Sunday, September 9, 2007

Much ado about CPF

This was taken from one of the online Singaporean forums. Some interesting facts and figures on the workings of CPF. I figure Singaporeans need to read up on this issue to fully understand what annuity effect has on your money. Thanks to Scroobal for the following information:


I do realise that not many people are not aware how CPF functions. Here are couple of points. More than happy if folks out there can correct if the understanding is wrong.

  1. CPF Board is an accounting and administrative body. It plays no part in managing CPF funds for investment purposes. By law it is not allowed and neither is it equipped. There are exception which are Insurance schemes where funds are relatively small.
  2. In 2006, out of current members' balance of $125B, $108B are in long term deposits
  3. The $108B was handed over to MAS in return for Special Issue Goverment Securities. This is where it disappears into a black hole as I can't it in the MAS financial records.
  4. The interest received in return was $4B which makes this about 3.7% interest return.
  5. The CPF Board determines the interest for this investment but the methodology is not revealed. However the interest given to member balances cannot exceed 2.5% unless approved by Minister of Finace. The methodology for determining member interet is well known and published in their website.
  6. By this arrangement, technically if the $108B yielded 20% return via investment, the Govt is not obliged to declare a bumper bonus and has never done so. It has never returned anything higher.
  7. Granted that CPF balances are guaranteed by the Govt, and a fee may be order to acknowledge this but retaining excessive profits is basically placing an indirect tax on the returns.
  8. Financial Report also shows that surplus income of CPF Board gos to the Consolidated Fund and this amounted to $66M in 2006. This is despite CPF performing a number of functions for various Govt bodies and which are only billed on a cost recovery basis.

From the above, one can surmise the following

  • Additional returns no matter how high are retained by the Govt
  • Someone is making management fees from the funds invested
  • In view of the indirect tax, CPF members incur higer rate of taxation.
  • Did the money given out on the eve of elections come from these returns
  • If from the onset, all returns from investment are returned to member balance via higher interest minus of course management and guarantor's fees, the compunding effect on the balances would have been tremendous over 25 years using an accepatble Global Pension Fund as benchmark

Some interesting tidbits

  • Academic in Universities in the past were allowed to run their own Provident Fund which was managed by OCBC. Wonder why the special allowance. To many questions from smart people and to buy their silence. One wonders
  • No wonder the selfemployed and businessmen never found CPF attractive
  • Admin and Intelligence Service now and the rest of the Civil Service in the past were on pensionable service and therefore their opportunity cost was lesser. Certainly no motivation to improve the CPF system as it does not affect them.

I bet my bottom dollar that the investment returns retained by the Govt over 48 years in total was higher than the returns given to CPF members.

Is the current scheme morally wrong? Is this a bad deal facilitated by legislation? Will transparency help address misconceptions and wrong perception? Is there room to improve?

Sunday, September 2, 2007

Chardonnay 2006- Jacob's Creek & Tesla

Yesterday's dinner consisted of a roasted chicken drumstick and baked pizza stub. The meal was paired off with a Chardonnay 2006 from Jacob's Creek.This winery is a pretty well established brand and is located in Barossa Valley, Melbourne. Aside from the trademark cream of Chardonnay it's really sweet and has a bit of melon, color is light pine with a slight tinge of green. Low acidity and tannin on this wine , aftertaste is weakly lingering. Went well with my chicken drumstick. For 8 AUD no complains but I've had better chardonnays. It only gets a 6.3/10 from me. Was looking for the Old Bastard brand but didn't manage to find it so I settled for the chardonnay. The next grape I will hop to will be Riesling, my personal favourite.

Did some reading on my quality management subject, got a bit bored and started surfing. Did a google on Tesla. How many of you have heard of him?Tes who you ask? Nikola Tesla, contemporary of Edison and Einstein; is one of the greatest contributors to modern science. Unfortunately he was kinda weird and pissed off JP Morgan who financed his experiments. Eventually he died poor and forgotten. Sad... Heaven makes sport of men. Especially those with exceptional talent. If it weren't for this guy there would be no A/C power, radio and a host of other engineering contraptions. Tesla fits exactly in the mold of the mad scientist, but he was a humanitarian with a hatred for war. He envisioned free power for all which was the reason why the businessmen stopped financing him.

Tesla had some interesting concepts on electromagnetic waves and he believes that FTL(Faster than light) is possible. He puts forward that scalar waves travel at 1.5c. I have similar sentiments that FTL is definitely possible. Although I think the Theory of Relativity is a beautiful explanation, it has also limited us severely in terms of scientific progress. Recent years have seen only a few leaps in terms of theoretical physics and it seems that relativity has this dampening effect. The fact remains that there are unexplained UFO cases that seem to violate our known physics and Tesla's explanation seems a plausible platform to expound on the possibilities of these gravity defying flight patterns of the UFOs. Logically if UFOs exist and are unexplained then there are 2 possibilities: 1)they are of alien origin 2)they are man made. If they are of alien origin some form of FTL is very likely possible. Secondly if they are man made, there has already been a breakthrough in gravity manipulation or some form of advanced field propulsion.

It will be a cosmic joke if we are the only sentient lifeform out of the 200 billion stars in Milky Way. Given that we believe evolution spawned humans through chance and natural selection, it works out too in terms of probability that aliens are really not that far fetched. Interesting thought isn't it? Perhaps one day we can live life amongst the stars sipping a Chardonnay 2006 with an alien friend.


