'.
He pointed out that exports to Europe and the US continued to fall in double-digit figures and that the bulk of growth of pharmaceutical exports last month stemmed from a 124 per cent increase in drug exports to Japan compared with last year. If the Japan export numbers were stripped out, export growth was just 1.1 per cent.
'It looks to us that output overshot orders in the first couple of months of the year, perhaps reflecting renewed optimism about the US and euro zone economies,' Mr Prior-Wandesforde added.
'This has subsequently proved to be yet another false dawn.'
aaronl@sph.com.sg
18/5/2012
A 'DISORDERLY' default in Europe is now a possibility and holds grave dangers for the Singapore economy, the Government warned yesterday.
The increased risk that the European crisis will spin out of control is a key reason the Trade and Industry Ministry (MTI) is sticking to its growth forecast of between 1 and 3 per cent this year, despite positive signals from the economy in recent months.
The economy expanded by 1.6 per cent in the first quarter compared with the same period a year ago, driven by construction and services.
But while economic activity picked up in the first quarter, the MTI said the outlook for the rest of the year is cloudy as recovery in the global economy remains fragile and vulnerable.
The recovery in the United States, which seemed to be picking up earlier in the year, has started to lose steam and China's growth prospects have also fallen.
But the biggest risk is in Europe, where fears of Greece defaulting on its loans have sparked turmoil in financial markets.
MTI permanent secretary Ow Foong Pheng told a briefing yesterday that changes in the political landscape in the region 'endanger promised reforms and crisis measures'.
The French have a new President while the Greeks will head to the polls next month after elections on May 6 failed to deliver a government.
'The high level of uncertainty surrounding the euro zone's political climate and fiscal outlook will continue to weigh on the global economy. This will in turn dampen growth in Singapore's externally oriented sectors,' said Ms Ow.
The MTI added that a 'disorderly' default by euro zone members 'cannot be ruled out at this stage'. 'If it materialises, there will be considerable downside for the global economy and Singapore's externally oriented industries,' it said.
A disorderly default occurs when a country such as Greece does not pay its creditors on time.
'This then leads to investors dumping bonds of other European countries, such as Portugal and Italy. The fear is really over contagion,' said OCBC economist Selena Ling.
The MTI's warnings came despite first-quarter gross domestic product (GDP) figures which show that the economy, especially the domestic sectors, continued to show resilience.
Construction was the main driver of growth for the three months to March 31, growing 7.7 per cent over the same period last year. Services expanded 2.2 per cent, but manufacturing fell 1 per cent compared with last year.
Compared with the last three months of 2011, the economy actually grew by 10 per cent, suggesting that the pace of growth has picked up.
Non-oil domestic exports in April were up a surprisingly high 8.3 per cent, lifted by pharmaceuticals, which surged 38.4 per cent.
Barclays economist Leong Wai Ho noted that the MTI composite leading index, a forward-looking indicator of the health of the economy, rose 2.9 per cent.
'We believe growth has bottomed out and expect the economy to expand 4 per cent for the whole of 2012,' he said.
But Credit Suisse economist Robert Prior-Wandesforde said the strong export figures are largely due to exporters' belief in a 'false dawn'.
He pointed out that exports to Europe and the US continued to fall in double-digit figures and that the bulk of growth of pharmaceutical exports last month stemmed from a 124 per cent increase in drug exports to Japan compared with last year. If the Japan export numbers were stripped out, export growth was just 1.1 per cent.
'It looks to us that output overshot orders in the first couple of months of the year, perhaps reflecting renewed optimism about the US and euro zone economies,' Mr Prior-Wandesforde added.
'This has subsequently proved to be yet another false dawn.'
aaronl@sph.com.sg
Thursday, May 17, 2012
Note key risks in perpetual securities, MAS cautions
The Straits Times
Magdalen Ng
17/5/2012
THE Monetary Authority of Singapore (MAS) has issued a word of warning to investors caught up in the investing flavour of the month - perpetual securities.
The MAS cautions that perpetual securities are not like regular bonds, and says investors should consider the key risks of any products before investing in them.
In response to queries, an MAS spokesman said yesterday that issuers offering perpetual securities to retail investors are required to comply with the Securities and Futures Act (SFA).
This legislation 'requires proper disclosure of the feature and risks of the product either in a prospectus or an offer information statement'.
'Investors should note, among other factors, that perpetual securities, unlike plain vanilla bonds, do not have a maturity date and the issuers are not obliged to redeem the perpetual securities.'
However, the MAS did not confirm if it had met bankers over concerns on the unprecedented run of perpetual bond sales with retail investors in Singapore, as reported by Reuters, on Monday.
Perpetuals are bond-like instruments, and offer attractive interest returns. However, unlike bonds where an investor gets the interest and principal according to a fixed schedule, issuers of perpetual securities can defer coupon payouts under certain circumstances. Repaying the principal is also left to the issuer's discretion.
The MAS noted: 'If issuers do not exercise the redemption option, investors who wish to exit their investments can only do so by selling them in the secondary market. They will therefore be exposed to market price fluctuations, which could be quite severe, especially if interest rates go up. They may also be exposed to the risk that there could be a lack of willing buyers in adverse markets.'
Retail investors were able to buy into the $500 million offered by Genting Singapore through the automated teller machines of local banks, as per a regular initial public offering.
This is because perpetual securities meet the requirements of an 'Excluded Investment Product' under the SFA. Consequently, they can be sold without advisory services that can point out risks, so long as there is a prospectus available.
While the MAS 'expects issuers to make clear to investors the difference between perpetual securities and other bonds', there is no way of knowing whether the person who reads the prospectus fully comprehends the literature.
While the general public can apply through the ATMs, OCBC Bank sells certain investment products such as dual currency returns and perpetual securities only to their Premier Banking customers and other sophisticated clients.
'We have a structured process of recommending appropriate investment products to these customers. This sales and advisory process requires our sales staff to conduct a financial needs analysis with our customers, which includes understanding their financial objectives, risk profiles, and investment horizons,' said Ms Koh Ching Ching, head of group corporate communications at OCBC.
A DBS spokesman said that retail perpetual bond offerings are marketed just like retail equity and retail plain vanilla bond offerings.
'At the IPO stage, the purchase of these retail instruments is generally self-directed as DBS does not sell them over the counter at branches. Retail investors are referred to the IPO prospectus or offer information statement and can subscribe to them via ATMs.'
Magdalen Ng
17/5/2012
THE Monetary Authority of Singapore (MAS) has issued a word of warning to investors caught up in the investing flavour of the month - perpetual securities.
The MAS cautions that perpetual securities are not like regular bonds, and says investors should consider the key risks of any products before investing in them.
In response to queries, an MAS spokesman said yesterday that issuers offering perpetual securities to retail investors are required to comply with the Securities and Futures Act (SFA).
