Monday, December 31, 2012

Happy Fiscal Cliff Day

Good luck to the people of the world relying on American politicians not tipping the USA back into recession today!

Sunday, December 30, 2012

Net Worth Update (December 2012)


  • Paid the downpayment (5% of purchase price) and stamp fees for my HDB BTO flat. Depleted my CPF Ordinary Account and used up about $1000 of cash.
  • Starting from this month, I will be including the equity value of my HDB BTO flat (to be built in 2016/2017) in the net worth calculation. However, this value will not be realized until I fulfill the Minimum Occupation Period in 2021/2022. So for this reason, we should focus on 'Investible Net Worth' which excludes the home equity.
  • Sold 2000 shares of  STI ETF at $3.18. Sale proceeds are transferred to 'Phillip Money Market Fund'

Friday, December 21, 2012

The #economia50

My thanks to those who voted for me in economia’s (the official magazine of the ICAEW) list of the top 50 most influential sources of finance news and information in social media.

I am number 30 on the list.

As per economia:
We asked, and you responded. Here are the top 50 most influential sources of finance news and information in social media, voted for by economia readers and ordered by PeerIndex…

Using the hastag #economia50, readers sent us their nominations, we counted the votes and ranked them according to influence in association with PeerIndex, to reveal the economia Finance Twitter 50.

Topping the list is Michel Barnier, the EU commissioner who oversees financial regulation. The bilingual bureaucrat’s presence at the top of the list suggests the significance of the ongoing EU audit debate as well as the general uncertainty over the eurozone.

Aside from the influence of Europe, the list is dominated by journalists, with Newsnight’s economics editor Paul Mason coming in at number seven. The energetic tweeter offers insight to the UK economy and the political machinations behind it.

Flying the flag for chartered accountants in the top ten is Richard Murphy, founder of the Tax Justice Network and an advisor to the TUC on taxation and economic issues. A sometime columnist for The Guardian and, he offers his followers forthright views on the profession.

Never afraid to express his opinions on HMRC or the profession in general, Ken Frost rounds out the top 30. Frost writes regularly on his own website and blogs for Metro.

Given her role as chair of the Public Accounts Committee, which has spent the last month lambasting tax avoidance schemes used by large companies in the UK, it’s no surprise that MP Margaret Hodge features on our list at 37.”
The full list can be seen here economia.

Wednesday, December 19, 2012

UBS Fined $1.5BN

Last Friday I wrote that UBS was to be fined $1Bn for its role in the LIBOR rate fixing scandal.

I was wrong, UBS has in fact been fined $1.5BN.

Mea culpa!

Tuesday, December 18, 2012

RBS and NatWest To Refund £10M

It appears that some bank customers when withdrawing cash from an ATM are a tad forgetful and, believe it or not, don't actually take the cash dispensed from the machine.

What happens then?

The ATM sucks the cash back in and recredits the customer's account.

Well that's how most banks treat it, except NatWest and RBS which don't; instead, up until now, they have been crediting a "dump account".

However, that seems set to change as Finextra reports that Royal Bank of Scotland and NatWest have set aside a £10M reserve to refund up to 300,000 customers who made a withdrawal at the ATM but walked away without the cash.

The bank is apparently checking its records over the past seven years and will repay the money, plus the interest earned on the sum, to customers who forgot their cash. 
This brings a whole new meaning the phrase "bank error in your favour".

Cyprus To Default

According to Cyprus Finance Ministry Secretary Christos Patsalides Cyprus is going to default within days unless it receives Euro300BN.

Oddly enough there are some people who have been taken by surprise by this development.

I don't understand why, in August I wrote the following:
"Cyprus has barely managed to sell Euro23.1M of government bonds.

It achieved a "bid to cover ratio" of 1 (ie there were only just enough "punters" prepared to buy them), at a yield of 7% (the last auction in June achieved a yield of 6.25%).

A yield of 7% is "the point of no return"; it is the level at which Greece, Portugal and Ireland went with their begging bowls to others asking for a bailout.

Why is Cyprus having problems?

Around 40% of its largest banks' exposures are to Greece
Therefore this should come as no surprise to anyone.

Monday, December 17, 2012

Greece's New Fence

Today's announcement by Greece that it has completed its "anti immigration" fence along its border with Turkey could not have come at a better time, for it seems that it is still struggling to collect back dated taxes.

The Washington Post reports:
"The European Union says that Greek tax collection is still falling well short of some key targets that need to be met to reduce the government’s staggering debt pile.

The EU’s task force to help Greece overcome the crisis that brought it to the brink of bankruptcy said in Monday’s quarterly report that Athens still has trouble to deal with old, outstanding tax claims. With 2 months to go in 2012, it was still about a billion euros behind the EU target of recovering €2 billion."
The fence will not only help prevent immigration, but also stop Greek citizens escaping from their own country.

Friday, December 14, 2012

UBS $1BN LIBOR Settlement

UBS is, according to the Telegraph, close to agreeing a settlement with UK and US regulators on LIBOR rigging.

The bank is expected to announce next week that it has reached a combined $1BN deal with US and British authorities to settle an investigation into the role it is alleged to have played in rigging global borrowing rates.

To put the $1BN into context, LIBOR is the basis for $800 TRILLION of financial products. The banks that participated in its rigging would have made billions out of this over the years.

Additionally, UBS's bonus pool was $2.79BN in 2011.

Therefore shed no tears for them!

Wednesday, December 12, 2012

Merkel Downplays Euro Summit

Another week another European summit to, allegedly, save the Eurozone etc.

This summit (scheduled for Thursday and Friday), as with all the others, has no chance of success. Indeed even Angela Merkel realises it is a waste of time, as she has warned members of her Christian Democrat party that the' summit is unlikely to result in an agreement on deepening economic and monetary union in the Eurozone.

The only purpose, and tangible outcome, of these summits is to provide a recurring source of revenue for the catering companies.

Tuesday, December 11, 2012

Northern Rock Customers To Receive Windfall

In the spirit of a game of Monopoly, where a "bank error in your favour" has occurred, some of Northern Rock's customers are to receive an unexpected windfall.

Reuters reports that Northern Rock Asset Management, the state-owned remnant of defunct lender Northern Rock plc, is refunding £270M of interest payments to approximately 152,000 customers.

For why?

Northern Rock failed for some reason to make mandatory disclosures in loan documentation and customer letters in 2008. The mistakes pre-date the separation of Northern Rock plc and Northern Rock Asset Management.

There is of course a downside, the refund according to Treasury Economic Secretary Sajid Javid is "likely to increase public sector net borrowing for 2012/2013".

HSBC On Probation

Congratulations to HSBC for entering the record books, wrt the size of settlement that it has agreed to for money laundering.

The BBC reports that HSBC has confirmed it is to pay US authorities $1.9BN in a settlement over money laundering, the largest paid in such a case.

A US Senate investigation said the UK-based bank had been a conduit for "drug kingpins and rogue nations".

HSBC has announced it has appointed a former US official to work as its head of financial crime compliance, which is a new position.

Bob Werner was previously the head of the US Treasury's Office of Foreign Assets Control (OFAC) - the agency responsible for enforcing the US sanctions on countries including Iran.

He will be responsible for beefing up HSBC's anti-money laundering and sanctions compliance systems.

As per HSBC's statement on the matter, it is now effectively on probation for the next five years:
"Over the five-year term of the agreement with the Department of Justice, an independent monitor will evaluate HSBC's progress in fully implementing these and other measures it recommends, and will produce regular assessments of the effectiveness of HSBC's compliance function."
The full text of the statement is reproduced below:
"HSBC has reached agreement with United States authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws. This includes a Deferred Prosecution Agreement (DPA) with the US Department of Justice. HSBC has also reached agreement to achieve a global resolution with all other US government agencies that have investigated HSBC's past conduct related to these issues1 and anticipates finalising an undertaking with the United Kingdom Financial Services Authority shortly.

