Category: retire]SG

Temasek^MAS_OFR^GIC

Posted on by tiger40490

Q: given Singapore’s oversized reserve, does Singapore’s investment/asset-mgmt talent pool have adequate calibre?
A: I think MAS and GIC allocte large portions to external managers with specific expertise, and manage the allocation with control, periodic reviews and rebalancing. I feel China government is less likely to do that. (On a footnote, Temasek is somewhat differnet. It owns stakes in many government-linked companies.)

In contrast, Private money AUM in Singapore was about SGD 5T as in Singapore assets under management up 10% to $5.4 trillion in 2023; new debt issues rise 21% | The Straits Times

— based on Ravi Menon: How Singapore manages its reserves (bis.org)

Singapore’s reserves are held and managed in three distinct pots: the MAS, GIC, and Temasek.

MAS manages the OFR [official foreign reserve, SGD 500b as of mid 2024]. MAS is the most conservative of the three investment entities, with the OFR invested mainly in safe and liquid assets. Probably low-return. Out of the 3 pots, I guess only MAS fund can help defend the Singapore dollar, due to liquidity.

The GIC (well over USD 100b, possibly many times bigger) is a sovereign fund manager, managing the government’s foreign assets.  These assets are separate from the OFR. At GIC’s inception, part of the OFR was transferred from MAS to GIC, which was tasked to invest the reserves in a globally diversified portfolio of asset classes with a higher risk profile to deliver good long-term returns. GIC’s annual (dividend?) return contributes to the revenue of the government.

Temasek (SGD 400b in Nov 2022) is another state-owned equity investor. More than a quarter of Temasek’s portfolio is invested in Singapore, with the rest invested in 1) Asia and 2) global markets.  Compared to MAS and GIC, Temasek is further out on the risk-return spectrum. I suspect that Temasek doesn’t have a statutory duty to pay annual dividends to share holder (i.e. the SG government). Such an obligation would limit the level of risk capital in the fund.

— Temasek 2022 .. based on https://www.channelnewsasia.com/business/temasek-holdings-net-portfolio-value-crosses-400-billion-first-time-annual-review-2803921

  • 63% in Asia
  • 27% in SG
  • 22% in China .. #2 country allocation
  • — by sector
  • #1 sector: 23% financial services
  • #2 sector: 18% telecommunications, media and technology
  • #3 sector is transportation and industrials (energy and resources)

Unlisted securities (52%) registered 16% IRR over 20Y. These are often the most risky, unestablished businesses.

— CPF money and GIC.. demystified and clarified in every S’pore dollar is backed by hard asset #ownership.

subway^MRT: illustrating fiscal discipline

Posted on by tiger40490

Trigger: In the subway system, we can see evidence of the fiscal discipline and cost efficiency of U.S. vs SG. Adjusted for ridership, I suspect the budget is no higher in SG, but the quality is much better in terms of frequency, weekend /availability/, cleanliness, probability of delays, customer service, wear-n-tear of equipment,,,

Let’s look beyond the subway. Most Americans, rich or poor, get a lousy deal in terms of public service per tax dollar. U.S. corporations and individuals pay much higher taxes, but governments run deficits every year. Therefore, public debt increases every year to cover the deficit. Without enough data, I can only hypothesize that SG system is more judicious with public spending.

One exception to prove the rule — U.S. social security administration is efficient (according to various sources). Other public service providers are inefficient.

Americans rely on private transport much more than Singapore residents. Similarly, top American employers spend a lot to provide employees the “public” service that’s wanted but missing. In other words, private employers step in to cover the gap between public services and employees’ needs.

— government deficit .. Looking into the numbers, another reason for the excellent service/tax ratio in Singapore is the non-tax income to the SG government. That includes profit from government-linked companies, and sovereign funds.