This legislation 'requires proper disclosure of the feature and risks of the product either in a prospectus or an offer information statement'.
'Investors should note, among other factors, that perpetual securities, unlike plain vanilla bonds, do not have a maturity date and the issuers are not obliged to redeem the perpetual securities.'
However, the MAS did not confirm if it had met bankers over concerns on the unprecedented run of perpetual bond sales with retail investors in Singapore, as reported by Reuters, on Monday.
Perpetuals are bond-like instruments, and offer attractive interest returns. However, unlike bonds where an investor gets the interest and principal according to a fixed schedule, issuers of perpetual securities can defer coupon payouts under certain circumstances. Repaying the principal is also left to the issuer's discretion.
The MAS noted: 'If issuers do not exercise the redemption option, investors who wish to exit their investments can only do so by selling them in the secondary market. They will therefore be exposed to market price fluctuations, which could be quite severe, especially if interest rates go up. They may also be exposed to the risk that there could be a lack of willing buyers in adverse markets.'
Retail investors were able to buy into the $500 million offered by Genting Singapore through the automated teller machines of local banks, as per a regular initial public offering.
This is because perpetual securities meet the requirements of an 'Excluded Investment Product' under the SFA. Consequently, they can be sold without advisory services that can point out risks, so long as there is a prospectus available.
While the MAS 'expects issuers to make clear to investors the difference between perpetual securities and other bonds', there is no way of knowing whether the person who reads the prospectus fully comprehends the literature.
While the general public can apply through the ATMs, OCBC Bank sells certain investment products such as dual currency returns and perpetual securities only to their Premier Banking customers and other sophisticated clients.
'We have a structured process of recommending appropriate investment products to these customers. This sales and advisory process requires our sales staff to conduct a financial needs analysis with our customers, which includes understanding their financial objectives, risk profiles, and investment horizons,' said Ms Koh Ching Ching, head of group corporate communications at OCBC.
A DBS spokesman said that retail perpetual bond offerings are marketed just like retail equity and retail plain vanilla bond offerings.
'At the IPO stage, the purchase of these retail instruments is generally self-directed as DBS does not sell them over the counter at branches. Retail investors are referred to the IPO prospectus or offer information statement and can subscribe to them via ATMs.'
Tuesday, May 15, 2012
Singapore's stressed singles
15 May 2012
Chew I-Jin and Mao Ailin
The annual International Day of Families today was established by the United Nations in 1993 to mark how changing social, economic and demographic processes impact families around the globe.
On this 19th anniversary, it is encouraging to note that recent Budget-related statements by Members of Parliament recognise that better support is needed for different forms of the Singaporean family, which include single parents, divorced parents, foreign spouses of Singapore citizens and fathers who want more caregiving opportunities.
Why do families exist? For caregiving, not just procreation. Indeed, procreation without adequate caregiving leads to many social problems.
Diverse forms of the family provide care. Apart from nuclear families, there are single-person-headed households, patchwork families (resulting from divorce and remarriage) and, increasingly, multi-generational families in which singles (unmarried and childless) look after elderly parents.
Population statistics show a steady rise in singlehood. In 2000, 33.3 per cent of males and 21.9 per cent of females aged 30-34 years were single. This increased to 43.1 per cent of males and 30.6 per cent of females in 2010. Meanwhile, "the proportion of residents aged 65 and above increased from 7.2 per cent in 2000 to 9.3 per cent in 2011" (Population in Brief 2011).
JUGGLING responsibilities
These statistics are related. Increasingly, the elderly are cared for by unmarried children, mostly daughters. The 1995 National Survey of Senior Citizens in Singapore showed singles constituted 24 per cent of family caregivers caring for those aged 65 and above. This has increased to 26 per cent, according to a Ministry of Health report last year.
Women constitute 74 per cent of those caring for the elderly, according to an NUS Social Work Report of Singapore Family Caregiving in 2006.
Describing single caregivers of the elderly, Dr Kalyani Mehta, head of gerontology programme, UniSIM, said: "Many of them are not 'swinging' singles but 'stressed' singles, who are juggling work and caregiving responsibilities."
In shaping policies for Singapore's rapidly greying population, we must ensure single adults caring for elderly parents do not slip through the cracks.
Recent Budget support for single caregivers - including subsidies for home-based care and domestic foreign helpers for elderly parents, assistance through Medisave top-ups and GST vouchers - are laudable. But are these enough?
The 2006 NUS Report of Singapore Family Caregiving states that 25 per cent of family caregivers express concern about their worsening financial situation. Fifty-five per cent of healthcare expenditure in Singapore is funded out of pocket, compared to only 30 per cent in Taiwan, Japan, Hong Kong and South Korea, according to a 2012 paper on inequality and the new social compact, presented at the Institute of Policy Studies.
Are parents to rely largely on the income of working children for long-term caregiving?
CAREGIVING LEAVE
More effective approaches could include universal Medishield and risk-pooling across all age groups to provide more affordable healthcare coverage for older persons; and waiving levies for hiring foreign domestic workers to assist low-income caregivers, especially singles who work to support elderly parents. Also, childcare leave could become "caregiving leave" for all dependents, enabling single caregivers - some without siblings - to care for ill elderly dependents or take them to a doctor.
Further, more retiring Singaporeans - including those who have made tremendous personal sacrifices to care for elderly parents - now live alone: From 6.6 per cent in 2000 to 7.7 per cent in 2005, according to a Ministry of Community Development, Youth and Sports Report on the State of the Elderly in Singapore in 2009.
Among the elderly living in HDB estates, those living with friends or relatives (not immediate family) have almost doubled from 3.3 per cent in 1998 to 6.4 per cent in 2008.
These, too, are families, bound by ties of care and compassion, rather than obligations of kinship. It is time to recognise that caring for one another is the basis of families. Family policies should not be premised solely on relationships of blood or marriage.
On this International Day of Families, it is worth reflecting on how such policies can better support singles - those who are caregivers as well as those who receive care - and their families. Only then can we become a truly inclusive and caring society.
Chew I-Jin and Mao Ailin are co-chairs of the Association of Women for Action and Research's (AWARE) Singles In Singapore sub-committee.
Chew I-Jin and Mao Ailin
The annual International Day of Families today was established by the United Nations in 1993 to mark how changing social, economic and demographic processes impact families around the globe.
On this 19th anniversary, it is encouraging to note that recent Budget-related statements by Members of Parliament recognise that better support is needed for different forms of the Singaporean family, which include single parents, divorced parents, foreign spouses of Singapore citizens and fathers who want more caregiving opportunities.
Why do families exist? For caregiving, not just procreation. Indeed, procreation without adequate caregiving leads to many social problems.
Diverse forms of the family provide care. Apart from nuclear families, there are single-person-headed households, patchwork families (resulting from divorce and remarriage) and, increasingly, multi-generational families in which singles (unmarried and childless) look after elderly parents.