Under these agreements, HSBC will make payments totaling US$1.921bn, continue to cooperate fully with regulatory and law enforcement authorities, and take further action to strengthen its compliance policies and procedures.

Stuart Gulliver, Group Chief Executive, said: "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organisation from the one that made those mistakes. Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters.
"While we welcome the clarity that these agreements bring, ensuring the highest standards wherever we do business is an ongoing process. We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world."

In the past several years, the Board of HSBC Holdings plc has taken decisive action to direct management to fix past shortcomings as they have come to light. Since 2011, with new senior leadership teams in place at both HSBC Group and HSBC North America, HSBC has taken extensive and concerted steps to put in place the highest standards for the future.

The Department of Justice has recognised these efforts in the DPA: "Management has made significant strides in improving 'tone from the top' and ensuring that a culture of compliance permeates the institution. The efforts of management have dramatically improved HSBC Bank USA's and HSBC Group's Bank Secrecy Act / Anti-Money Laundering and Office of Foreign Assets Control compliance programs."

As noted in the DPA, HSBC Bank USA already has, over the past several years, undertaken the following voluntary remedial measures:
  • increased its spending on anti-money laundering (AML) approximately nine-fold between 2009 and 2011;
  • increased its AML staffing nearly ten-fold between 2010 and 2012;
  • revamped its Know Your Customer programme, including treating non-US HSBC Group Affiliates as third parties subject to the same due diligence as all other customers;
  • exited 109 correspondent relationships for risk reasons;
  • clawed back bonuses for a number of senior officers, and
  • spent over US$290m on remedial measures.
HSBC Group has also undertaken a comprehensive overhaul of its structure, controls, and procedures. A number of these improvements is included in the DPA. Among other measures, HSBC Group has:
  • simplified its control structure, allowing the Group to manage risks worldwide more effectively;
  • elevated the role of Group Compliance and given it direct oversight over every compliance officer globally, so that both accountability and escalation now flow directly to and from HSBC Group Compliance;
  • created the new role of Head of Group Financial Crime Compliance and Group Money Laundering Reporting Officer, who will help to establish a Global Financial Intelligence Unit;
  • made other new senior hires with extensive experience handling relevant international legal and regulatory issues, including a new Chief Legal Officer and a new Global General Counsel for Litigation and Regulatory Affairs;
  • adopted a set of guidelines limiting business in those countries that pose a high financial crime risk;
  • issued a new global sanctions policy using a more extensive and consistent set of lists to screen all cross-border payments;
  • commenced a review of all Know Your Customer files across the entire Group - the first phase of this remediation will cost an estimated US$700m over five years, and
  • undertaken to implement single global standards shaped by the highest or most effective anti-money laundering standards available in any location where the HSBC Group operates.
Over the five-year term of the agreement with the Department of Justice, an independent monitor will evaluate HSBC's progress in fully implementing these and other measures it recommends, and will produce regular assessments of the effectiveness of HSBC's compliance function.

The agreement notes that HSBC Bank USA and HSBC Group have "provided valuable assistance to law enforcement." HSBC conducted multiple extensive internal investigations, voluntarily made employees available for interviews, and collected, analysed and organised voluminous evidence and information.

HSBC is firmly committed to putting in place robust standards that will help promote the integrity of the global financial system. 
Media enquiries to:
Patrick Humphris
+44 (0)20 7992 1631

New York
Robert A Sherman
+1 212 525 6901

Hong Kong 
Gareth Hewett
+ 852 2822 4929

Investor Relations enquiries to:
Guy Lewis
+44 (0)20 7992 1938

Robert Quinlan
+44 (0)20 7991 3643

Hong Kong
Hugh Pye
+852 2822 4908

1 These include: (i) a deferred prosecution agreement with the New York County District Attorney's Office; (ii) consent orders with the Board of Governors of the U.S. Federal Reserve System; (iii) an agreement with the U.S. Department of the Treasury's Office of Foreign Assets Control; (iv) agreements and consent orders with the Office of the Comptroller of the Currency (the "OCC"); and (v) a consent order with the Financial Crimes Enforcement Network ("FinCEN") of the Treasury Department. 
Notes to editors:
The websites of the agencies involved in these agreements are as follows:
US Department of Justice: Financial Services Authority:
The New York County District Attorney's Office:
The Board of Governors of the US Federal Reserve System: Department of the Treasury's Office of Foreign Assets Control:
Office of the Comptroller of the Currency:
Financial Crimes Enforcement Network of the Treasury Department:

The HSBC Group
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 6,900 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa. With assets of US$2,721bn at 30 September 2012, the HSBC Group is one of the world's largest banking and financial services organisations."

Sold 2 lots of STI ETF @ $3.18

The innate human tendency to be greedy makes selling stocks difficult. For example, an investor purchases shares of a stock at $10 a share and tells himself that when the stock price hits $20, he will sell it all. When the share price finally reaches $20, the investor becomes greedy and decides to hold out for more gains. When the stock price continues rising to $22, greed overcomes rationality again and the investor holds out for more. The stock price suddenly takes a downward turn and is back at $18. The investor then tells himself that once the stock price hits $20 again, he will sell it all.

This is exactly how I felt when I tried to sell my STI ETF for the past few days. My initial selling price was $3.15. When it reaches $3.15, I became greedy and decided to hold out for more gains. When it continued rising to $3.17, I placed my sell order at $3.18 and the stock price dropped back to $3.16. Fortunately, the share price rose back to $3.18 today and I finally managed to sell all my 2000 shares of STI ETF.

My decision to sell the STI ETF was part of the strategy to liquidate my stock holdings and sit on more cash while waiting for the next market correction/downturn. I initiated a position in STI ETF last year September at $2.72 and total return for the past 15 months is approximately 20% including dividends. In addition, the share price is at its 52 week high and I feel that the recent rally might not be sustainable as uncertainties are still looming over the US fiscal cliff, Europe crisis, China slowdown and Middle East tensions.

Monday, December 10, 2012

Christmas Windfall For Barnsley Building Society

Members of Barnsley Building Society are in for an unexpected Christmas present as they will receive up to £5,000, after the building society recovered money tied up in failed Icelandic banks.

Barnsley was forced to merge with Yorkshire Building Society after £10M it had deposited with two Icelandic banks, Kaupthing Singer & Friedlander and Heritable Bank, was feared lost.

However, as per the Telegraph, it promised that any money it recovered from the banks' administrators would be returned to its savers and borrowers. Approximately £8.8M has been recovered.

Barnsley's savers will receive 3.31% of their total savings balance held with the society on October 21 2008, subject to a minimum of £25 and a maximum of £5,000. Borrowers will get a flat payment of £250, although all payments will be taxed at source. Approximately 28,000 account holders will benefit.

To qualify for the windfalls, savers and borrowers are required to have maintained continuous membership between October 21 2008 and October 21 this year with one or more of the brands in the Yorkshire Group, which also includes Chelsea and Norwich & Peterborough building societies and Egg.

The payments are expected to be completed by 21 December, just in time for Christmas.

Greece Extends Bond Buyback Deadline

Friday was the alleged "deadline" for the Greek bond buyback. However, as I stated at the time:
"Note the use of the word "expected". Doubtless if insufficient bondholders have come forward the deadline will be extended."
Unsurprisingly, the deadline has indeed been extended to noon GMT Tuesday, in the hopes of selling another Euro3-4BN of bonds.

Sunday, December 9, 2012

Back To The Carefree Life

Exams are finally over and the December holidays have just started. I am officially a "Man Of Leisure" till 7 January 2013. This will be my last school holiday and I will be graduating middle of next year.

The reason why I am feeling so carefree now is because the problems that I have been worrying about for the past few months are all cleared :
  • ICT deferment approved
  • All bursaries granted. Total amount = $5500
  • Invited to final interview for full time job in 2013
  • Request for higher HDB Additional Housing Grant approved. Signed my Agreement For Lease.
  • CFA Scholarship awarded
Besides growing my net worth, there is nothing left for me to anticipate or work towards. With so much time on my hands, I shall reread some of my books on investments, research on some SGX listed companies and prepare for my final interview in January.