I guess a less discussed reason is rEstate appreciation, which is stronger in SG. I guess that land sale revenue (to government) has grown over the decades. Also, many local rEstate assets are owned by government-linked companies, and these assets appreciate much faster than in the U.S.

retirees do worry about inflation erod`nest egg

Posted on by tiger40490

https://www.cnbc.com/2021/06/07/heres-an-option-to-protect-your-portfolio-from-inflation.html  says CPI-inflation is a top concern as investors fret about the rising cost of groceries, housing, gasoline and other living expenses.

Q: Is this widespread in the U.S. or Singapore?
A: I have limited insight. I would assume this is a top concern among some retirees in _every_ country, but less in SG

We can look at realized inflation. One of the biggest complaints of Chinese citizens is inflation in everyday purchases i.e. CPI inflation (housing doesn’t qualify). SG is not bad as discussed in several bposts.

Q: is SGD 3k CRBR realistic?
A: I still feel confident.

SG CPI-inflation: 30Y xp, basket composition

Posted on by tiger40490

% of burn rate … excludes tax payment, P in P+I

Is it better to spin off to a new bpost [[30Y xp@SG inflation]]?

k_deflation

For long-term burn rate management, inflation (along with medical) is one of the top 5 concerns. Long-term (30Y) prediction of inflation is unreliable. 3k/M burn rate doubling over 20Y is an unreliable prediction.

If we exclude flights, enrichment, bx, rental cost, then the crbr (couple retirement burn rate) is showing very low inflation. Indeed, each individual’s concept of “basket of goods” can vary greatly, just as each person’s retirement burn rate. (The last observation was echoed by Officer Teo at Bishan CPF service center.) My own burn rate record-keeping is more reliable and relevant data source than official inflation, though I can derive insight from official “basket of goods” including housing, private car, enrichment.

==== CPI basket. https://www.singstat.gov.sg/find-data/search-by-theme/economy/prices-and-price-indices/related-info/faq-on-cpi shows the percentage weights for an average Singaporean family, which contrasts my percentages (in color):

  • 25% housing + utilities .. (excluding telco) SG CPI uses imputed rent, so this weight is comparable to mine (30%). From here on, I need to include a phantom $2k imputed rent into my monthly burn rate. Also 25% weight in U.S. CPI
  • 21% nutrition
  • 17% transport … (including flights) more like 10% due to absence of car
  • 8% recreation + culture …. probably including tourism, dining
  • 6.5% education .. more like 15-20% in my basket
  • 6.5% medical .. (including bx, excl wellness) $176/M more like 4% of my 5k/M. Was 10% in my basket during Q3sg.
  • 5% household_durables … (unfamiliar category) includes semi-consumption or big-ticket items like furniture, electronics
  • 5% misc
  • 4% comms .. includes phones and monthly bills. $200/5k = 4%
  • 2% clothing

Warning: CPI excludes non-consumption expenditures such as loan repayments, purchases of houses, income taxes,,,

Q: which category is currently my biggest category, beside housing?
A: nutrition, utilities (MRT, energy, telecom…)

==== Q: Did individuals’ basket price double over 30Y?
Raymond said “less than doubled over 30Y”. Raymond pointed that actually some items became cheaper, often thanks to Chinese improvement in quality. (See also https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=549&action=edit)  Raymond also felt housing inflation is too high due to government. I think he mostly referred to BTO prices.

Zeng Sheng said “maybe 60% increase” since he arrived in 1998 (22 years ago).

Pauline Teo’s book basically says “yes”, using 3% compound inflation rate. The Jan 2021 DBS seminar also used 3% compound inflation over 20 years. The Singapore CPI inflation rate shows average around 2%/Y, according to my google search in 2020.  BeReadyWithCPF microsite also used 2% inflation to forecast retirement cash flow.

— in 1994 I started living on my own, spending perhaps $500/M excluding rent. When I first met XiaoAn I think he guessed “probably below $1500 including rent” and I said yes. Assuming my 2001 burn rate was $1k/M excluding rent,

Q: would I be able to live alone today at the same burn rate?
A: Yes I’m confident. Look at my c++US phase excluding rent + airfare.