Population statistics show a steady rise in singlehood. In 2000, 33.3 per cent of males and 21.9 per cent of females aged 30-34 years were single. This increased to 43.1 per cent of males and 30.6 per cent of females in 2010. Meanwhile, "the proportion of residents aged 65 and above increased from 7.2 per cent in 2000 to 9.3 per cent in 2011" (Population in Brief 2011).
JUGGLING responsibilities
These statistics are related. Increasingly, the elderly are cared for by unmarried children, mostly daughters. The 1995 National Survey of Senior Citizens in Singapore showed singles constituted 24 per cent of family caregivers caring for those aged 65 and above. This has increased to 26 per cent, according to a Ministry of Health report last year.
Women constitute 74 per cent of those caring for the elderly, according to an NUS Social Work Report of Singapore Family Caregiving in 2006.
Describing single caregivers of the elderly, Dr Kalyani Mehta, head of gerontology programme, UniSIM, said: "Many of them are not 'swinging' singles but 'stressed' singles, who are juggling work and caregiving responsibilities."
In shaping policies for Singapore's rapidly greying population, we must ensure single adults caring for elderly parents do not slip through the cracks.
Recent Budget support for single caregivers - including subsidies for home-based care and domestic foreign helpers for elderly parents, assistance through Medisave top-ups and GST vouchers - are laudable. But are these enough?
The 2006 NUS Report of Singapore Family Caregiving states that 25 per cent of family caregivers express concern about their worsening financial situation. Fifty-five per cent of healthcare expenditure in Singapore is funded out of pocket, compared to only 30 per cent in Taiwan, Japan, Hong Kong and South Korea, according to a 2012 paper on inequality and the new social compact, presented at the Institute of Policy Studies.
Are parents to rely largely on the income of working children for long-term caregiving?
CAREGIVING LEAVE
More effective approaches could include universal Medishield and risk-pooling across all age groups to provide more affordable healthcare coverage for older persons; and waiving levies for hiring foreign domestic workers to assist low-income caregivers, especially singles who work to support elderly parents. Also, childcare leave could become "caregiving leave" for all dependents, enabling single caregivers - some without siblings - to care for ill elderly dependents or take them to a doctor.
Further, more retiring Singaporeans - including those who have made tremendous personal sacrifices to care for elderly parents - now live alone: From 6.6 per cent in 2000 to 7.7 per cent in 2005, according to a Ministry of Community Development, Youth and Sports Report on the State of the Elderly in Singapore in 2009.
Among the elderly living in HDB estates, those living with friends or relatives (not immediate family) have almost doubled from 3.3 per cent in 1998 to 6.4 per cent in 2008.
These, too, are families, bound by ties of care and compassion, rather than obligations of kinship. It is time to recognise that caring for one another is the basis of families. Family policies should not be premised solely on relationships of blood or marriage.
On this International Day of Families, it is worth reflecting on how such policies can better support singles - those who are caregivers as well as those who receive care - and their families. Only then can we become a truly inclusive and caring society.
Chew I-Jin and Mao Ailin are co-chairs of the Association of Women for Action and Research's (AWARE) Singles In Singapore sub-committee.
Monday, May 14, 2012
The best place in the world to be creative
14 May 2012
Fredrik Haren
I have lost count of the number of times I have been asked: "As an author of creativity books, how on earth can you live in Singapore?"
And when I reply, "Because I think it is the best place in the world to live for a creative person", most people think I am kidding and everyone asks me to explain.
But no, I am not kidding. And yes, let me explain.
I moved to Beijing from my native Sweden in 2005 because I wanted to be in Asia when Asian countries truly started to embrace creativity.
The defining moment for me was when Hu Jintao gave a speech to the Chinese people in which he said that "China should be an innovative country 15 years from now".
Since I write books on business creativity, I just had to move to Asia and see this shift happen.
After two years in Beijing, I learnt two things: Firstly, I wanted to leave Beijing, which is a fascinating city, but has too much traffic, too much pollution and too little water for a Swede brought up in the Stockholm archipelago; and secondly, I wanted to remain in Asia.
So I went on a grand journey. While doing research for my book The Developing World, I constantly travelled over a period of more than 10 months.
I went to 20 developing countries and when I came to each new city that I thought had potential to become my new home, I made sure my schedule allowed me to stay a few extra days to get a feel of life there.
I spent two weeks each in Seoul, Hong Kong, Bangkok, Shanghai, Mumbai, New Delhi, Istanbul and Singapore.
Then I made a list of positives and negatives about each city. Obviously, Singapore won in the end.
SINGAPORE VIRTUES
Why? Well, for many reasons.
Such as quality of life - I now drink as much fresh mango juices in Singapore as I did beers in Beijing, weather (no, I do not mind the heat; I love it), security (I love countries where there is a good chance you will get your iPhone back if you left it behind in a restaurant) and convenience (like the fact that Changi Airport has extensive connections to the world, since my work involves a lot of travelling to different countries on a frequent basis).
Those are the usual reasons that attract most people to Singapore.
But the main reason I live in Singapore is because this city-state, to me, is the one place on earth where it is the easiest to have a globally-creative mindset.
Some people say Singapore is "Asia for beginners". I do not agree. I think Singapore is "globalisation for beginners", or rather, "globalisation for early adopters".
With a diverse mix of races, religions and nationalities, Singapore not only represents the cross-section of the world, it is also a time capsule of what the world will look like in the future.
And I love that.
New York may call itself 'the capital of the world' but Singapore is the world. Unlike New York, which is a global city in the United States, Singapore is a global city - a global city-state. Singapore is a city in the world, not a city in a country in the world.
And this makes it easier to have a global outlook here since nationalistic barriers do not block the view as much.
A BEAUTIFUL MIX
A positive side-effect of this is that Singapore is one of the least racist countries in the world.
Now, that does not mean that there is no racism in Singapore, but I have worked in more than 40 countries, and I have never experienced less racism than I do in Singapore.
That is important to me. Not only because we are a mixed-race family - I am from Sweden, my wife from the Philippines and my son a happy mix of Stockholm, Manila and Singapore.
As an European, I am ashamed and disappointed when European leaders recently proclaim that "the multi-cultural society does not work". I just wish they would come to Singapore.
To live in a place that is celebrating "Western New Year" and "Chinese New Year" is not only twice as fun, it also gives you the feeling that there is more than one way of doing things.
On a recent New Year's Eve party, we realised our group consisted of 10 people with 10 different passports.
A friend told me how they had had an after-work beer at his company and 14 people - from 14 different countries - showed up.
At our wedding, we had 40 guests from eight countries, comprising at least four religions and four races, and, at the time, no one was counting.
It all just felt as if it was the most natural thing in the world. The point, of course, is that it is not the most natural thing in the world. Unfortunately, in most places in the world, it would be rare, strange and exotic to have such a natural mix of backgrounds.