Also, I will be liquidating my SingPost and STI ETF shares so that I will have enough cash to take advantage of the next market correction. 

Saturday, December 8, 2012

Securitization’s House of Cards

After reading Felix Salmon’s post about the Australian judge who stood up to ratings giant Standard & Poor’s (which slapped a AAA grade on some securitizations that all too quickly crapped out), I got curious.

How badly did S&P and ABN Amro (the creator of the investment) behave? What exactly happened with these odd products (called “constant proportion debt obligations,” or CPDOs for short)?

Felix made it sound pretty bad. After digging around some, I’m convinced now that it was even worse.

What follows are some damning things about the case that Felix -- and sometimes even the judge herself, in her decision -- didn’t touch upon.

Judge Jayne Jagot found S&P liable for losses suffered by investors that trusted their shoddy ratings. That was a big blow to S&P, which in the U.S. is used to hiding behind the skirt of the First Amendment, protesting that its ratings are only “opinions,” as if the company’s analysts were no more than film critics for a free alternative weekly.

Now CPDOs are awfully complex (Jagot approvingly quotes a description of them as “grotesquely complicated”). The way you rate one of these Rube Goldberg-ian securitizations is through a model, into which you feed a bunch of variables, then observe how the original investment fares in a series of random trial runs.

Investors in the ill-fated “Rembrandt” 10-year CPDOs were basically selling insurance (in that credit default swap kind of way) on the members of a couple of CDS indexes, known together as the Globoxx. The insurance protects against default on the debt of the companies in the indexes (each has 125 members, I think). That put the investors in a “long” position on the underlying bonds. So they benefit when the debt becomes safer and doesn’t default.

Sort of.


Because here’s the problem with a CPDO.

It needs higher credit spreads (which indicate higher risk, which leads to fatter “insurance premiums”), while at the same time it paradoxically needs lower credit spreads (as they indicate a lower risk of default, and thus a smaller chance of taking losses).

How the heck do you square that circle? Well, ABN Amro started by jamming bad, incomplete data into the model. And the bank succeeded because S&P stunningly accepted whatever ABN Amro spoon-fed it, like a lapdog with its eye solely on the milk bone (that would be the rating fee it was promised).

To see the problems with one bit of data in particular, you need to take a closer look at the plumbing of these things:

The Rembrandt CPDOs were actually selling insurance in a rolling series of contracts. They started out by issuing protection through 5 1/4 year default swaps on the Globoxx basket. Six months later, they exited that position and sold a fresh 5 1/4 year contract on the new Globoxx (every six months, companies that no longer meet the investment-grade criteria are replaced in the indexes). By that time, of course, the original 5 1/4 year contract has become a 4 3/4 year contract. The process of changing over from the old index to the new is called “the roll.” The old “off the run” contract gives way to the new “on the run” one.

ABN Amro won a coveted AAA rating on the CPDO partly because of its wrongheaded exploitation of “the roll.”


See, credit risk curves for a company (of investment-grade quality anyway) tend to slope slightly upwards. Not by a whole lot -- but enough. Generally the longer you commit to insuring debt, the more you want to receive each year, because the more scary unknowns may be lurking way out in the future.

Why did that matter for a Rembrandt CPDO investor? Simple: When the CPDO does “the roll,” it buys a 4.75 year Globoxx contract (in CDS land, if you’ve sold a contract, you can later buy the exact same contract to cancel out your earlier position) and starts selling a 5.25 year default swap. So, assuming nothing else has changed, you reap a neat little benefit from the six-month difference in term. You buy a 4.75 year contract at x and sell a 5.25 year at x plus a little something.

ABN Amro calculated that “little something” at 7 basis points, or 0.07%. Seems like a puny, negligible number. Yet it was anything but. The CPDO could be as much as 15 times leveraged (and 15 times 7 is 105, or more than a full percentage point). Without that 7 basis points of roll-down benefit, occurring every six months, this AAA investment would have received a junk rating.

Yet this 7 points of roll-down benefit was a grossly flawed number -- and ABN Amro’s own model inputs showed as much!


It was never adjusted for the danger of “ratings migration,” which Jagot describes as “the phenomenon ... by which the rating of a reference entity might decrease between rolls without default.” That’s an especially insidious problem with an investment-grade index that’s changing its composition every six months.

Here’s an example of how ratings migration could sting the CPDO: It sells a Globoxx contract at 60 basis points. The economy lurches south, and some of the companies that belong to the index (what the judge refers to as “reference entities”) slip a few notches, into junk territory. After six months, let’s say the Globoxx has climbed to 80, indicting higher levels of risk. The “junk” members are replaced by new investment-grade companies, so let's suppose the new Globoxx contract is at 60 again. Got that?

Here’s the math: +7 basis points of roll-down benefit, -20 points of ratings migration. That equals a net loss of 13 basis points.

What’s worse is ABN Amro practically assures this negative ratings migration will occur -- then apparently never adjusts the model for it!

We know that because ABN Amro had to feed another bit of data into the model called “long-term average spread” (LTAS), which we’ll call “average spread,” to keep things simple. This starts at 40 in year one, then balloons to 80 in year two. In other words: ABN Amro itself expected the average level of the Globoxx to jump 40 basis points. So it’s highly likely, if that’s true, that at least a few companies were going to migrate right out of the index. This alone should have knocked out a chunk of that roll-down benefit.


But it didn’t. One reason: a glaring weakness of the model was that various key parts apparently didn’t “talk to each other” -- which made it ripe for exploitation.

Never was this weakness more apparent than with the interaction between the model’s assumptions for average spreads and volatility and default probabilities. Quite simply, there didn't seem to be any! Each variable lived in its own walled-off silo, informing the model without disturbing variables anywhere else. That’s beyond absurd.

Here’s one illustration why.

Initially ABN Amro made certain observations about the Globoxx: there was a certain expected default rate for companies in the indexes, the historical volatility was 15% (wrong, by the way -- it was actually almost twice that, and S&P never bothered to check either), the average spread was 40 to start out with (inexplicably, this simple, easily confirmable fact was wrong too -- by 25 percent!).

But, in the real world, these variables don’t live in separate silos. Actually, they’re more like joined at the hip. So when ABN Amro estimated that average spread would increase from 40 to 80 after one year -- a big jump -- to be thorough and honest and reflect reality -- it should also have adjusted volatility higher and the default rate higher as well.

The CPDO should have performed worse, not better, when average spread increased. But the investment actually did better when credit risk doubled!


If you’re getting the impression that ABN Amro cleverly worked the S&P model like deaf, dumb, and blind Tommy would a cheap pinball machine, you’re not the only one.

From Judge Jagot’s summary: “At least one person within S&P considered that ABN Amro, whether intentionally or not, had effectively ‘gamed’ the model.” The bank would have been in a good position to figure out how to game the model, too, because two former employees of S&P were on its payroll.

One way to game a model for a CPDO, as this Federal Reserve working paper by Michael B. Gordy and Sren Willemann shows:
If spreads widen early in the life of the CPDO and then hold steady, the higher carry on future index positions can outweigh the initial loss of NAV [net asset value].
And what scenario for spreads did ABN Amro predict? 40 basis points for the first year, then widening out to 80 basis points in the second year, and holding steady for the next nine years! Sheer coincidence?


So ABN Amro crammed bad data into the model, exploited weaknesses of the model ... but wait, there’s more. The CPDO models being used at the time, it turns out, were intrinsically flawed anyway. They assigned extremely low probabilities to credit spreads blowing out to the levels seen in late 2007. Now, this isn’t late 2008 we’re talking -- only 2007.

The Fed paper notes:
The spread levels realized in late 2007 are qualitatively comparable to the levels seen in 2002, so ought not to have been taken as extreme events.
(By the way, I haven’t even really explored the question of whether any investment using 15 times leverage, and thus susceptible to the smallest of price movements, should ever be rated AAA. Also the CPDO used a “doubling down” gambler’s strategy: whenever credit spreads moved the wrong way, leverage was increased, to a maximum of 15 times. Interestingly, the CPDO began its life at 15 times leverage, underscoring the absurdity of this strategy. How could it double down when it’s already at its limit? This is like Dumb and Dumber go to the casino with $1,000 in pocket, intending to use the “double down” approach, then put the whole thousand on the very first bet.)