Saturday, September 1, 2007

Apec 2007

Depending on your perspective, Sydney in the upcoming days will be either the safest place in the world or the most dangerous. Why do I say so? Well it’s APEC 2007-Sydney! Leaders and their entourages from 21 countries representing 40% of the world population will be descending on this city .To safeguard the dignitaries, 7th of September has been declared a holiday for Sydney in order to minimize traffic flow and residents have been advised to plan for a weekend out of town. I guess the fishing spots and hiking trails will be mighty crowded. So far traffic has been rerouted and Anzac Parade (one of the main roads) not far from where I stay is going to be cleared at certain timings over the week to come. As I write this, a chopper just flew past overhead. Part of the stepped up security measures no doubt.

Sydney did a remarkable job in the 2000 Olympics, the stadium is a magnificent piece of architecture and the security did a pretty neat job in maintaining order. I hope for all our sakes they repeat the sterling performance. The current landscape is unlike 2000, it’s a gloomier world these days with epic natural disasters, wars and rampant acts of terrorism. Year 2000 was a huge celebration for mankind, where we ushered in a new millennium and laid to rest the yakking of sulky doomsayers. I remember holding a big barbeque party for my Polytechnic classmates back then. In the past 7 years, things have changed a lot: 9/11 in September 2001, Indian Ocean Tsunami 2004, Hurricane Katrina 2005, possibility of an impending US recession and even Harry Potter plots grew darker to reflect the changing times.

Some issues I hope the leaders will address are: global warming, renewable energy, widening wealth-gaps and auditing of international charities. Venerable MM Lee himself has been concerned about the global warming issue and has consulted Holland on how to build dikes. Global warming is a huge concern for island nations and it’s not something to be taken lightly. Millions of lives are at stake here it’s not something that will happen in the far future that time is well in our lifetime! With the Industrial Revolution (IR), humankind birthed the monstrous entity named Corporation, which hastens our progress towards inevitable doom. Greenhouse gases have increased at an exponential rate since the IR, causing glaciers and ice masses to melt; climate changes. I hope that for once the oil sheiks and executives of petroleum corporations will put obsessing about profits aside and think of the future, of their fellow men for a change. Suffer a loss in profit but we get to exist longer as a species. Sacrifice is often needed for progress. Open the safes and take out the promising research, do not seek to hinder the progress of alternative energy. Do not see an undermining of profits as a threat to the corporation; it is the corporation that is the threat to our very existence! Humans should rein in the corporation and not let the profit charts take away our rights to exist. Civilization is so very fragile; we learn from history that great civilizations can vanish in a twinkling of an eye. If we do not start actively using safer alternative energy forms it will be too late.

Al Gore has stated very plain facts on his documentary An Inconvenient Truth. He showed glaciers and ice masses melting, weather changes and some changes in ecology. The fact is the damage goes deeper than that. Increased temperatures also bring about an increased rate of temperature-sensitive mutations in viruses and those dormant viruses locked in by the last Ice Age will emerge. Mosquitoes thriving in warmer climates will now be able to travel to what used to be cooler places on Earth and spread hemorrhagic fever. We have no immunities against these new biological threats. Natural cycles of insects are altered and may cause breeding to grow out of control. Warmer weather also mean that the hurricanes grow more energetic, causing greater damages. Katrina is only a show of what’s coming on Nature’s agenda. The only reason why there’s been little public paranoia is because the education has not sunk in. People need to see real world impact before they realize the gravity of the situation, often not it’s already too late to remedy.

The critical task that lay before mankind in this century is to come up with energy efficient transportation, effective alternative energy sources, improvements on recycling technologies and methods of waste disposal. For example Brazil is doing a great job at biofuels. Also places like Ireland are using tidal arrays to harness the currents for good use. Developments in high temperature superconducting magnets will help to secure alternative energy sources as reliable. Surfaces that aid in catalytic combustion will also be an area of research as well as molecules with ability to increase the octane power of biofuels. USA is a critical player in this global warming issue as it is the largest contributor of greenhouse gases. More US states must start using alternative means of energy to break OPEC’s dominance.

Next is about wealth gaps. People should have a minimal standard of living worldwide shouldn’t they; after all it’s the 21st century? Some people rationalize: oh that poor people may not have the material luxury but they are happy blah blah. These people should probably stay a month in Botswana with the Aids victims and the famine victims in Zimbabwe or tsunami victims in Sulawesi. Others are simply apathetic over what happens elsewhere in the world as long as they themselves are living in their comfortable wells. Currently the rich are getting ridiculously rich while the poor starve to death. One end of the spectrum we have people gorging on Big Macs until their BMI is 35 and the other end we see malnutritioned people at 17 BMI. Think about the inches you will add to your waist and the poor people in Zambia before you take that bite. Perhaps you should be thinking of how to send that Big Mac to a starving kid. What makes it worse is that wealth is so poorly distributed. The richest 2% of adults in the world own more than half of global household wealth. Alone, the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In comparison the bottom half of the world adult population owned barely 1% of global wealth. This is from a study by WIDER. We see people like Warren Buffet, Bill Gates and George Soros donating away a large part of their assets. This is admirable and really necessary for proper wealth distribution. What about the rest of us? Read the WIDER report and find out where you stand and do something. There are now indications that biofuels may bring about a change in Africa. Tough strains of bioefficient crops can be engineered to grow in Africa. That spells hope but in the mean time they are still starving.

Last of all we need to have an inbuilt transparency and auditing for International Charities. There are unscrupulous and selfish people in this world who work for charities and siphon money off these organizations. Charities have innate operating costs but surely there is no need for an extremely posh office or for executives to fly all over the world in First Class or to pay themselves huge salaries. Charities need to be accountable to the public. Their priority is first and foremost to famine victims and they should be morally and legally accountable if charity funds are not used in the most efficient way possible. There should never be the situation where we donate 10 dollars and only $0.50 goes to the victim. Read about corruption here.