— Q: has price doubled over 30Y from 1991 to 2021?

  • shirt, pants, shoes – i feel didn’t double
  • pouch — doubled.. was probably $2-$3
  • cinema .. didn’t double. Alternatives include home movie
  • backpacks — didn’t double, due to cheap imports from China
  • doctor consultation – didn’t double, due to OPEC-style price control
  • —- nutrition
  • cheapest coffeeshop meal – didn’t double. $3~5, based on … 10 observations. My recall is rather imprecise and unreliable, often mixing cooffeeshop and foodcourt prices.
  • foodcourt .. comparable foodcourt meals costs $5~6. If I compare the price figures displayed in food court, then apparently doubled, but most of those stalls I “never” try. Probably in 1991 they were already pricier than mixed vegie rice.
  • bread – didn’t double
  • milk – didn’t double
  • Burger – didn’t double
  • Ice Kachang (and other deserts) – more than doubled. Used to be $0.60. I feel this is classic luxury item. I should simply avoid it.
  • —- housing-related
  • HDB rental – I was paying $300 in 1995 to 2005. Now should be more than double.
  • electricity tarrif before GST: 16.7c/kWh as of 2005. Not doubled.
  • —- transport:
  • MRT fare – roughly doubled. In contrast, NYC subway has increased from USD2/trip (2007) to $2.75 now.
  • bus fare — nearly doubled. Was 50c
  • air ticket – didn’t double. Actually lower if you include Budget airlines.
  • Taxi meter fare nearly doubled, but Grab is a bargain

https://tablebuilder.singstat.gov.sg/table/TS/M212951 shows about 69 specific items (of the CPI basket, mostly nutrition). It plots the price change over 12 years.

What items are in the hard_basket?

— over 30Y, some things became …. cheaper !? See also globalization reducing minimum cost@acceptableFood

  • laptops, budget smartphones, routers
  • broadband
  • mobile plans. If you look hard, you can find some “products” that are cheaper than before.
  • bicycles esp. foldable
  • haircut — $5 in 1991
  • fan
  • stationery
  • white sugar, beer, … according to singstat

currency_in_circulation

Posted on by tiger40490

This bpost can belong to tanbinvest or the recrec blog. I keep it in tanbinvest for now because it is about SGD currency strength, affecting my long horizon (including retirement) planning.

Currency in circulation .. is explained in [[TheEconomicsOfMoneyBankingAndFinancialMarkets]] P412 (FedReserve). Other central banks may use their own systems to calculate/report their currency in circulation. However, there is some international agreement (or standard?) as the Bank for International Settlements provides detailed statistics of the worth of banknotes and coins for 18 major currencies.

— Q: Does money printing affect currency strength?

A: For USD, [[TheEconomicsOfMoneyBankingAndFinancialMarkets]] has lots of details but I guess the Fed money printing process is equivalent to printing physical money.

Excessive money printing without _additional_ foreign reserve is dangerous, and can lead to currency depreciation.

I guess many central banks actually borrow money (by issuing bonds with legislative approval) to print its own currency.

— Q: how is the total “currency in circulation” affected by electronic banking?
A: [[TheEconomicsOfMoneyBankingAndFinancialMarkets]] has a chapter on money supply, but I haven’t read it. I believe that banks have rigorous (audited and consistent) systems to account for every penny.

Fundamentally, electronic payment is only a record of physical movement of cash and should never take place without “physical”.

(You could be a company, part of a local or central government, or another bank.) A bank would increase your account balance by $1 exactly when you deposit $1 physical cash. Things are more tricky when you deposit foreign currency (as exporter do) or when you receive electronic transfer, but I believe all changes in your account balance is backed by physical movements of physical cash.

The vault (of a central bank or a private bank) holds gold and foreign bank notes. These assets change hands upon an electronic transfer between institutions.

 

prevalence@poverty: U.S.imt Sg

Posted on by tiger40490

With a vague title, this blogpost may eventually merge with a blogpost with a less vague title.