What ABN Amro did -- and what S&P contributed to -- seems pretty much like fraud to me. But here’s the thing: at the heart of most (if not all) securitizations, I bet you’ll find similar kinds of “fraud” -- negligent and poor modeling, wrong or unrealistic data inputs, massaging of data to barely achieve desired ratings. It may not occur to this degree, but it’ll be there.

That’s because, as I’ve said before in looking at CLOs, the complexity of securitization disguises a simple truth: amid all the fee extraction and other costs, there simply isn’t enough yield available in the underlying assets -- whether they’re loans, or mortgages, or credit default swap contracts -- to justify all the high ratings, after all the slicing and dicing. This is the mathematical fraud at the heart of securitizations (liquidity and diversification arguments notwithstanding).

Someday I think someone from the world of academic finance will take a deep look at this issue, and expose securitization’s house of cards. That person could do worse than starting with such egregious instruments as these Australian CPDOs and their clearly flagrant abuses of models and ratings.

Friday, December 7, 2012

D Day For Greek Bondholders

Today is D Day for those who wish to sell their Greek bonds.

As per the Hellenic Republic Ministry of Finance:
"The invitation is expected to expire at 5:00pm, London time..The expected settlement date of the invitation is 17 December 2012."
Note the use of the word "expected". Doubtless if insufficient bondholders have come forward the deadline will be extended.

Thursday, December 6, 2012

Eurozone Languishes In Recession

EU GDP figures have confirmed that the Eurozone is languishing in recession for the second time in four years.

GDP in the Eurozone fell by 0.1% in Q3, having fallen 0.2% in the previous three months.

Meanwhile in Greece the unemployment rate in September rose to 26%, up from 25.3% in August (in September 2011 it was 18.9%).

Not all was doom and gloom, Italy continues to provide "comic relief" in the shape of ex Prime Minster Berlusconi's antics. He is now openly speculating that may well stand for Prime Minister for the fifth time in next March's elections.
Market rumours also abound that Mario Monti will resign as Prime Minister today.

Well done Italy for trying to provide a much need distraction form the financial chaos, sadly though this merely adds to it!

Wednesday, December 5, 2012

Live Coverage of George Osborne's Autumn Statement

Greece Most Corrupt EU Country

The Corruption Perception Index 2012 has, unsurprisingly, ranked Greece as being perceived as being the most corrupt EU country out of the 27 member states.

Greece's global ranking also took a knock, and has fallen from 80th in 2011 to 94th in 2012.

Osborne Rearranges The Deckchairs On The Titanic

George Osborne is set to deliver his Autumn Statement 2012 today at 12.30pm, in which he will rearrange the deckchairs.

Tuesday, December 4, 2012

Boris Johnson's Wise Words On The Euro

Boris Johnson has given a most concise and effective summary of the Euro:
"It will limp on with sclerotic growth rates continuing to immiserate loads of uncompetitive parts of the eurozone and it will be a bad business. It will eventually blow up but I wouldn't care to bet when."
It would appear that Angela Merkel agrees with him:
"I could take it easy and say the euro is saved. But I am very cautious about saying the worst of the crisis is over." 
In fact it would appear that Merkel believes that things are going to become worse.

Invitation To Final Interview

Maria Bastone/Agence France-Presse/Getty Images

After weeks of waiting, I finally received an email invitation to the final interview for an institutional sales/trading position. Having passed the online tests, telephone interview and assessment centre, this final interview will be the last hurdle in securing a full time job before graduation. From what I gathered, the remuneration package includes an annual base salary of at least $50,000 and a profit sharing scheme. I feel that the offer is quite attractive for a fresh graduate and the exposure that I will be getting from this job is immense. .

Monday, December 3, 2012

Spain Requests Bailout That Is Not A Bailout

Spain has requested a €39.5bn bailout for its banks, which is likely to be approved later today at a meeting of eurozone finance ministers in Brussels.

However, this is not a "bailout" in the Greek sense of the word. Spain will use this money only for its banks, it will not use it to prop up its ailing economy.

The request for a full bailout, in the Greek sense of the word, has yet to come. However, be patient it will come!

Banks Trouser Taxpayers' Money

The Telegraph reports that banks drew down £4.36BN from the Bank of England's Funding for Lending Scheme in its first two months and increased net lending by £496M.

The scheme does not help firms access credit (it should be noted that banks are in fact tightening their lending criteria), it only makes credit cheaper to those successful in their loan applications.

Friday, November 30, 2012

Wheels Fall Off Greek Bailout Plan

Unsurprisingly the wheels have fallen off the Greek bailout plan.

For why?

Eurozone banks do not want to take the losses that will arise from the Greek bond buyback plan.

The IMF will not release the next tranche of bailout money until the Eurozone delivers on the bond buyback plan.

See the problem?

Thursday, November 29, 2012

Net Worth Update (November 2012)


  • Received one bursary this month and credited into one of the savings accounts
  • Increase in stock portfolio value due to trend reversal in Biosensors and improving global sentiments and outlook.
  • Received $62.50 of SingPost dividends
  • Part time income contributes to the increase in cash

Wednesday, November 28, 2012

Greece - The Never Ending Story

Despite Eurozone hyperbole that the Greek crisis has been "solved", via a debt write down, bond buyback and probable gifting of the next tranche of bailout money, it appears that this is not the end of the story.

German Finance Minister Wolfgang Schaeuble has in fact warned that Greece may need additional help.

As per, Euro-area governments may provide additional funding through the European Union structural fund and further interest payment reduction as long as Greece meets all its obligations under the agreement.

In other words there is an open ended commitment to prop Greece up.

Tuesday, November 27, 2012

It's All At The Co-op Now!

Simon Gompertz writes that as a result of an order from our European overlords (requiring Lloyds to hive off a large number of branches) 3.5 million customers of Lloyds TSB will start receiving letters from the bank from tomorrow, informing them that their accounts will be moved to a new bank (TSB) owned by the Co-op.

Monday, November 26, 2012

Mark Carney Named As Governor of The Bank of England

Mark Carney, the Governor of the Bank of Canada, has been named the new Governor of the Bank of England.

He will take over from Sir Mervyn King next June.

D Day For Greece?

Another day, and other summit to "resolve" the Greek crisis. In theory Eurozone finance ministers will meet in Brussels today to discuss Greece's debt problems. However, it is possible that given there is no likelihood of any tangible outcome that the meeting will be delayed until December.

Despite the certainty of failure, the Eurorcrats continue to spout the "party line" that a solution needs to be/will be found. ECB vice president Vitor Constancio says that he expects a deal on Greece to be reached today.

However, EU Commissioner Olli Rehn is a little more "Delphic" and according to the Telegraph has stated that a decision must be taken on the next tranche of aid to "get rid of uncertainty hanging over Greece".

That of course is true, but uncertainty can be ended in two ways:

1 Give Greece more money, or

2 Cut Greece off and force it to default and exit the Eurozone.

Either way the uncertainty is ended!

Friday, November 23, 2012

EU Budget Summit Cancelled

Unsurprisingly the EU budget summit has been cancelled.

A waste of time, effort and money (our money!).

EU Draft Budget Proposal Leaked

Courtesy of Open Europe a draft of the latest HermanVan Rompuy (HvR) proposal for the EU budget has been published.

The headline spending figure remains broadly unchanged in the new proposal, standing at €1,014BN (a €4BN increase), but more is spent on farm subsidies and structural funds, in a move designed to appease France, Poland, Italy and Spain.

Thus the budget in its present form will not pass, as the UK will veto it.

Thursday, November 22, 2012

Eurozone Imploding At Alarming Pace

Chris Williamson, chief economist at Markit is quoted by the Telegraph as saying that the Eurozone is deteriorating at an "alarming pace".