For people living in Singapore, it is so natural you do not grasp how unnaturally natural it is, and how valuable.
OF ROOTS AND BRANCHES
Now, do not get me wrong. I am not saying that knowledge of your own culture and background is not important. It is.
It is often said that a person without roots is fickle, doesn't know how to connect to who he is and can be easily manipulated, because there are no basic values keeping him grounded. Roots are important.
But if one is going to use a metaphor (in this case, of likening a human being to a tree), one has to use the whole metaphor. Because it is equally true that a tree without branches also perishes.
A tree that does not spread its branches out in all directions to gather as much sunlight and energy as possible might have deep and strong roots, but it will eventually still wither and die.
In other words, to be rootless is dangerous, but so is being branchless.
And if your own culture is the roots, the cultures of the rest of the world is the energy that your branches need to reach out to, so that you can get new ideas and ways of doing things by learning from others, be inspired to try new foods, acquire new habits and try new customs.
It will make you curious of other ways of doing things, be inspired by different ideas and energised by alternate points of views. And that is what creates creativity.
And nowhere in the world is it easier to let your branches spread out than in Singapore.
Want some exposure to American influence? Watch American Idol the day after it airs in the US.
What about a dose of Indian culture? Join in the Deepavali celebrations together with thousands of Indians in Little India.
Want to practice your Chinese language? Go and order frog in Geylang.
HEIMSKUR MEANS 'MORON'
The Icelandic Vikings, who lived a thousand years ago, had a word for people who never left their farms on Iceland and never ventured outside. The word was heimskur. It means moron.
As they saw it, a person who did not open up to the world to find new ideas from other cultures was a moron. I think the Vikings would have loved Singapore. I sure know that I do. It is the one place with the fewest heimskurs that I have found .
Too many people limit their potential, their creativity - and in the end - their lives, because they are not embracing the whole human spectrum of creativity.
They are not taking full advantage of the potential of the world, because they are not living in the world. They are stuck in their own corner, looking inwards, seeing whatever that is different as "foreign".
And I think that answers the question of why I am living in Singapore - because Singapore makes me more human by making me more a part of the world, a part of humanity. And by being part of the world, I have a bigger chance to be inspired and have new ideas.
Ideas that will benefit us all.
Fredrik Haren, an author and speaker on business creativity, has lived in Asia since 2005, and has been in Singapore since 2008. His work The Idea Book has been included in The 100 Best Business Books of All Time. This article appears in the Singapore International Foundation's book aimed at bridging communities, Singapore Insights from the Inside.
Fredrik Haren
I have lost count of the number of times I have been asked: "As an author of creativity books, how on earth can you live in Singapore?"
And when I reply, "Because I think it is the best place in the world to live for a creative person", most people think I am kidding and everyone asks me to explain.
But no, I am not kidding. And yes, let me explain.
I moved to Beijing from my native Sweden in 2005 because I wanted to be in Asia when Asian countries truly started to embrace creativity.
The defining moment for me was when Hu Jintao gave a speech to the Chinese people in which he said that "China should be an innovative country 15 years from now".
Since I write books on business creativity, I just had to move to Asia and see this shift happen.
After two years in Beijing, I learnt two things: Firstly, I wanted to leave Beijing, which is a fascinating city, but has too much traffic, too much pollution and too little water for a Swede brought up in the Stockholm archipelago; and secondly, I wanted to remain in Asia.
So I went on a grand journey. While doing research for my book The Developing World, I constantly travelled over a period of more than 10 months.
I went to 20 developing countries and when I came to each new city that I thought had potential to become my new home, I made sure my schedule allowed me to stay a few extra days to get a feel of life there.
I spent two weeks each in Seoul, Hong Kong, Bangkok, Shanghai, Mumbai, New Delhi, Istanbul and Singapore.
Then I made a list of positives and negatives about each city. Obviously, Singapore won in the end.
SINGAPORE VIRTUES
Why? Well, for many reasons.
Such as quality of life - I now drink as much fresh mango juices in Singapore as I did beers in Beijing, weather (no, I do not mind the heat; I love it), security (I love countries where there is a good chance you will get your iPhone back if you left it behind in a restaurant) and convenience (like the fact that Changi Airport has extensive connections to the world, since my work involves a lot of travelling to different countries on a frequent basis).
Those are the usual reasons that attract most people to Singapore.
But the main reason I live in Singapore is because this city-state, to me, is the one place on earth where it is the easiest to have a globally-creative mindset.
Some people say Singapore is "Asia for beginners". I do not agree. I think Singapore is "globalisation for beginners", or rather, "globalisation for early adopters".
With a diverse mix of races, religions and nationalities, Singapore not only represents the cross-section of the world, it is also a time capsule of what the world will look like in the future.
And I love that.
New York may call itself 'the capital of the world' but Singapore is the world. Unlike New York, which is a global city in the United States, Singapore is a global city - a global city-state. Singapore is a city in the world, not a city in a country in the world.
And this makes it easier to have a global outlook here since nationalistic barriers do not block the view as much.
A BEAUTIFUL MIX
A positive side-effect of this is that Singapore is one of the least racist countries in the world.
Now, that does not mean that there is no racism in Singapore, but I have worked in more than 40 countries, and I have never experienced less racism than I do in Singapore.
That is important to me. Not only because we are a mixed-race family - I am from Sweden, my wife from the Philippines and my son a happy mix of Stockholm, Manila and Singapore.
As an European, I am ashamed and disappointed when European leaders recently proclaim that "the multi-cultural society does not work". I just wish they would come to Singapore.
To live in a place that is celebrating "Western New Year" and "Chinese New Year" is not only twice as fun, it also gives you the feeling that there is more than one way of doing things.
On a recent New Year's Eve party, we realised our group consisted of 10 people with 10 different passports.
A friend told me how they had had an after-work beer at his company and 14 people - from 14 different countries - showed up.
At our wedding, we had 40 guests from eight countries, comprising at least four religions and four races, and, at the time, no one was counting.
It all just felt as if it was the most natural thing in the world. The point, of course, is that it is not the most natural thing in the world. Unfortunately, in most places in the world, it would be rare, strange and exotic to have such a natural mix of backgrounds.
For people living in Singapore, it is so natural you do not grasp how unnaturally natural it is, and how valuable.
OF ROOTS AND BRANCHES
Now, do not get me wrong. I am not saying that knowledge of your own culture and background is not important. It is.
It is often said that a person without roots is fickle, doesn't know how to connect to who he is and can be easily manipulated, because there are no basic values keeping him grounded. Roots are important.
But if one is going to use a metaphor (in this case, of likening a human being to a tree), one has to use the whole metaphor. Because it is equally true that a tree without branches also perishes.
A tree that does not spread its branches out in all directions to gather as much sunlight and energy as possible might have deep and strong roots, but it will eventually still wither and die.
