CPF investment risks have multiplied, better for PAP to return our CPF

A few years ago, CPF fund manager, GIC, had already acknowledged global asset prices were overinflated. Yet, the government has been channeling additional billions in CPF into GIC.

GIC expected market downturn years ago

GIC had actually been anticipating a market downturn after 2013, as evident by its shifting away from risk: riskier assets were converted into ‘Nominal Bonds’ and ‘Cash’. Data from GIC reports.

* ‘Cash’ no longer disclosed

The flip side is this asset class does not earn a sufficient rate of return to pay CPF members and therefore GIC was forced to assume higher investment risk in other asset classes.

GIC concealing ‘Cash’ position

GIC has a serious issue with transparency.  This has been highlighted in numerous posts.

From the above table, it should also be obvious that GIC had tried to conceal its ‘Cash’ position after 2013 by commingling with ‘Nominal Bonds’. Any other fund manager would have been taken to task by shareholders/stakeholders, probably given the boot.

The PAP government, if it is not trying to conceal any material information from Singaporeans, should not condone poor corporate governance by GIC and disclose a breakdown in ‘Cash’ and ‘Nominal Bonds’.

‘Cash & Nominal Bonds’ increased 10%, earning peanuts?

From 2008 to 2013, ‘Cash & Nominal Bonds’ averaged 25% of GIC’s portfolio. This has increased by 10% to 35% in 2017. With rock-bottom interest rates, this would mean that GIC’s portfolio has not been very productive, ie 35% of assets earning peanuts returns.

According to SWFI, GIC’s AUM is estimated to be US$359 billion or S$494 billion.

Questions:
Is S$173 billion (35%) earning peanuts returns?
If the above is true, why does PAP amend legislations to trap our CPF in GIC?
Wouldn’t it be a win-win situation to return CPF to retirees at 55?

CPF risks have multiplied

In the 3 years before global stock markets began to collapse in 2007, net CPF contributions amounted to only $11.28 billion. ​In the last 3 years, net CPF contributions amounted to $42.29 billion.

Since global assets are overinflated and GIC has invested more CPF in these assets, doesn’t this also mean CPF members’ risks have multiplied?

GIC’s increasing AUM due to PAP removing CPF goal posts

GIC may be the envy of many fund managers but in reality, its performance sucks. Its AUM has seen a phenomenal increase not because of its superior performance but due to PAP tweaking CPF legislations.

From 2007 to 2016, net CPF contributions – less CPF interest – amounted to S$122 billion.

A substantial amount came from retirees who were forced into a pay-until-you-mati instalment plan by PAP, after postponement of the withdrawal age.
Under PAP’s PUYM plan, every member had to maintain an additional $66,400 ($166,000 – $99,600) in GIC at 55.

From 2007 to 2016, the CPF Medisave Minimum Sum increased by $20,500 from $28,500 to $49,000. Together with the $66,400 increase in the OA Minimum Sum, PAP forced every CPF member to retain an additional $86,900 in GIC at 55.

In view of the increased investment risks as well as GIC’s subpar returns, wouldn’t it be a win-win situation for PAP to return CPF members our retirement savings?

PS

Why is GIC forced to take additional risk,  investing additional billions from retired CPF members in overinflated foreign assets? Or is GIC in desperate need of funds to conceal massive losses?​

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Minister Lawrence Wong talking cock again, still thinks Singaporeans were born yesterday

I refer to ST article, “Major infrastructure projects over next decade will put Singapore economy on stronger footing: Lawrence Wong”.

Someone should let Wong know that Singaporeans are not dumbasses and the days when propaganda worked wonders are over.

To put our economy on a stronger footing, we urgently need to improve on productivity which Wong’s PAP has failed for decades. This has already been confirmed by his boss, PM Lee, who told us productivity had been kosong for several years before 2016. CNA

That our economy had managed to eke out a 1% gain after staying in negative territory for several years is confirmation of its weakness. If our economy was never on a strong footing to begin with, how will it become ‘stronger’?  Wong TKSS right?

Throwing billions at infrastructure projects is nothing new: during the past 5 years, PAP had embarked on record infrastructure construction, ie record residential housing, hospitals, roads, expressways, etc. So what happened to our economy?

Unemployment went up and is expected to increase further, more well-educated Singaporeans are turning to Grab and Uber, record number of private school closures in 2016, etc.

If more firms are closing amid tough economy, how did Wong come to the conclusion that our economy is strong?

Is our economy really that strong or was Wong talking cock?

How is our economy able to grow when PAP has priced Singapore out with exorbitant costs to benefit itself, the landlord?

Throwing tax dollars and past reserves at infrastructure projects will mostly benefit construction companies, some of which are PAP ‘affiliates’, eg OKP.

​Since construction companies hire mostly foreigners, this will benefit the government through increased foreign worker levy collection.

At the end of the day, how can we have an “economy on stronger footing” when good jobs are not created for Singaporeans?