Meanwhile the "Gnomes of Brussels" continue to demand an increase in their bloated budget.

This will not end well for the hapless citizens of the Eurozone.

Wednesday, November 21, 2012

How Much Can A Middle Class Family Save?

According to an article published on Yahoo News, "People who earn S$4,000-S$7,000 are considered middle and upper middle classes." I could not find the household income range for a middle class family and thus, I will take the $7,000 (highest salary range for a middle class individual) as the combined income of a typical middle class family.  This makes more sense as the combined income of 2 upper middle class individuals would amount to $14,000, which is considered quite well to do.

Hypothetical scenario:
  • Newly wed couple in their mid thirties making a combined $7,000 a month. Combined savings of $50,000 left after wedding, renovation and honeymoon.
  • CPF contribution (20%) is $1,400 per month or $1,000 if only one person is working. (Salary ceiling for CPF contribution is  $5,000). 
  • Parents allowance of $500 per month
  • Bought a second hand car with monthly expenditure of $1300 (including  monthly installment, yearly insurance, road tax, petrol, hdb parking, ERP + coupons, maintenance)
  • Bought a resale flat and take up a loan of $300,000 at 2% per annum interest for 20 years -Monthly installment is $1,518 in this case. For an income of $7,000, monthly contribution to ordinary account is $1,610 or $1,150 if only one person is working (cash top up of $368 monthly)
  • Electricity bills = $150 per month
  • Internet + cable tv + handphone bills = $200 per month
  • Familly insurance = $300 per month
  • Monthly food expenditure = $900 - $5 for each meal per person. Assuming 30 days a month and 3 meals per day.
  • Has a new born baby - assume monthly child expenses to be $500 per month at this stage. Note that this expense will increase over time due to enrichment courses, school fees, etc as the baby grows older.
  • If the couple wants to sponsor child's future university fees in 20 years, saving $300 per month for 20 years would amount to $72,000. (current university tuition fees is around $30,000 to $40,000 excluding other miscellaneous fees such as textbooks, hostel fees, etc)

I did not include caregiving expenses or additional allowance for parents should they take care of the couple's child. So to simplify things, let's just assume the husband is the sole breadwinner and his wife is a full time housewife. By assuming one person is working, CPF contribution will reduce by $400 while cash payment for mortgage will increase by $386 and so, there is essentially not much of a difference. 

Tabulating the raw data above:

Assuming income and expenses remain stagnant, the family will be able to save $1,482 every month. Also, assuming that they started out with $50,000 and are able to generate a 3% return consistently on their savings, they will be able to accumulate $578,064 by the end of 20 years. Personally, I feel that this amount is far from enough for a comfortable retirement in Singapore.

As mentioned, this is only a hypothetical scenario for a middle class family. The family might have more than 1 kid or not give birth at all. There might be unforeseen circumstances such as illnesses, retrenchment, etc. There could also be positive events such as salary increment, job promotion or even striking lottery. So just take this with a pinch of salt.


Of Mice and Men - Samaras Cancels Begging Bowl Qatar Trip

Lats Friday I wrote of  a begging bowl trip by Greek PM to Qatar (and possibly Asia Pacific and Russia) that was "definitely" going ahead:
"In the meantime, hoping to delay the arrival of the fat lady, Antonis Samaras Greece's PM is to go on a tour of the Middle East, China and Russia to try to attract investment.

However, whilst the trip to Qatar is
definitely going ahead the other ports of call have yet to be confirmed; not everyone likes people turning up on their doorstep begging for money."
Less than a week later and it seems that the "definite" trip has been cancelled.

As per Zerohedge:
"Greek Premier Cancels Planned Visit to Qatar on Nov. 26: Office. So much for that bailout plan."
As I noted last Friday, not everyone likes people turning up on their doorstep begging for money.

The Troika's Stark Choice

Despite Greece's doom laden warnings that it would run out of cash by 16 November,  as at the time of writing this article it hasn't.

In other unsurprising news Eurozone finance ministers, the IMF and the ECB (aka the Troika) have failed, for the second week running, to reach an agreement as to how/whether to bail Greece out again.

The bottom line is that Greece's debt is unsustainable.

The Troika face a stark choice, either the debt is written off or Greece is written off.

Tuesday, November 20, 2012

UBS Banker Kweku Adoboli Guilty of Fraud

A former UBS banker, Kweku Adoboli, has been found guilty of fraud after losing the bank $2.3BN in unauthorised trading.

Ooh La La Moody's Downgrades France

Moody's has downgraded France from AAA to Aa1.

Moody's rationale for the downgrade being that France’s long-term economic growth has been hit by its inflexible labour market and low levels of innovation eroding its competitiveness and industrial base.

It also cited France's exposure to the ongoing Eurozone crisis.

Moody’s is quoted by the Telegraph:
Further shocks to sovereign and bank credit markets would further undermine financial and economic stability in France as well as in other euro area countries. 

The impact of such shocks would be expected to be felt disproportionately by more highly indebted governments such as France.

Monday, November 19, 2012

Barclays Purges Thought Crimes

Echoing an Orwellian dictatorship, Barclays is attempting to "cleanse" the minds of its executives of their aggressive money making thoughts.

The Mail reports that Antony Jenkins, the CEO of Barclays, has ordered more than 100 of the bank's most senior executives to attend a two-day re-education event.

The process is designed to cleanse their minds of the aggressive culture instilled by his predecessor Bob Diamond.

The re-education event, to be held in North London, is part of a drive by Jenkins to win back the trust of customers and regulators by making a decisive break with the Diamond era.

The attendees will participate in a series of seminars and bonding exercises aimed at instilling ethical values. The executives will then be expected to act as evangelists for the new culture throughout the organisation. During the two days they will be immersed in sessions including history lessons on the bank’s heritage as a Quaker institution.

They will also be subjected to ‘360 degree feedback’ on their performance, with people both above and below them contributing to their bonus assessments. The process is designed to penalise self-serving or unethical behaviour.

Let's see how that goes then!

Friday, November 16, 2012

Lagarde and Greece Wait For The Fat Lady

Christine Lagarde (CEO of the IMF) is quoted by the Telegraph wrt a possible deal being brokered for Greece next week:
"You know, it's not over until the fat lady sings, as the saying goes.

It's a question of working hard, putting our mind to it, making sure that we focus on the same objective, which is that... Greece can operate on a sustainable basis, can recover, can get back on its feet, can re-access markets as early as possible.
That is what is driving the IMF's determination."
In the meantime, hoping to delay the arrival of the fat lady, Antonis Samaras Greece's PM is to go on a tour of the Middle East, China and Russia to try to attract investment.

However, whilst the trip to Qatar is definitely going ahead the other ports of call have yet to be confirmed; not everyone likes people turning up on their doorstep begging for money.

Thursday, November 15, 2012

Eurozone Driven Into Recession Again

The Eurozone has fallen back into recession again.

As per Eurostat:
"GDP fell by 0.1% in the euro area1 (EA17) and increased by 0.1% in the EU271 during the third quarter of 2012, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the second quarter of 2012, growth rates were -0.2% in both zones.

Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.6% in the euro area and by 0.4% in the EU27 in the third quarter of 2012, after -0.4% and -0.3% respectively in the previous quarter.

During the third quarter of 2012, GDP increased by 0.5% in the United States compared with the previous quarter (after +0.3% in the second quarter of 2012) and fell by 0.9% in Japan (after +0.1%).

Compared with the same quarter of the previous year, GDP rose by 2.3% in the United States (after +2.1% in the previous quarter) and by 0.2% in Japan (after +3.4%).
Could it be that the dogmatic policy of austerity, being pursued by unelected bureaucrats and vainglorious politicians, is driving the Eurozone onto the rocks?

Surely not?!