In other words, to be rootless is dangerous, but so is being branchless.
And if your own culture is the roots, the cultures of the rest of the world is the energy that your branches need to reach out to, so that you can get new ideas and ways of doing things by learning from others, be inspired to try new foods, acquire new habits and try new customs.
It will make you curious of other ways of doing things, be inspired by different ideas and energised by alternate points of views. And that is what creates creativity.
And nowhere in the world is it easier to let your branches spread out than in Singapore.
Want some exposure to American influence? Watch American Idol the day after it airs in the US.
What about a dose of Indian culture? Join in the Deepavali celebrations together with thousands of Indians in Little India.
Want to practice your Chinese language? Go and order frog in Geylang.
HEIMSKUR MEANS 'MORON'
The Icelandic Vikings, who lived a thousand years ago, had a word for people who never left their farms on Iceland and never ventured outside. The word was heimskur. It means moron.
As they saw it, a person who did not open up to the world to find new ideas from other cultures was a moron. I think the Vikings would have loved Singapore. I sure know that I do. It is the one place with the fewest heimskurs that I have found .
Too many people limit their potential, their creativity - and in the end - their lives, because they are not embracing the whole human spectrum of creativity.
They are not taking full advantage of the potential of the world, because they are not living in the world. They are stuck in their own corner, looking inwards, seeing whatever that is different as "foreign".
And I think that answers the question of why I am living in Singapore - because Singapore makes me more human by making me more a part of the world, a part of humanity. And by being part of the world, I have a bigger chance to be inspired and have new ideas.
Ideas that will benefit us all.
Fredrik Haren, an author and speaker on business creativity, has lived in Asia since 2005, and has been in Singapore since 2008. His work The Idea Book has been included in The 100 Best Business Books of All Time. This article appears in the Singapore International Foundation's book aimed at bridging communities, Singapore Insights from the Inside.
Thursday, May 10, 2012
Retail investor wises up, stays on sidelines
R Sivanithy10/5/2012
RETAIL investors have traditionally been given the short end of the stick, with brokers, banks and exchanges placing greater emphasis on big players such as institutions and high-frequency traders (HFT) because of the vast liquidity these sophisticated players can generate.
Yet despite the proliferation of HFT and other forms of computerised trading in today's markets, volume all over the world is falling. As experts puzzle over the reasons, a novel hypothesis is readily available - the humble small investors, having grown tired and disillusioned with the way markets have evolved, have withdrawn from stocks and it is their absence which may well explain the volume loss.
The New York Times (NYT) reported on May 7 that trading in the US stock market has fallen since the 2008 sub-prime crisis and has continued to fall with the average daily trades on all US exchanges in April amounting to 6.5 billion units, about half the 12.1 billion done at the 2008 peak.
Also reported was that the New York Stock Exchange last week said first-quarter trading business was 23 per cent lower than in Q1 2011.
Over in Hong Kong, Reuters on Monday reported that turnover in shares traded on the exchange fell in January-March to HK$63 billion from HK$75.3 billion a year earlier. Meanwhile, the Singapore Exchange (SGX) last Friday announced that although its derivatives turnover grew 29 per cent year-on-year for April, securities turnover was 27 per cent down at $23.5 billion and that average daily value in securities was 27 per cent lower at $1.2 billion.
According to data compiled by the World Federation of Exchanges, 48 of 52 exchanges it tracks suffered double-digit falls in turnover for the first quarter this year compared with 2011. The four exceptions were Bermuda, Brazil, India and Saudi Arabia.
This global drying of liquidity in equities has occurred despite zero interest rates, rising earnings and central banks like the US Federal Reserve and the European Central Bank standing resolute as lenders of last resort to markets in case of collapse.
For the past four years since Lehman Brothers went bust, this kind of support from officialdom has meant stock markets all over the world have been resilient, occasionally suffering large losses when recession worries surface but always bouncing back, usually stronger than before.
This is because explicit guarantees of near-unlimited injections from monetary authorities remove a large portion of equity investment risk. If so, then one would quite reasonably expect stock market participation - both retail and institutional - to rise, not fall. So why is volume all over the world dropping?
No conclusive reasons have been found but from the various hypotheses that have been put forth one crucial point emerges - retail presence is just as vital as any other.
NYT quoted US observers who believe declining liquidity is because high-speed traders have scaled back their activities for two reasons - more regulations aimed at curbing their activities and the departure of retail investors, a group that the high-speed players exploited to make money.
More regulations are to be expected given the concerns relating to front-running and manipulation often associated with rapid-fire computerised trading.
The withdrawal of retail players, however, is interesting because it suggests that this group has wised up to the folly of trying to compete against opponents who can plough vast sums into building computers that can react a million times faster than humans.
"On a typical trade, two HFT firms will not trade against each other," a US HFT trader was quoted in the NYT article as saying. "For most established firms, if ordinary investors don't want to trade, there's really nothing for us to do."
HFT doesn't really contribute to Singapore equity market volume but anecdotal feedback from dealers and the local broking community is that retail investors here, having been burnt repeatedly over the years by market calamities such as 1998's regional crisis, the dotcom bust of 2000, the 2003 Sars epidemic, the 2008 US sub-prime collapse and the ongoing European sovereign debt crisis, have departed the market - mostly in favour of real estate.
Notwithstanding data from SGX that over the past 10 years money invested in the Straits Times Index would have earned a better return than if invested in property, an unshakeable belief persists that investing in bricks and mortar is safer and surer than investing in stocks. Not surprisingly the real estate market has continued to defy the odds and it remains resilient despite the government's strong anti-speculative property measures.
Adding to the disillusionment with Singapore equities is a dearth of quality listings, the scandals associated with China stocks that have depressed the entire China segment and a system that allows new companies to place out all their shares to selected investors, thus leaving either nothing or only scraps for the man in the street.
There are, of course, other contributory factors. Europe's constant debt problems and the continent's current anti-austerity wave that threatens bailout efforts, the on-off US economic recovery and China's probable hard landing are shrouding the investment outlook with uncertainty and are likely keeping many investors out of the market.
Also, exchange volume has probably been hit by attractive alternatives such as dark pools which can transact large parcels faster and at lower cost.
But for countries whose equity markets have HFT, it is ironic that a probable factor behind declining volume is none other than HFT itself, an activity that was encouraged because it was supposed to boost liquidity in the first place. - BT
RETAIL investors have traditionally been given the short end of the stick, with brokers, banks and exchanges placing greater emphasis on big players such as institutions and high-frequency traders (HFT) because of the vast liquidity these sophisticated players can generate.
Yet despite the proliferation of HFT and other forms of computerised trading in today's markets, volume all over the world is falling. As experts puzzle over the reasons, a novel hypothesis is readily available - the humble small investors, having grown tired and disillusioned with the way markets have evolved, have withdrawn from stocks and it is their absence which may well explain the volume loss.
