I like to ask commenters in my blog to give your full name and vested interest (if any), if you wish to state an honest opinion that appear to be confrontational.
I will delete any comment that represents a personal attack, if it is made in the cloak of anonymity.
I accept opinions that may differ from my opinion, even if anonymous, so long as it is expressed fairly and with honest intent.
Tuesday, July 17, 2007
Logic9 (Sudoku)
Have you seen the Sudoku puzzle in Today paper? Do you know how to play the puzzle? You can read the rule of this puzzle and the tips here.
The puzzles are good for children (i.e. train them in mathematics and logic) and for seniors (keep the mind active). Enjoy.
The puzzles are good for children (i.e. train them in mathematics and logic) and for seniors (keep the mind active). Enjoy.
An efficient public service
COMMENT POSTED IN MY BLOG:
What do you mean - "owned by the people"? If the company is owned by the government, is it the same as being "owned by the people"? Even Income has shareholders. Who owns Income then?
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REPLY:
The key distinction should be the mode of operation and not on the type of ownership.
Some activities can be operated as a public service, on a cost-recovery basis, with the aim aim to keep the charges as low as possible. They do not aim to make large profit for shareholders.
Transport, utilities, health care and savings for retirement can be runned as a public service to meet the needs of the general public. They can be operated efficiently, at low cost, and high standard of customer service (without being privatised).
NTUC Income is operated as a cooperative, for the benefit of its policyholders. This is similar to a "public service".
What do you mean - "owned by the people"? If the company is owned by the government, is it the same as being "owned by the people"? Even Income has shareholders. Who owns Income then?
-------------------------
REPLY:
The key distinction should be the mode of operation and not on the type of ownership.
Some activities can be operated as a public service, on a cost-recovery basis, with the aim aim to keep the charges as low as possible. They do not aim to make large profit for shareholders.
Transport, utilities, health care and savings for retirement can be runned as a public service to meet the needs of the general public. They can be operated efficiently, at low cost, and high standard of customer service (without being privatised).
NTUC Income is operated as a cooperative, for the benefit of its policyholders. This is similar to a "public service".
Well rated Bonds
REPORT FROM BLOOMBERG:
Bear Stearns told investors in one of its hedge funds that they won't get any money back after creditors forced it to sell assets at depressed prices.
A second fund still contains `sufficient assets' to cover the $1.4 billion it owes its parent firm, there's very little value left for the investors.
The funds faced `unprecedented declines' in bonds that were rated AAA or AA, the two top investment grades.
Lesson: It is possible for well-rated bonds to face unprecendented declines, and may lead to a 'credit event'.
Bear Stearns told investors in one of its hedge funds that they won't get any money back after creditors forced it to sell assets at depressed prices.
A second fund still contains `sufficient assets' to cover the $1.4 billion it owes its parent firm, there's very little value left for the investors.
The funds faced `unprecedented declines' in bonds that were rated AAA or AA, the two top investment grades.
Lesson: It is possible for well-rated bonds to face unprecendented declines, and may lead to a 'credit event'.
Risk of credit default
Investors in some structured products are taking the risk of credit default. If a "credit event" happens, they may lose a substantial or all of their principal.
What is the risk of this happening?
The issuer said "We have issued similar products in recent years, and none have not defaulted".
I studied a report from a credit rating agency on the default rates in past years:
* For the past two years, the default rate is small. It is at a historical low level, due mainly to the booming global economy.
* Looking at a longer period, the default rate is higher. It is still small, but not that small.
As the structured products are issued for 5 to 6 years, the risk of a global downturn is "not small". This could lead to a higher default rate.
Lesson: Do not take this risk (as you may not be adequately compensated for it). If things turn bad, you may be in for a big surprise. By that time, you cannot reverse your decision.
What is the risk of this happening?
The issuer said "We have issued similar products in recent years, and none have not defaulted".
I studied a report from a credit rating agency on the default rates in past years:
* For the past two years, the default rate is small. It is at a historical low level, due mainly to the booming global economy.
* Looking at a longer period, the default rate is higher. It is still small, but not that small.
As the structured products are issued for 5 to 6 years, the risk of a global downturn is "not small". This could lead to a higher default rate.
Lesson: Do not take this risk (as you may not be adequately compensated for it). If things turn bad, you may be in for a big surprise. By that time, you cannot reverse your decision.
Cash back on a Term Policy
A life insurance company advertised a "cash back" if there is no claim under its term insurance plan.