Why I care about poverty in my chosen country? It is subtle… Inequality, social unrest, financial strength of the government…

Q: why is poverty less widespread among Singapore nationals (Citizens + PRs) than U.S. and other countries?

— Reason: very high home ownership
— Reason: (my personal observation) price levels are generally lower than U.S., except raw foods
Inflation for basic necessities (not discretionary consumption) is, for decades, managed by a nanny state. Not managed in U.S. and many countries.

U.S. price levels can be very low, mostly due to efficient companies operating in free market. Government has much less control.

— Reason: SG government probably has a (not perfect but) functional system to keep track of every needy family including broken families. Arguably the most valuable feature of the “system” is adequate manpower. The system is not perfect but is far more effective than other countries in case-management to keep each needy family from falling behind.

In the U.S. the church and charity organizations play this role at a smaller scale. The case load is much higher per 1000 families, so they can’t cope.

— Reason: less freedom to bring yourself into poverty.
Many [1] people fall into poverty due to self-management (including self-discipline). They must want to be successful before a system can help them avoid/escape poverty. Singapore government leaves less room for “wrong moves” including falling off the train.

Strict control on gambling, debt, alcohol, drugs. Education system is compulsory, stressful and competitive. Savings are compulsory. The problem kids are identified early and put through years of tough programs. The systems push them to work harder, make the best of themselves and not rely on the system.

I have heard of many Singaporeans speaking of “hard to survive in Singapore” and “easier life in western countries”. Some (not all) of them don’t want to be very successful and would rather have an easy (lazy) life. Some of them would spend and gamble their way into poverty.

If you just want to be poor and become a problem to the Singapore system, then you have to work hard to remain poor. As long as you are on their radar, they will come and push you to work harder.

— Reason (minor): The government has numerous training programs to up-skill the unskilled Singaporeans.

[1] In every country, some percentage of the poor actually want to be successful i.e. work hard, but are stuck. The most valuable help IMO is training.

satiation income_level=USD 75k #Newport,SunsetWay

Posted on by tiger40490

See also self-evaluation of life: CSASS

[[Thinking fast and slow ]] includes a whole chapter dedicated “experienced wellbeing”, including a very brief contrast against CSASS. P397 hypothesized that beyond the satiation level of income, you can buy more expensive (pleasurable) experiences, but you are likely to lose some abilities to enjoy the pleasures of a simple life.

Warning — “satiation level” is only in terms of experienced wellbeing [xpSelf, not rmSelf], and doesn’t even imply hard limits on long-term satisfaction, life chances, success (as defined in 4 ways).  This satiation is really about “savoring the moment“.

Kahneman reported that based on 450,000 (450k) responses from thousands of Americans, beyond the satiation level of $75k/Y household income (as of 2011, in high-cost US locations), experienced wellbeing (NOT the CSASS evaluation by the rmSelf) no longer increases. “The average increase of experienced well-being associated with incomes beyond that level was precisely zero.”

(Note in 2011 I happened to live in the U.S.)

This research is relatively new content in a book of well-researched contents. In a 2022 BBC radio program [[money, money, money: Value]], a Yale professor referenced some similar research.

— moving to Newport .. When we moved to Newport, something strange happened to our experienced well-being. My wife probably felt less well off than before, because every other young mother in the neighborhood was better off in terms of education, English, earning capacity, perhaps dressing. Newport feels young, cosmopolitan, and smells affluent. Perhaps she felt not belonging there. I remember visiting my ex-schoolmate HY.Cai in Newport…

There’s another “reason”. The “more expensive experience” refers to the affluent location including clean streets + landscaping (see other blogpost). This enhanced our experienced wellbeing. But I guess we also lost some abilities to enjoy some simple pleasures of life, like cooking, going to a small neighborhood park.

— Similar experience: PandanValley vs SunsetWay/Clementi .. I remember my first visits to SunsetWay (more intense at Clementi).