The New York Times (NYT) reported on May 7 that trading in the US stock market has fallen since the 2008 sub-prime crisis and has continued to fall with the average daily trades on all US exchanges in April amounting to 6.5 billion units, about half the 12.1 billion done at the 2008 peak.
Also reported was that the New York Stock Exchange last week said first-quarter trading business was 23 per cent lower than in Q1 2011.
Over in Hong Kong, Reuters on Monday reported that turnover in shares traded on the exchange fell in January-March to HK$63 billion from HK$75.3 billion a year earlier. Meanwhile, the Singapore Exchange (SGX) last Friday announced that although its derivatives turnover grew 29 per cent year-on-year for April, securities turnover was 27 per cent down at $23.5 billion and that average daily value in securities was 27 per cent lower at $1.2 billion.
According to data compiled by the World Federation of Exchanges, 48 of 52 exchanges it tracks suffered double-digit falls in turnover for the first quarter this year compared with 2011. The four exceptions were Bermuda, Brazil, India and Saudi Arabia.
This global drying of liquidity in equities has occurred despite zero interest rates, rising earnings and central banks like the US Federal Reserve and the European Central Bank standing resolute as lenders of last resort to markets in case of collapse.
For the past four years since Lehman Brothers went bust, this kind of support from officialdom has meant stock markets all over the world have been resilient, occasionally suffering large losses when recession worries surface but always bouncing back, usually stronger than before.
This is because explicit guarantees of near-unlimited injections from monetary authorities remove a large portion of equity investment risk. If so, then one would quite reasonably expect stock market participation - both retail and institutional - to rise, not fall. So why is volume all over the world dropping?
No conclusive reasons have been found but from the various hypotheses that have been put forth one crucial point emerges - retail presence is just as vital as any other.
NYT quoted US observers who believe declining liquidity is because high-speed traders have scaled back their activities for two reasons - more regulations aimed at curbing their activities and the departure of retail investors, a group that the high-speed players exploited to make money.
More regulations are to be expected given the concerns relating to front-running and manipulation often associated with rapid-fire computerised trading.
The withdrawal of retail players, however, is interesting because it suggests that this group has wised up to the folly of trying to compete against opponents who can plough vast sums into building computers that can react a million times faster than humans.
"On a typical trade, two HFT firms will not trade against each other," a US HFT trader was quoted in the NYT article as saying. "For most established firms, if ordinary investors don't want to trade, there's really nothing for us to do."
HFT doesn't really contribute to Singapore equity market volume but anecdotal feedback from dealers and the local broking community is that retail investors here, having been burnt repeatedly over the years by market calamities such as 1998's regional crisis, the dotcom bust of 2000, the 2003 Sars epidemic, the 2008 US sub-prime collapse and the ongoing European sovereign debt crisis, have departed the market - mostly in favour of real estate.
Notwithstanding data from SGX that over the past 10 years money invested in the Straits Times Index would have earned a better return than if invested in property, an unshakeable belief persists that investing in bricks and mortar is safer and surer than investing in stocks. Not surprisingly the real estate market has continued to defy the odds and it remains resilient despite the government's strong anti-speculative property measures.
Adding to the disillusionment with Singapore equities is a dearth of quality listings, the scandals associated with China stocks that have depressed the entire China segment and a system that allows new companies to place out all their shares to selected investors, thus leaving either nothing or only scraps for the man in the street.
There are, of course, other contributory factors. Europe's constant debt problems and the continent's current anti-austerity wave that threatens bailout efforts, the on-off US economic recovery and China's probable hard landing are shrouding the investment outlook with uncertainty and are likely keeping many investors out of the market.
Also, exchange volume has probably been hit by attractive alternatives such as dark pools which can transact large parcels faster and at lower cost.
But for countries whose equity markets have HFT, it is ironic that a probable factor behind declining volume is none other than HFT itself, an activity that was encouraged because it was supposed to boost liquidity in the first place. - BT
Saturday, May 5, 2012
The Outsourced Life
By ARLIE RUSSELL HOCHSCHILD
Published: May 5, 2012
IN the sprawling outskirts of San Jose, Calif., I find myself at the apartment door of Katherine Ziegler, a psychologist and wantologist. Could it be, I wonder, that there is such a thing as a wantologist, someone we can hire to figure out what we want? Have I arrived at some final telling moment in my research on outsourcing intimate parts of our lives, or at the absurdist edge of the market frontier?
A willowy woman of 55, Ms. Ziegler beckons me in. A framed Ph.D. degree in psychology from the University of Illinois hangs on the wall, along with an intricate handmade quilt and a collage of images clipped from magazines — the back of a child’s head, a gnarled tree, a wandering cat — an odd assemblage that invites one to search for a connecting thread.
After a 20-year career as a psychologist, Ms. Ziegler expanded her practice to include executive coaching, life coaching and wantology. Originally intended to help business managers make purchasing decisions, wantology is the brainchild of Kevin Kreitman, an industrial engineer who set up a two-day class to train life coaches to apply this method to individuals in private life. Ms. Ziegler took the course and was promptly certified in the new field.
Ms. Ziegler explains that the first step in thinking about a “want,” is to ask your client, “ ‘Are you floating or navigating toward your goal?’ A lot of people float. Then you ask, ‘What do you want to feel like once you have what you want?’ ”
She described her experience with a recent client, a woman who lived in a medium-size house with a small garden but yearned for a bigger house with a bigger garden. She dreaded telling her husband, who had long toiled at renovations on their present home, and she feared telling her son, who she felt would criticize her for being too materialistic.
Ms. Ziegler took me through the conversation she had with this woman: “What do you want?”
“A bigger house.”
“How would you feel if you lived in a bigger house?”
“Peaceful.”
“What other things make you feel peaceful?”
“Walks by the ocean.” (The ocean was an hour’s drive away.)
“Do you ever take walks nearer where you live that remind you of the ocean?”“Certain ones, yes.”
“What do you like about those walks?”
“I hear the sound of water and feel surrounded by green.”
This gentle line of questions nudged the client toward a more nuanced understanding of her own desire. In the end, the woman dedicated a small room in her home to feeling peaceful. She filled it with lush ferns. The greenery encircled a bubbling slate-and-rock tabletop fountain. Sitting in her redesigned room in her medium-size house, the woman found the peace for which she’d yearned.
I was touched by the story. Maybe Ms. Ziegler’s client just needed a good friend who could listen sympathetically and help her work out her feelings. Ms. Ziegler provided a service — albeit one with a wacky name — for a fee. Still, the mere existence of a paid wantologist indicates just how far the market has penetrated our intimate lives. Can it be that we are no longer confident to identify even our most ordinary desires without a professional to guide us?
Is the wantologist the tail end of a larger story? Over the last century, the world of services has changed greatly.