Wednesday, November 14, 2012

Some Updates

  • Received one of my bursaries
  • Attended 2 job interviews: One will notify me by end of next week while the other will be in December
  • Project deadlines are all due this week and exams are coming in two weeks
  • Slight problem in the HDB Additional Housing Grant and might have to fork out more cash. Will elaborate more when things are all settled

The Eurozone Tinderbox

The growing backlash against the economic dogma of Eurozone austerity has found physical form today, as unions stage a series of demonstrations and "general strikes" across the European Union.

By way of an example, Greece continues to suffer. The Hellenic Statistical Authority has released data that shows that the Greek economy shrank by 7.2% on an annual basis in the three months to the end of September.

Driving economies and people into the ground for the sake of an economic doctrine imposed by unelected bureaucrats will backfire on those who pursue this misguided policy.

Tuesday, November 13, 2012

Allegations of Gas Market Rigging Akin To LIBOR

The FSA and Ofgem are looking into allegations that some of the UK's largest utilities have manipulated the UK physical natural gas markets.

Seth Freedman, a whistleblower, told them that he saw evidence that wholesale gas prices, used as the basis for domestic energy bills, were manipulated by some of the big power companies.

Mr Freedman, who worked at ICIS Heren (a firm which reports gas prices), said he saw what he took to be suspect trading on September 28 (the end of the gas industry’s financial year).
The fact that gas is traded like all other commodities makes it susceptible to speculation.

In the event that Mr Freedman's allegations are proven to be true, then this would be a scandal equivalent to the LIBOR rigging by the banks.

You can almost hear the lawyers rubbing their hands with glee at the thought of the lawsuits that are going to come from this.

Greek Bond Auction Falls Short

Greece's t-bill auction fell Euro1BN short of raising the Euro5BN due for Friday's bond deadline, although it was almost Euro1BN above its target.

However, it may well manage to sell some more and make up the shortfall before then.

Monday, November 12, 2012

Greece Needs Another Euro32BN

The Troika draft report on Greece states that Greece needs another Euro15BN to get it through to 2014.

For good measure the report goes on to say that Greece may need extra Euro17.6BN in 2015/16.

Whilst the powers that be ponder where that money is going to come from, of more pressing need to Greece is this Friday's bond maturity deadline; yet still no sign of the next tranche of bailout money!

Euro1.4BN EU Fraud

Bruno Waterfield has just tweeted that the EC has confirmed that 'part of' the proposed roll over of €1.4BN from 2012 to next year are funds 'under investigation'.

Which basically means there is a suspicion of fraud wrt this sum of money.

Don't you just love the EU's budgetary process and financial "controls", the stories that just keep giving.

Friday, November 9, 2012

Greece Faces D Day - Again

Today Euro of Greek bonds mature, next Friday 16th November a further Euro4BN mature.

Greece has issued, as it often does, a warning that if it dopes not receive bailout money by then it may default on those bonds.

However, Wolfgang Schaeuble, Germany's finance minister, is not so easily cowed by these threats; he told reporters yesterday that a decision on Greece next week "would be too soon".

Thus, as ever, the Eurozone crisis drags on as the politicians and bureaucrats dither over whether to continue to fund Greece or expel it.

Thursday, November 8, 2012

Rehn Writes Greece Off

Olli Rehn, the European Economic and Monetary Affairs Commissioner, has written Greece off by stating that Greece's debt (expected to reach at least 189% of GDP in 2013) is unsustainable whilst at the same time ruling out the possibility of an official sector debt restructuring.

Rehn negelected to state that the level of unemployment in Greece is also unsustainable. Youth unemployment now stands at a staggering 58% in August vs 45% in August 2011.

The only option remaining for Greece is to leave the Euro.

Wednesday, November 7, 2012

Australian Judge Sees the Light, Rules Against S&P

Felix Salmon has a good post saluting Jayne Jagot. The Australian judge (color me amazed) actually took the time to understand what was going on with CPDO securitizations that Standard & Poor's rated AAA and that later tanked. Once she did, she was a bit horrified, one gathers. She ruled that S&P must pay damages to the suckers investors that believed its ratings were professionally derived in good faith.

Here's the "why it matters":
The coverage of the decision (Quartz, FT, WSJ, Bloomberg, Reuters) concentrates, as it should, on the hugely important precedent being set here: that a ratings agency — in this case, S&P — is being found liable for losses that an investor suffered after trusting that agency.
Jagot found that S&P wasn't even "reasonably competent" (actually, the insinuation is they were grossly incompetent). Her decision spans a numbing 635,000 words (context: an average longish novel runs about 100,000).

The upshot: S&P never bothered to develop its own models or assumptions; it just lazily accepted what it was fed by its "boss" (ABN Amro, which paid for the ratings).

One of my favorite parts of the post was actually post-post, in the comment section:
Very good article. The question that you don’t ask is: why is an Australian judge the first to do this research, and what have the SEC and FSA been doing for the last five years?

Tuesday, November 6, 2012

EU Budget Qualified Again

The European Court of Auditors found that controls over 86% of the EU budget are only "partially effective", this makes the 18th year running that the budget has been qualified.

To add to this annual disgrace, it transpires that the frequency rate for "material error" rose by 8% in 2011 from 36% to 44%, with £4BN in EU payments directly affected by irregularities.

The EU's response?

They intend to increase their expenditure by £95BN over the next eight years.

Who pays for this?

The hapless citizens of the EU, who are themselves being told by their EU overlords to endure years of austerity!

Friday, November 2, 2012

RBS Take PPI Hit

Yesterday I wrote about Lloyds upping its PPI claims provision, today it's the turn of RBS.

Royal Bank of Scotland this morning reported a £1.38BN Q3 loss after taking a £400M provision against the cost of payment protection insurance compensation costs, for good measure it also booked a £1BN charge against the value of its own bonds.

The Telegraph reports that the total amount of money put aside by the bank to pay claims now stands at £1.7BN, having paid out £1BN thusfar.

RBS said that it was possible the cost of PPI compensation could grow further still.

Thursday, November 1, 2012

Lloyds PPI Chickens Coming Home To Roost

The old saying "what goes around, comes around" springs to mind when reading that Lloyds has been forced to make an additional PPI provision in Q3 of £1BN.

The total amount set aside by Lloyds for the PPI mis-selling scandal is £5.3BN, giving rise to a Q3 loss of £144M.

Lloyds has paid out £3.7BN in compensation thus far. However, it may have to make further additional provisions next year.

The Telegraph reports that Lloyds is less than pleased to be on the receiving end of fraudulent claims for compensation, driven in part by the plethora of claims management companies that are pushing people to make claims. Lloyds has written to the Financial Ombudsman Service asking for claims management companies to be forced to meet the cost of spurious requests for compensation.

Wednesday, October 31, 2012

Net Worth Update (October 2012)


Net worth for October increased by a mere 0.15% due to the fall in my commodities fund and the unexplained selldown in Biosensors. I believe the sound management and good fundamentals of Biosensors are making current prices look attractive. Biosensors is currently on a short term downtrend and the next important event will be the release of its financial results on 7 November 2012.

Cash/cash equivalents decreased by $2927.68 due to the purchase of 3 lots of Biosensors. Stock holdings increased by $3420 for the same reason.

The Economic Wasteland That Is The Eurozone

The September unemployment figures for the Eurozone make grim reading, for the Eurozone as whole the unemployment rate hit a record high of 11.6%.

That is a figure that is both shameful and dangerous.

However, dig deeper and it can be seen that Spain and Greece are suffering even more with rates of 25.8% and 25.1% respectively.

To add to the woes of the Greek people Greek finance Minister, Yiannis Stournaras, has submitted the 2013 budget to parliament. If the current policies of austerity, being imposed to assuage the Troika, are maintained/pursued:

-Public debt to GDP will hit 189.1%
-There will be a general government deficit of 5.2%
-There will be an economic contraction of 4.5%

It is clear that with rates of unemployment and debt at these levels democracy will be hard pressed to survive, as people will reach out for any ideology other than Eurozone austerity to save them.

Yet what does the European Commission do?

It asks for a budget increase of 5% to feed its bloated bureaucracy and those that serve it, whilst forcing the people of Greece and other Southern European states into penury.