This is how the plan works:
* the premium for the term insurance plan is, say $X a year
* for the cash back plan, the insurance company will charge $Y, which is probably charge 3 or 4 times of $X
* the difference between $Y and $X is invested to produce the cash back benefit to be paid on the end of the term.
Is this a good plan? You should consider the following:
* what is the return on the premium for the cash back benefit
* do you get a cash value, if you discontinue the plan during the term.
Lesson: Generally, it is better to avoid a "bundled" or "lock-in" product, unless the terms of the product are designed to be fair to the consumer.
This is how the plan works:
* the premium for the term insurance plan is, say $X a year
* for the cash back plan, the insurance company will charge $Y, which is probably charge 3 or 4 times of $X
* the difference between $Y and $X is invested to produce the cash back benefit to be paid on the end of the term.
Is this a good plan? You should consider the following:
* what is the return on the premium for the cash back benefit
* do you get a cash value, if you discontinue the plan during the term.
Lesson: Generally, it is better to avoid a "bundled" or "lock-in" product, unless the terms of the product are designed to be fair to the consumer.
What's bad about the Singapore system?
I posted my views earler about what's good about the Singapore system. They are:
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
I will now give my views about what's bad about the Singapore system. They are:
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
Yes. They are the same as the "what's good". The same factors that accounted for our success also contributes to our problems. I shall elaborate more about the negative aspects in a few days time.
If we understand both the good and the bad aspects, we may be able to adjust, to increase the "good" and reduce the "bad" impacts.
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
I will now give my views about what's bad about the Singapore system. They are:
* low corruption
* meritocracy
* economic development
* efficiency
* stable and good government.
Yes. They are the same as the "what's good". The same factors that accounted for our success also contributes to our problems. I shall elaborate more about the negative aspects in a few days time.
If we understand both the good and the bad aspects, we may be able to adjust, to increase the "good" and reduce the "bad" impacts.
Confusing Message
A friend told me this story.
A direct marketing company carried out a pilot to test the impact of different types of messages sent by mail, and followed up by a telephone call.
Their finding: The message that confuses the customer gives the best response. They decided to adopt that message.
This is why you get a thick prospectus, when you buy a structured product. It is very confusing to the public, but they still decided to buy the product (even though they do not understand how it works).
Lesson: Do not buy any product that you do not understand. Go for the simple products. It is safer.
A direct marketing company carried out a pilot to test the impact of different types of messages sent by mail, and followed up by a telephone call.
Their finding: The message that confuses the customer gives the best response. They decided to adopt that message.
This is why you get a thick prospectus, when you buy a structured product. It is very confusing to the public, but they still decided to buy the product (even though they do not understand how it works).
Lesson: Do not buy any product that you do not understand. Go for the simple products. It is safer.
Branding
Many companies spend millions of dollars on "branding". They want consumers to associate their products or company with certain "qualities".
For a financial service company, the most important qualities are:
* trust
* efficiency
* good value products
These qualities are not created by "branding". They are real qualities that have to be built over time. Branding can only tell people what "you really are".
If you try to tell people "what you are not", the truth will prevail. The consumers will ignore your advertising, as it is not true.
For a financial service company, the most important qualities are:
* trust
* efficiency
* good value products
These qualities are not created by "branding". They are real qualities that have to be built over time. Branding can only tell people what "you really are".
If you try to tell people "what you are not", the truth will prevail. The consumers will ignore your advertising, as it is not true.
Owned by the people
The CEO of a small listed company asked me, "Why was NTUC Income not a listed company? "
I gave this reply, "When I was the CEO, I resisted the listing of NTUC Income. I wanted it to remain a cooperative, so that it can work for the interest of its policyholders".
He gave this insightful reply, "I agree with you. In fact, some of our businesses should be owned by the people, for example, trains, buses and utilities. Right now, these businesses are owned by the shareholders. If the company makes too much profit, 5,000 shareholders are happy, but 2 million people are unhappy".
I gave this reply, "When I was the CEO, I resisted the listing of NTUC Income. I wanted it to remain a cooperative, so that it can work for the interest of its policyholders".
He gave this insightful reply, "I agree with you. In fact, some of our businesses should be owned by the people, for example, trains, buses and utilities. Right now, these businesses are owned by the shareholders. If the company makes too much profit, 5,000 shareholders are happy, but 2 million people are unhappy".
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