A hundred — or even 40 — years ago, human eggs and sperm were not for sale, nor were wombs for rent. Online dating companies, nameologists, life coaches, party animators and paid graveside visitors did not exist.
Nor had a language developed that so seamlessly melded village and market — as in “Rent-a-Mom,” “Rent-a-Dad,” “Rent-a-Grandma,” “Rent-a-Friend” — insinuating itself, half joking, half serious, into our culture. The explosion in the number of available personal services says a great deal about changing ideas of what we can reasonably expect from whom. In the late 1940s, there were 2,500 clinical psychologists licensed in the United States. By 2010, there were 77,000 — and an additional 50,000 marriage and family therapists.
In the 1940s, there were no life coaches; in 2010, there were 30,000. The last time I Googled “dating coach,” 1,200,000 entries popped up. “Wedding planner” had over 25 million entries. The newest entry, Rent-a-Friend, has 190,000 entries.
And, in a world that undermines community, disparages government and marginalizes nonprofit organizations as ways of meeting growing needs of working families, these are likely to proliferate. As will the corresponding cultural belief in the superiority of what’s for sale.
WE’VE put a self-perpetuating cycle in motion. The more anxious, isolated and time-deprived we are, the more likely we are to turn to paid personal services. To finance these extra services, we work longer hours. This leaves less time to spend with family, friends and neighbors; we become less likely to call on them for help, and they on us. And, the more we rely on the market, the more hooked we become on its promises: Do you need a tidier closet? A nicer family picture album? Elderly parents who are truly well cared for? Children who have an edge in school, on tests, in college and beyond? If we can afford the services involved, many if not most of us are prone to say, sure, why not?
And the market expands to fill increasing demand. The director of research and development at the company eHarmony, for example, the champion of the marriage market, has envisioned expanding the company’s operations into later stages of adult life, and into workplace and college relations. EHarmony now operates in Canada, Brazil and Australia, as well as across Europe. The more members of diverse communities hunger for counsel, comfort, dates, support, the more outfits will spring up to extend services for those who can pay. The cycle takes another turn.
Paradoxically, the more we depend on market services — and market logic — the greater its subtle but real power to undermine our intimate life. As the ex-advertising executive and author of “In the Absence of the Sacred,” Jerry Mander, observed, “With commerce, we always get the good news first and the bad news after a while. First we hear the car goes faster than the horse. Then we hear it clogs freeways and pollutes the air.”
The bad news in this case is the capacity of the service market, with all its expertise, to sap self-confidence in our own capacities and those of friends and family. The professional nameologist finds a more auspicious name than we can recall from our family tree. The professional potty trainer does the job better than the bumbling parent or helpful grandparent. Jimmy’s Art Supply sells a better Spanish mission replica kit than your child can build for that school project from paint, glue and a Kleenex box. Our amateur versions of life seem to us all the poorer by comparison.
Consider some recent shifts in language. Care of family and friends is increasingly referred to as “lay care.” The act of meeting a romantic partner at a flesh-and-blood gathering rather than online is disparaged by some dating coaches as “dating in the wild.”
We picture competition as a matter of one business interest outdoing another. But the fiercest competition may be the quiet continuing one between market and private life. As a setter of standards of the ideal experience, it often wins, whether we buy the service or not.
The very ease with which we reach for market services may help prevent us from noticing the remarkable degree to which the market has come to dominate our very ideas about what can or should be for sale or rent, and who should be included in the dramatic cast — buyers, branders, sellers — that we imagine as part of our personal life. It may even prevent us from noticing how we devalue what we don’t or can’t buy.
As Michael J. Sandel, a Harvard professor of government, notes, a prison cell upgrade can be purchased for $82 a day in Santa Ana, Calif., and for $8 solo drivers in Minneapolis can buy access to car pool lanes on public roadways. Earlier this year, officials at Santa Monica College attempted to allow students to buy spots in oversubscribed classes for $462 per course. The school’s trustees dropped the proposal only after large-scale protests. Even more than what we wish for, the market alters how we wish. Wallet in hand, we focus in the market on the thing we buy. In the realm of services, this is an experience — the perfect wedding, the delicious “traditional” meal, the well-raised child, even the well-gestated baby.
As we outsource more of our private lives, we find it increasingly possible to outsource emotional attachment. A busy executive, for example, focuses on efficiency; his assistant tells me, “My boss outsources patience to me.” The wealthy employer of a household manager detaches herself from the act of writing personal Christmas-present labels. A love coach encourages clients to think of dating as “work,” and to be mindful of their R.O.I. — return on investment, of emotional energy, time and money. The grieving family member hires a Tombstone Butler to beautify a loved one’s burial site.
Focusing attention on the destination, we detach ourselves from the small — potentially meaningful — aspects of experience. Confining our sense of achievement to results, to the moment of purchase, so to speak, we unwittingly lose the pleasure of accomplishment, the joy of connecting to others and possibly, in the process, our faith in ourselves.
There is much public conversation about the balance of power between the branches of government, but we badly need to confront the larger and looming imbalance between the market and everything else.
A society in which comfort, care, companionship, “perfect” birthday parties and so much else is available to those who can pay for it?
What would we say if a wantologist put us on a couch and asked, “Is this the kind of society we want?”
Arlie Russell Hochschild is a professor emerita of sociology at the University of California, Berkeley, and the author of “The Second Shift” and the forthcoming book “The Outsourced Self: Intimate Life in Market Times,” from which this essay is adapted.
Published: May 5, 2012
IN the sprawling outskirts of San Jose, Calif., I find myself at the apartment door of Katherine Ziegler, a psychologist and wantologist. Could it be, I wonder, that there is such a thing as a wantologist, someone we can hire to figure out what we want? Have I arrived at some final telling moment in my research on outsourcing intimate parts of our lives, or at the absurdist edge of the market frontier?
A willowy woman of 55, Ms. Ziegler beckons me in. A framed Ph.D. degree in psychology from the University of Illinois hangs on the wall, along with an intricate handmade quilt and a collage of images clipped from magazines — the back of a child’s head, a gnarled tree, a wandering cat — an odd assemblage that invites one to search for a connecting thread.
After a 20-year career as a psychologist, Ms. Ziegler expanded her practice to include executive coaching, life coaching and wantology. Originally intended to help business managers make purchasing decisions, wantology is the brainchild of Kevin Kreitman, an industrial engineer who set up a two-day class to train life coaches to apply this method to individuals in private life. Ms. Ziegler took the course and was promptly certified in the new field.
Ms. Ziegler explains that the first step in thinking about a “want,” is to ask your client, “ ‘Are you floating or navigating toward your goal?’ A lot of people float. Then you ask, ‘What do you want to feel like once you have what you want?’ ”
She described her experience with a recent client, a woman who lived in a medium-size house with a small garden but yearned for a bigger house with a bigger garden. She dreaded telling her husband, who had long toiled at renovations on their present home, and she feared telling her son, who she felt would criticize her for being too materialistic.