This is a recipe for revolution.

Tuesday, October 30, 2012

UBS Redundancies Smokescreen

Whilst UBS is enveloped by the smokescreen of publicity derived from its mass culling (and handling of that mass culling) of staff today, it seems to have been a "good" day for it to also let the world know that it is under investigation in Singapore, along with other banks, for possible manipulation of Libor and other benchmark rates.

As per Reuters:
"These investigations focus on whether there were improper attempts by UBS (among others), either acting on our own or together with others, to manipulate LIBOR and other benchmark rates at certain times."

UBS - U've Been Sacked

UBS may well regret how it has handled informing its staff about their redundancies today.

The FT reports that UBS was one of the most popular trends on twitter, as the blogosphere flooded with comments describing the shock and resentment of staff.

According to the PR bullshit being spouted by UBS the redundancies are a ‘strategic acceleration from position of strength.

Who hires these people, and why are they still in their jobs?

UBS Redundancies Update

Ralph Sinclair has tweeted the follwoing:
"From inside 100 Liverpool Street: "Whole desks are gone and there are people stood outside without access to the building."

UBS Redundancies

It seems that UBS is making some people redundant today and over the next three years (10,000 in total).

Sadly, as per Owen Callan, UBS is using the "old school" method of informing them.

People arrive at work, if their passes don't work they are ushered into a special room where they are told that they are on special leave.

Monday, October 29, 2012

Greece Riskier Than Syria

The Washington Post reports that an annual survey of finance directors by BDO has found that Greece is considered a riskier place to invest and set up business in than Syria.

Only Iran and Iraq are considered more risky than Greece.

Sunday, October 28, 2012

Telephone Interview Update

I think I did quite well for the telephone interview as I was quite well prepared. Here are the questions posed to me :

Tell me about yourself 
Why are you suitable for this role?
Describe an event where you showcased your integrity
Describe an event where you encountered a communication conflict and how did you resolve it?
What is the most challenging task that you have done to date?
What is the most challenging module that you have done? Why is it challenging? Did you like this module?
Do you work well in a team? How do you usually contribute to your team? Give an example where you contributed to your team and what did you learn from it?

As you can see, the telephone interview made up of mostly competency questions. It took about 25 minutes in total and the outcome of the interview will be released by the end of next week. 

Meanwhile, another bank has invited me to take their psychometric test.

We have reviewed your details against our recruitment criteria and would like to invite you to participate in the next stage of our selection process, which will be a psychometric test designed to look for key behaviours essential to the position that you have applied for.    

I was pleasantly surprised that I managed to advance to the next stage of the selection process as my friend who has a higher GPA than me got rejected by this same bank.

This coming week will be extremely hectic and I might not have the time to apply for more jobs. By the end of this year, I aim to secure a full time job and reach the $60,000 mark for my net worth.

Friday, October 26, 2012



Sukuk literally means “pieces of paper” or “documents that acknowledge something.” In a commercial sense it refers to instruments used in Islamic finance to allow one party to raise capital or funds in the capital market with the issuance of sukuk papers that list the rights and obligations of all parties involved in a transaction. Even though sukuk are sometimes referred to as Islamic bonds, they are not bonds in the conventional sense as holders of the former are not supposed to expect a fixed rate of returns from their purchase of these securities, as is the case with conventional bond holders. In the case of sukuk, what is important is that holders of the certificates must own the underlying assets to justify returns which are not fixed but are tied to actual returns/incomes generated by the assets owned. Hence, in the case of sukuk musharakah, for example, investors are sold portions of assets to be used in business. Returns to holders are in fact income or profit earned from the use of the assets in a manner specified in the sukuk contracts.

The class of assets that has been used for the purpose of issuing sukuk is fast developing, ranging from mere tangible properties to include rights and claims or receivables. However, the latter classifications have been the subject of discussion by Shariah scholars in terms of their status with regard to securitization or sukuk issuance.

The emergence of sukuk in the market and their wide approval by international Islamic investors stems initially from the fact that they are supposed to be asset-backed. The underlying assets are normally in the form of real tangible assets, a portion of which are sold to investors as previously stated. But in the beginning what the investors own are basically proportionate interest or ownership of the capital provided/money price when they purchase the sukuk as a result of which they are given the necessary certificates/sukuk.

Therefore, sukuk are different from Islamic debt securities which have been widely used in Malaysia for quite sometimes even though they have been described as sukuk as well of late. Islamic debt securities consider outstanding debts to be the subject matters of the transactions that lead to the issuance of securities and as such these certificates may be properly known in fact as debt certificates rather than sukuk that are basically investment certificates whose returns are tied up to the real performance of the relevant assets that back up these papers.

The debts in Islamic debt securities (IDS) are normally debts that have originated from the sale and purchase of tangible assets by way of installments or deferred price the process of which ends up with the debtor/purchaser in the BBA/credit sale issuing certificates of indebtedness in favor of the seller the same to be made tradable in the financial or capital market. What happen in the case of Islamic debt securities is that in order for the certificates to be made tradable the concept used is what is known as sale of debt or bai al-dayn as understood in Islamic law whose permissibility has been debated by Muslim jurist since ancient time

On the other hand, in the case of sukuk, the subject matters represented by the certificates are tangible assets that have been purchased with the use of the fund contributed by the investors when they purchase the sukuk. Given that these assets are held in common by all the relevant investors, each of them is considered to have owned a proportionate interest in the asset commensurate with their respective amount of investment the ownership of which will allow him to get the anticipated return if any and at the same time to assume ownership risk as well throughout the duration.

For those who do not approve a sale of debt in the form of certain sum of money owed (the majority), their concern arises from the act of selling the debt to a third party for more or less than its value that will according to them result in riba'. Apart from this, they also insist that other conditions need to be fulfilled first before debts can be sold particularly to third parties. This is done to safeguard the interests of all parties involved and to avoid triggering Shariah restrictions related to riba' and gharar.

However, when the issued securities represent mixed assets comprising real tangible assets and debts, the trading of these securities can be allowed according to some opinions provided that the value or proportion of real tangible assets surpasses that of the debts or at least 51% or more of the combination of the two.

Greece Fails To Meet Targets

Unsurprisingly Greece is failing to meet its debt targets.

Reuters reports:
"Greek debt will be above the target of 120 percent of GDP in 2020, a preliminary report by the IMF showed on Thursday, and Athens will need more reforms before emergency credit from international lenders can start flowing again."
What now then?

Exit or political fudge?

Cynthia Carroll To Leave Anglo American

Anglo American, the mining giant, has announced that Cynthia Carroll will step down as chief executive after six years at the helm, once a replacement has been found.

She has come under increasing pressure from investors over Anglo's deteriorating share price and the company's industrial relations at its platinum operations in South Africa. Earlier this year shareholders asked the chairman to look for a new chief executive. 

Wednesday, October 24, 2012

Pensioners To Work For Pensions

In an admission as to how parlous the finances of the UK are, especially wrt funding pensions, Lord Bichard a former benefits chief has suggested that retired people should be encouraged to do community work such as caring for the "very old" or face losing some of their pension.

He is right to prompt a discussion about how pensions can be funded. However, I am not so sure that this is a viable solution.

Aside from the obvious political difficulties of "selling" it to the public, a good many fit retired people play an active role in their local communities already. As such, it is unlikely that even if this idea ever came to fruition it would achieve any measurable financial benefits.

Legs Kicked From Under Property Market

New rules to be announced tomorrow by the FSA wrt conditions on which mortgages can be granted will kick the legs out from under the struggling property market and, by definition (since the British economy is underpinned by the property market), the economy.

The new rules will make it much harder for the following to take out a mortgage:

- those over 50
- the self employed
- those wishing to use an interest only mortgage

Thus, at a stroke, the tenuous recovery that might be occurring within the economy has been stymied.

Tuesday, October 23, 2012

Das Rheingold - The Funeral of Siegfried?