At SunsetWay, a typical HDB estate, I was able to enjoy some simple pleasures of life like

  • more variety of hawker food, compared to PandanValley
  • cheaper goods in provisions shops, compared to PandanValley
  • much shorter walk to public transport, compared to PandanValley, and easier to reach MRT or Clementi town

— rural HDB estates.. locations unpopular with the affluent. Places like CCK, Yishun, Woodlands further out from MRT. Or perhaps older estates in TPY-Bishan-AMK.

every SGD dollar=backed by hard asset #ownership

Posted on by tiger40490

 

As of 2020, the total currency in circulation was S$57 billion.[6] This figure was 29 billion in 2012. All issued Singapore currency in circulation (notes and coins) are fully backed by external assets in its Currency_Fund to maintain public confidence. Such external assets consists of all or any of the following:[9] (a) gold; (b) foreign exchange in the form of time deposits; Treasury Bills; (c) securities of (or guaranteed by) foreign governments or international financial institutions; (d) equities; (e) corporate bonds; (f) futures; (g) other asset.

As at 31 March 2017, MAS’s assets (S$395 billion) were more than seven times larger than the assets of the Currency_Fund (S$55 billion).

Official Foreign Reserves (mas.gov.sg) shows similar history levels for end of 2017. By the way, the end-2019 level was below end-2018, possibly due to covid19 preparation

As part of the MAS total assets, Singapore’s foreign reserves officially stood at over US$288.2 billion, as of July 2022 according to the MAS.[11] This is confirmed by the monthly query result on MAS Monthly Statistical Bulletin – IV.7 Official Foreign Reserves

2022 Q1 gold.org/IMF data shows similar numbers:

  • SG total reserve [sum of the below] = USD 434.4 billion
  • SG FX reserve = USD 424.8 billion
  • SG gold reserve = 153.74 tonne = USD 9.6 billion, or 2.2% of total reserve

MAS assets including OFR+gold add up to S$580b as of Feb 2022, but excludes assets managed by GIC and Temasek. All of them are owned by the the SG gov, operated by the PAP administration. See “oil money” below. Comprable to the Nobel memorial fund, or the Harvard endowment fund, it is not owned by any SG citizen. The private money held by SG citizens would add up to a separate amount. In contrast, the assets in CPF is 100% owned by individual citizens (simplest case), not owned by SG gov; the assets of IBM is 100% owned by shareholders. One shareholder could be Intel, another could be SG MAS.

Each (portion) of the SGD 29b was created exclusively by MAS, either physically or (presumably) electronically. Electronically means deposite into a bank account. Every physical note has a serial number. Either physical or electronic, a new SGD 1 represents a kind of “claim” on the $55b CurrencyFund.

— owernship of CPF money

Backgrounder: In general, every amount has an owner. (A central bank and a government is also a kind of owner.) MLP managed 40b but each dollar has a known owner. When Intel invests $100m free cash, that 100m is “owned” by Intel, but Intel stocks are owned by millions of investors including institutional investors. Ownership is complicated by holding companies and investment trusts.

1. CPF money belongs to individual Singaporeans, and not government’s money. This ownership difference must be understood first. If $200m CPF money (including my money) is managed by GIC, then this $200m is not “government’s money”. See MOF | Is our CPF money safe? Can the Government pay all its debt obligations?

2. CPF money is invested with a fund manager — GIC. GIC also invests “government’s money.” The dual mandate of GIC is extremely confusing until you understand the ownership. Similar to GIC,

  • GSAM, was managing client’s money, employee’s money and Goldman’s house money.
  • MLP was managing client’s money and founder Izzy’s family money

— oil money .. when oil appreciates, many gulf countries became richer. Basically, the central banks and treasuries became richer with a bigger OFR.

Q: Who have the ultimate ownership of the oil assets (+ the derived cash)? Some say the king, some say the citizens, but I would say “not so simple”. The government is the proper owner, as stipulated in the constitution.