Ms. Ziegler took me through the conversation she had with this woman: “What do you want?”
“A bigger house.”
“How would you feel if you lived in a bigger house?”
“Peaceful.”
“What other things make you feel peaceful?”
“Walks by the ocean.” (The ocean was an hour’s drive away.)
“Do you ever take walks nearer where you live that remind you of the ocean?”“Certain ones, yes.”
“What do you like about those walks?”
“I hear the sound of water and feel surrounded by green.”
This gentle line of questions nudged the client toward a more nuanced understanding of her own desire. In the end, the woman dedicated a small room in her home to feeling peaceful. She filled it with lush ferns. The greenery encircled a bubbling slate-and-rock tabletop fountain. Sitting in her redesigned room in her medium-size house, the woman found the peace for which she’d yearned.
I was touched by the story. Maybe Ms. Ziegler’s client just needed a good friend who could listen sympathetically and help her work out her feelings. Ms. Ziegler provided a service — albeit one with a wacky name — for a fee. Still, the mere existence of a paid wantologist indicates just how far the market has penetrated our intimate lives. Can it be that we are no longer confident to identify even our most ordinary desires without a professional to guide us?
Is the wantologist the tail end of a larger story? Over the last century, the world of services has changed greatly.
A hundred — or even 40 — years ago, human eggs and sperm were not for sale, nor were wombs for rent. Online dating companies, nameologists, life coaches, party animators and paid graveside visitors did not exist.
Nor had a language developed that so seamlessly melded village and market — as in “Rent-a-Mom,” “Rent-a-Dad,” “Rent-a-Grandma,” “Rent-a-Friend” — insinuating itself, half joking, half serious, into our culture. The explosion in the number of available personal services says a great deal about changing ideas of what we can reasonably expect from whom. In the late 1940s, there were 2,500 clinical psychologists licensed in the United States. By 2010, there were 77,000 — and an additional 50,000 marriage and family therapists.
In the 1940s, there were no life coaches; in 2010, there were 30,000. The last time I Googled “dating coach,” 1,200,000 entries popped up. “Wedding planner” had over 25 million entries. The newest entry, Rent-a-Friend, has 190,000 entries.
And, in a world that undermines community, disparages government and marginalizes nonprofit organizations as ways of meeting growing needs of working families, these are likely to proliferate. As will the corresponding cultural belief in the superiority of what’s for sale.
WE’VE put a self-perpetuating cycle in motion. The more anxious, isolated and time-deprived we are, the more likely we are to turn to paid personal services. To finance these extra services, we work longer hours. This leaves less time to spend with family, friends and neighbors; we become less likely to call on them for help, and they on us. And, the more we rely on the market, the more hooked we become on its promises: Do you need a tidier closet? A nicer family picture album? Elderly parents who are truly well cared for? Children who have an edge in school, on tests, in college and beyond? If we can afford the services involved, many if not most of us are prone to say, sure, why not?
And the market expands to fill increasing demand. The director of research and development at the company eHarmony, for example, the champion of the marriage market, has envisioned expanding the company’s operations into later stages of adult life, and into workplace and college relations. EHarmony now operates in Canada, Brazil and Australia, as well as across Europe. The more members of diverse communities hunger for counsel, comfort, dates, support, the more outfits will spring up to extend services for those who can pay. The cycle takes another turn.
Paradoxically, the more we depend on market services — and market logic — the greater its subtle but real power to undermine our intimate life. As the ex-advertising executive and author of “In the Absence of the Sacred,” Jerry Mander, observed, “With commerce, we always get the good news first and the bad news after a while. First we hear the car goes faster than the horse. Then we hear it clogs freeways and pollutes the air.”
The bad news in this case is the capacity of the service market, with all its expertise, to sap self-confidence in our own capacities and those of friends and family. The professional nameologist finds a more auspicious name than we can recall from our family tree. The professional potty trainer does the job better than the bumbling parent or helpful grandparent. Jimmy’s Art Supply sells a better Spanish mission replica kit than your child can build for that school project from paint, glue and a Kleenex box. Our amateur versions of life seem to us all the poorer by comparison.
Consider some recent shifts in language. Care of family and friends is increasingly referred to as “lay care.” The act of meeting a romantic partner at a flesh-and-blood gathering rather than online is disparaged by some dating coaches as “dating in the wild.”
We picture competition as a matter of one business interest outdoing another. But the fiercest competition may be the quiet continuing one between market and private life. As a setter of standards of the ideal experience, it often wins, whether we buy the service or not.
The very ease with which we reach for market services may help prevent us from noticing the remarkable degree to which the market has come to dominate our very ideas about what can or should be for sale or rent, and who should be included in the dramatic cast — buyers, branders, sellers — that we imagine as part of our personal life. It may even prevent us from noticing how we devalue what we don’t or can’t buy.
As Michael J. Sandel, a Harvard professor of government, notes, a prison cell upgrade can be purchased for $82 a day in Santa Ana, Calif., and for $8 solo drivers in Minneapolis can buy access to car pool lanes on public roadways. Earlier this year, officials at Santa Monica College attempted to allow students to buy spots in oversubscribed classes for $462 per course. The school’s trustees dropped the proposal only after large-scale protests. Even more than what we wish for, the market alters how we wish. Wallet in hand, we focus in the market on the thing we buy. In the realm of services, this is an experience — the perfect wedding, the delicious “traditional” meal, the well-raised child, even the well-gestated baby.
As we outsource more of our private lives, we find it increasingly possible to outsource emotional attachment. A busy executive, for example, focuses on efficiency; his assistant tells me, “My boss outsources patience to me.” The wealthy employer of a household manager detaches herself from the act of writing personal Christmas-present labels. A love coach encourages clients to think of dating as “work,” and to be mindful of their R.O.I. — return on investment, of emotional energy, time and money. The grieving family member hires a Tombstone Butler to beautify a loved one’s burial site.
Focusing attention on the destination, we detach ourselves from the small — potentially meaningful — aspects of experience. Confining our sense of achievement to results, to the moment of purchase, so to speak, we unwittingly lose the pleasure of accomplishment, the joy of connecting to others and possibly, in the process, our faith in ourselves.
There is much public conversation about the balance of power between the branches of government, but we badly need to confront the larger and looming imbalance between the market and everything else.
A society in which comfort, care, companionship, “perfect” birthday parties and so much else is available to those who can pay for it?
What would we say if a wantologist put us on a couch and asked, “Is this the kind of society we want?”
Arlie Russell Hochschild is a professor emerita of sociology at the University of California, Berkeley, and the author of “The Second Shift” and the forthcoming book “The Outsourced Self: Intimate Life in Market Times,” from which this essay is adapted.
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