Germany, the economic "powerhouse" of Europe, is experiencing a crisis of confidence; so much so that in order to assuage some of the more extreme doubters, the Bundesbank audited its gold held in Frankfurt (lest people doubt that it had been sold off) and even allowed MPs to visit it to check for themselves.

So far so wunderbar!

Unfortunately, Germany also holds gold deposits abroad. The FT reports that Suddeutsche estimates about 1500 tonnes are held by the Fed, and about 800 tonnes by the central banks of England and France. The total value being approximately €133BN.

The German court of auditors has, not unreasonably, demanded regular audits of Germany's gold reserves abroad.

Fair enough, and perfectly reasonable, were it not for one "small" problem.

The last audits in New York were in 1979/80, and since then whilst the Bundesbank has been allowed into vault it has not been allowed to open the boxes in which the gold is allegedly stored.

As we all know markets are driven sentiment, and sentiment is affected by fear and doubt. Unless a full audit is conducted in the near future, the fear and doubt will grow to a critical mass and Siegfried may well meet his end.

Rumour has it that the US gold reserves in Fort Knox haven't been audited either, maybe the US needs to do the same as Germany and lance the boil of doubt?

Saturday, October 20, 2012

Telephone Interview Invitation

"We are pleased to inform you that we have reviewed your application and numerical test results and would like to invite you to a telephone interview"

After a month of gruelling wait, I finally received a phone interview invitation from an international bank. The position that I applied for is a Graduate Program at the Corporate and Investment Banking department. I shall not reveal the bank's name to avoid unnecessary attention and any possible repercussion. 

Just to sidetrack for a moment, my previous post 'Wedding Cost in Singapore' had stirred much attention at TR EMERITUS aka 'Temasek Review' and I was rather amused to see such critical and judgmental comments about my post. However, there were some sincere comments that were really helpful and I truly appreciate it. I was simply trying to come up with a rough estimate of my wedding cost and it generated more than 50 fiery naysay comments in Temasek Review. To my delight, it generated more than 3500 page views on that day which translated into $3.21 of Google Adsense earnings. Contrary to what many other bloggers claimed, my Nuffnang ads did not generate as much earnings for me.

Back to the main topic, an interviewer from UK will be calling me to conduct the phone interview. If I were the bank, I would have saved some cost by appointing the HR from Singapore to conduct the phone interview instead. Assuming a phone interview takes 20 minutes and there are 100 phone interviews to be conducted, a total of 2000 minutes of costly international calls would be made. An alternative is a 'skype' interview, which is less costly and more effective as you can examine the expression and body language of the interviewee. Anyway, this is just my opinion and there might be other reasons for them to conduct the phone interview in this manner.

From what I have been told, there are a few rounds of interview in the selection process. If I meet their requirements for the phone interview, I will be invited to their office for a group interview before finally meeting the HR/Manager for a face to face interview.

The phone interview is scheduled on this coming Wednesday. In the meantime, I will read up about the bank and prepare for the interview as much as I can.  I shall update the outcome of my interview by the end of next week.

Friday, October 19, 2012

Greece Runs Out of Cash

Greek Prime Minister Samaras has warned that Greece will run out of cash on November 16 unless it receives additional funds before then.

Thursday, October 18, 2012

Nokia Rumours

Unsubstantiated rumours are going around that Nokia is to file a chapter 11 in the face of Q3 losses of €576 million.

Merkel Frets About Greece's Schneckentempo

Chancellor Merkel is, not unsurprisingly, becoming a tad peeved at the schneckentempo (snail's pace) of economic reforms in Greece. So peeved in fact that she told the German Lower House of Parliament so this morning, ahead of today's EU summit on the ongoing Eurocrisis.

Sadly, the only ones who will benefit from today's summit are the caterers!

Wednesday, October 17, 2012

Heil Our EU Overlords!

Germany has demanded an EU “currency commissioner” with sweeping powers to strike down national budgets; a “large step towards fiscal union”; and yet another EU treaty.

Crisis? What Crisis?

Those of you who are worried about the Eurozone crisis, and the increasing levels of unemployment and poverty within that blighted region should worry no longer.

The beleaguered and embattled President of France, Francois Hollande, has told the world that the Eurozone is "close, very close" to exiting its self inflicted financial crisis.

So that's alright then!

Apparently this close exit from financial Armageddon is all thanks to the decisions made at June's EU summit. One might care to remind Hollande that June was 5 months ago, and since then the situation has in fact worsened.

Tuesday, October 16, 2012

Consequences Of Giving Up Your HDB BTO Flat

I had a long conversation with my sister regarding HDB BTO flats today. To my surprise, she revealed to me that she is intending to apply for a flat at either Queenstown or Toa Payoh in the upcoming November 2012 HDB Build-To-Order exercise with her boyfriend of 7 months. In my opinion, 7 months of relationship is far from stable and absolutely not enough to determine if her current boyfriend is 'the one' for her. Furthermore, she is only 21 this year and there is no need to rush into things, especially when stakes are high.

Several thoughts ran through my mind immediately:

What if they managed to get the flat but break up afterwards?
What are the penalties for giving up a HDB BTO flat halfway?
Will the downpayment and grant be forfeited?
Do they have to pay back the Additional Housing Grant in cash?
Will the first timer privilege be affected?

I kept these thoughts to myself in order not to dash her hopes. As an elder brother, I am naturally protective of my sister and hope that every choice she makes is the perfect one. This led to a two hour research on the penalties and forfeitures for giving up a HDB BTO flat.

Here are my findings regarding the consequences of giving up your BTO flat in the event of a break up:

Giving up your BTO flat after the online application

At this stage of the application, monetary stakes are still low and the only thing you forfeit is the administrative fee of $10 should you decide to give up. However, do note that if your queue number is within range (queue number less than the number of units offered), or in the case where you are invited to select a flat even if your queue number is out of range(due to applicants before you giving up their chances), HDB considers a cancellation as a rejection to select unit. Also, you will lose your first timer priority after two rejections.*

So if you have previously rejected a chance to select your flat, stakes are higher as this means you will be stripped of your first timer privilege for a year if you reject the chance to select a flat for the second time. In addition, any additional chances accumulated from the previous unsuccessful applications will be set to zero if you reject to select a flat.

*From HDB Website : "To manage the growing trend of repeated non-selection of flat by First-timers, First-Timer applicants who reject 2 chances to select a flat will have their First-Timer priorities removed for a period of one year. If they apply for a flat in any HDB sales exercise within that one-year period, they would no longer enjoy the above priorities for First-Timers."

Giving up your BTO flat after unit selection but before signing Sales Agreement for Lease

By this stage, you would have already paid the option fee and selected your desired unit. Stakes are higher now. By giving up your BTO flat after booking a unit, the option fee* that you paid during flat selection day will be forfeited. Also, according to a new HDB regulation, buyers who cancel their bookings after putting down an option fee will now be barred from buying BTO (Build-to-Order) and resale flats with housing grants for a period of one year.

*Option fee for 4/5 room : $2000
 Option fee for 3 room : $1500
 Option fee for 2 room : $500
 Option fee for studio apartment : $250

Giving up your BTO flat after signing Sales Agreement for Lease

Now, things are turning ugly and stakes are getting higher. By now, you would have already paid the stamp fees and downpayment through your CPF/Cash/Additional Housing Grant (AHG).

5% of the flat purchase price and expended legal and stamp fees will be forfeited should you give up your BTO flat at this stage.

So if you are eligible for the Staggered Downpayment Scheme and paid 5% of the purchase price as downpayment, nothing will be refunded. If you paid 10% of the purchase price as downpayment, half of it (5% of purchase price) and the expended stamp and legal fees will be forfeited.

Also, if you were granted the Additional Housing Grant, you have to pay back the disbursed grant with interest in cash

Similarly, you will be barred from buying BTO (Build-to-Order) and resale flats with housing grants for a period of one year.

In conclusion, be sure that your partner is 'the one' for you before applying a HDB flat with him/her. Stakes are high and giving up your HDB flat halfway can have a huge impact on your finances. I guess I will have to talk to my sister about this someday.