Simple is the Reason of My Heart

Why Microsoft is gunning Yahoo for US$44B

The news that Microsoft bids US$44B for Yahoo! has rocked the world of technology today.  It  is perhaps the most hostile move ever made by the software giant. The best part is that Yahoo! retorted the Microsoft bid as "unsolicited" but did not reject it. It means that they are seriously considering the sale. Why is Microsoft making such a big purchase on their shopping trip for technology companies? Here are some of my guesses for this big acquisition of US$44B.

Trends on the US dollar in 2008

A few years ago, a US$1 can be exchanged for approximately SGD$1.7. If you have been following the foreign exchange rates lately, the exchange rate for a US$1 is now SGD$1.4, which means that the US dollar has dropped about 15%. Definitely, there will be implications in the global economy. Of course, there are many reasons why the US dollar is slumping for the last year. One main reason is that the US economy is running on a budget deficit that has passed beyond a trillion. Other reasons include the rise of oil prices, the cost of war for the invasion of Iraq and the recent US subprime mortgage crisis. The question looming for most investors including myself, is the following: "Should we start buying the US$ now or wait for it to continue slumping?" Here are my thoughts collected after a few vibrant discussions with friends on the US dollar movement in the next few months.

The Cotai Strip - A Reprise of Singapore's IR Strategy

Over the past few days, I was on a holiday trip to Hong Kong and Macau. While in Macau, I visited the various casinos owned by the various groups who took part in the two IR bids a year back. One of the new kid on the block in Macau, was the Venetician Macao owned by Sands (who would also be opening up the first casino in Singapore by the Marina Bay). The Venetician Macao was already an amazing piece of architecture with an entire shopping area which replicated the city of Venice with gandolas and piazzas. Although I am not a fan of gambling and casinos, I was impressed and in awe by the infrastructure and pace of development of the Cotai Strip where this new casino resort is located. For that matter, Singapore will face a stiff competition from Macau which has already beaten Las Vegas as the largest gambling centre of the world in 2006. While visiting the casinos by Sands, MGM and Wynn, a few things fell in place for me, which helped me to figure out why the Singapore government did not choose any local operator for the casino and in the same light, why they ended up picking Sands for one of the IRs in Singapore.

The Singapore State-Owned Investment Corporations Conundrum

Without doubt, the recent news of the Government of Singapore Investment Corp (GIC) to invest 11B Swiss Francs into UBS, a prominent Swiss investment bank for a 9% equity and no direct control has taken Singapore into the limelight. Of course, the reason why GIC was able to make such a big investment, is because UBS has made significant losses in the US sub prime crisis. For a long time, Temasek Holdings has taken a higher profile than GIC in terms of making state investments. This event has brought up a dilemma that is raised by many Singaporeans, including my colleague Wayne Soon who believed that some form of parliamentary accountability is required for such a hefty investment. Singapore has embarked on a very difficult course by creating state-run investment enterprises, that is subjected to a few extra conditions which normal private sector driven investment funds don't, for e.g., accountability to the parliament and a lot of public scrutiny if something goes wrong. Should state funds be used for such extravagant investments where it can be instead used for other purposes such as helping the lower class?

Bad Samaritans - Macroeconomics Revisited

I came across this book when the author Ha-Joon Chang was interviewed about his book "Bad Samaritans" in the Bloomberg on the Economy podcast. I was impressed by how the author has defended his views in the book.  So, I bought the book in Kinokuniya bookstore yesterday, and yes, for those who have the discount card, it's 20% off till the end of the year. So, why is this book interesting? If you remember Andrew Keen's "The Cult of the Amateur" as the anti-thesis to the books Wikinomics and Chris Anderson's "The Long Tail", then "Bad Samaritans" is a book that portrays the opposite end to Thomas Friedman's "The Lexus and The Olive Tree". A scholar in development economics from my alma mater (Cambridge University), Ha-Joon Chang made some interesting comments about the future of globalization and applied the historical arguments how the rich and powerful governments such as the US are "bad samaritans". His argument can be simplified into the following: while most of the intentions of these governments are worthy, their free market ideology and lack of historical understanding failed them in their quest to take poor nations out of poverty. In fact, he demonstrated the successful developed nations such as Japan have totally evolved with policies contrary to those which are prescribed by the leading institutions such as World Bank and IMF. Here are two interesting lessons that I recommend you to take from the book.

The Interest rate to Curb Inflation in Singapore

I have been following with the news about Singapore's economic forecast with interest. Our government has expected inflation to rise to 3.5 to 4.5% in 2008 from a 2.0% estimate this year. On the ground, we hear two stories: one, the economy is booming and two, the costs of living are rising till everyone has to downgrade their expectations. The GDP growth is 8% this year, which means that the members of parliament will get at least of 3 months bonus, given the latest revisions of salary hikes for ministers and top civil servants. I don't have a problem with that, if they can do something about the rising costs of living and the taxi problem. While the government seems to be tone-deaf in the rising costs of living among the people, I am inclined to believe that they are going to do nothing and let the current hikes adjust till equilibrium. The rising costs, fueled by the sudden real estate boom and growing financial industry (with the coming of the integrated resorts in 2009), will adjust our expectations of better lifestyle for a while. The problem why everyone is feeling the pinch is that everything is rising except the interest rate. Yes, everyone is spending now, because there is no point saving given a low interest rate. If the government is seriously thinking about the current generation and the aging population, they have to find a way to deal with the rising costs of living which even the middle class are finding it hard to stomach. If we don't increase the interest rate, there is no incentive to save and given a lot of people will spend their money to hedge on stocks and get burnt (if a crisis happen). I hope that something is done about the interest rate, otherwise, the next PM will be giving another speech about increasing the retirement age to 75. Yes, these problems are interwined and complicated, but there exist solutions that can slow the problems while awaiting for a better solution like growing the small medium enterprises.

What do Singaporeans mean by the private sector being better

My colleague, Kway Teow Man wrote an article to explain the rationale behind the Civil Service Appraisal System. The article prodded me to think about why a lot of people out there are always making this assertion that "the private sector is better than the civil service". So what is it that people mean when they say that the private sector is better than the civil service?