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More money lost via our sovereign funds

September 27, 2011 12 comments

I haven’t been posting lately. No worries, I am not asked to shut down by some government authorities or whatever nots. I did not post on the Presidential Election simply because it’s pretty pointless to talk about a system created to protect the ruling party in the first place. I have mentioned before, that if the PAP sincerely meant the Presidential role to safeguard the national reserves, then no one affiliated, past or present, to the ruling party should be qualified to run for presidency. As such, I rest my case.

Anyway, the real reason I wasn’t updating or posting is due to my heavy workload. Taking a leaf from all the PAP MPs, some of whom are so desperate to tell the whole world how hard working they are and how much they are contributing to Singapore in order to justify their enormously large ‘pocket money’ through Facebook, I would like to say that I too am a very busy professional contributing to the Singapore’s economy (except that I don’t have that extra $15,000 a month for sitting on a chair in an air-con room and act interested in listening to people in the evening). For those who follow the news, I’m sure you know who or what I am talking about.

Today’s Bloomberg showcase an article that easily boils Singaporeans’ blood and would very much have hurt the ruling party’s general election and presidential election results if the recent financial crisis is to happen a few months earlier.: That GIC has lost billions and billions of dollars with their recent investments in the banks, notably UBS and Citibank. It’s a joke that it requires the elected president to approve $4 billion to cope with the economic downturn (disclosed in the last PE) while the GIC can easily lose twice as much (not counting Temasek, Bank of America, and Citibank’s losses). Where’s the risk management? Where’s the financial controls? Where’s the diversification? [For the article, click here]

True is, the approval card to boast to the world that a small country like Singapore can become the largest shareholder of a famous Swiss bank proves too much an attraction. Blinded by inflated ego and over-optimism thinking how on earth can such a big bank flop, GIC dives into throwing money into banks that were already showing signs of weak capital structure back in 2008. To be fair, it’s based on hindsight that I criticize their investments. But wasn’t the Lehman incident enough to warn them about bank stocks? Moreover, the magnitude of losses estimated by Bloomberg only shows how ‘un-diversified’ we are.

But the one point that I really cannot stand is the government’s and GIC’s inability to address the nation that they have made a mistake, that they have made a wrong investment move, that they have lost a lot of money. Evidently, here we have a PAP member, Inderjit Singh, a member of Parliament for the ruling People‚Äôs Action Party, and CEO of Infiniti Solution Pte saying: If we consider a longer-term horizon, then some of the issues like what UBS faces today should not be seen as failed investments.”

This, is, totally, bullshit. If we always use a long-term measurement, going by historical records and because the world is not ending, almost ANY investment would become a gain in the long run. But of what use is it using a hyper-long horizon? In the long run, says Keynes, we’re all dead! There’s no point! The question I would ask is, if GIC always takes in a long-term view in investment, why not Temasek? Why did Temasek realize the losses on Citibank, Bank of America etc? And did Temasek say anything about their loses? It only illustrates how stubborn the ruling party is!

And Singaporeans can and should be angry. Which shareholders will not be angry when their investments turned sour? The only irony is we shareholders don’t even know how much money we have invested and how much profits and loses we have made. To rub salt on the wound, we have to hear it from a third party (in this case, Bloomberg). Don’t even bring up the topic about how Singaporeans ‘forget’ the times when the fund earns money, as postulated by so many pro-PAP members. It’s precisely the basic job function of GIC and Temasek to earn profits. If they are incapable of doing so, then they shouldn’t be risking the money away and both funds should be closed.

Fact is, PAP will not apologize for anything (except when it’s nearing an election and they need some sympathy points. Trust me when I say more tears will flow in GE2016 when there’s a bigger group of young voters who are typically very idealistic and liberal). Simply because apologizing means you are weak. It means you are incapable. It means you are not fit to remain in power. Do you think they’ll want you to know that they are incapable? They’ll do all they can to disguise their incompetency!

P.S. Admittedly, this is an emotional post. But when you have don’t have transparency, no admittance of mistakes, blatant announcement of how capable the cabinet is to justify the ridiculous pay scale, telling the whole world that Singapore is unique because of the ‘highly talented’ and ‘corruption-free’ ministers, historical records of underhand methods in elections, and the list goes on….you can’t expect us ‘noises’ and ‘untalented’ citizens not to have a superbly high expectation of the ruling party. After all, you marketed yourselves to be extraordinary in the first place.

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