Wong could not resist the urge to own self praise own self: “If you look at our history in Singapore, we have never failed in restructuring our economy before.” This is worse than talking cock.

Almost 2 decades ago, then MOE Minister Teo Chee Hean spoke about “developing Singapore into a knowledge-based economy“. Since then, the PAP has been talking about KBE and is still talking today despite its obvious failure.

Does a KBE require PM Lee to import 900,000 mostly low-skilled foreign workers since taking over Lau Goh? And do we need to transform Changi Business Park into “Changalore“?

Everyone knows that most of the money PAP throws at any ‘solution’ eventually finds its way back to you know I know who.

Seriously, Lawrence Wong should not anyhow assume Singaporeans were born yesterday. 😦

PS
Lawrence Wong’s unforgettable quote on transparency.

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Majority of Singaporeans unlikely to sacrifice for Singapore Inc

When Singaporeans say we love our country, most are actually kidding.

Go ask wealthy foreigners who recently became new citizens whether they will die for Singapore or pack up and leave and you will know what I mean.

Even our own cock-talking PAP elites – who have gamed million$ from the system – are no different. Our paper generals, former ones like Keechiu Chan or one-shot-one-kill Ng, will probably be hiding in classrooms and not leading their men on the battlefield. Or maybe hide in any small space they could find when the enemy approaches.

When public property was damaged and set on fire during the Little India riot, didn’t our men in blue go into hiding instead of protecting our property?

I believe most Singaporeans were once willing to sacrifice ourselves decades ago because the state did take care of people’s needs; to reciprocate by protecting our home with our lives was a natural thing to do. No need to be told or engage in NS 50/National Day propaganda.

But after witnessing CEOs Lau Goh and Lee Hsien Loong transforming our country into the largest corporation in the universe, the situation today is vastly different. According to ‘CEO’ Lee:

To most new citizens and Singaporeans alike, Singapore Inc is more like a hotel today. Should there be a total loss of confidence in the government or a major crisis, most who could afford to pack up and leave will do so.

Since Singapore Inc is no longer our home but a home to everyone, who would want to die defending it?

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Did LKY say he wanted to be a dictator before our independence?

In 1960, LKY was reported to have said this in a radio interview:

Can anyone govern without consulting the people and still be serving?

Is PAP governing effectively by amending the Constitution to allow a racist PE?
Or locking up our CPF till we die?
Sure or not, pricing land cost in HDB flats without transferring strata titles is in our interests?
Was it also in citizens’ interests to be locked up for years, some for decades, because they spoke up for our country but were a threat to PAP?

It appears the seeds of an authoritarian government were already planted even before independence. 😦

Hmm … was LKY saying he wanted to be a dictator? What do you think?

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GIC masks its poor rate of return from CPF members by reporting in US$

GIC has been engaging in propaganda to ‘boost’ its performance, eg disclosing irrelevant information to mask its poor returns.

Since GIC invests in only foreign assets which carry high forex and political risks, one would have expected a higher rate of return. Instead, GIC has disappointed and due to its poor performance, it has forced PAP to pay low returns to CPF members for more than 2 decades.

In this post, we’ll take a look at its 5-year rate of return and GIC’s preference to disclose this in USD but not in SGD.

According to GIC, its 5-year rate of return in US$ has fluctuated between 2.6% and 12.4% since 2011.

From 2011 to 2016, US$ had depreciated in 4 out of 6 years (31 Dec exchange rate)**. By disclosing a US$ rate, GIC has therefore ignored the fact that our investments in SGD have depreciated. GIC has therefore been telling us half the story/half truth with regard to its investment performance.

In order to compute a US$ rate of return, the invested amount in SGD would first have to be converted to USD. To compute a SGD rate of return, the total returns plus capital in USD would have to be converted back to SGD at the end of the 5-year period.

An example using an initial capital of SGD 100 with a US$ 6.3% rate of return is shown in the table below.

From the table above, the 6.3% rate of return in US$ is in fact only 2.8% in SGD. This is due to the 15% depreciation of USD by the end of the 5th year. (Investing in foreign assets carry high risk.)

Using the same method of calculation, it can be seen that the 5-year rate of return from 2011 to 2016 in SGD is much lower than in US$ (table below).

Whenever US$ depreciated, the rate of return in SGD fell and vice versa.  GIC’s 5-year rate of return was below average CPF interest rates in 3 years, even negative in 2013.

But since returns would have to be eventually converted to SGD, shouldn’t GIC also disclose figures in SGD?

Should GIC be allowed to conveniently use the higher USD rate of return to mask its poor returns in SGD?

Hmm … why does GIC prefer to report its rate of return in US$ and not SGD?

Perhaps GIC does not want to cause panic among stakeholders?   Maybe CPF members should just act stupid. 😦

PS
CPF members could easily achieve a 4.7 rate of return by investing in our local stock market. Why should GIC take high forex and political risks to achieve such low returns?

**
I should have used 31 March exchange rates instead.  There is a discrepancy and GIC’s rate of return should have been lower.  My apology.

 

 

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