Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Monday, 23 January 2017

Unemployment with Artificial Intelligence and Automation

Automation and Artificial Intelligence (AI) is a big discussion topic at the World Economic Forum meeting at Davos. Many prominent speakers from politicians to business leaders spoke of both the pros and cons of it. Even in Singapore, our local media has recently published an article that half of the world's jobs can be gone if businesses just adopt the existing technologies. 30% of what most of us do on a daily basis can be automated away. This means that we could be clocking 30% less hours working or we could see more unemployment.

In 1930, Economist John Keynes published an essay stating that in the future, people will work for only 15 hours a week and spend the rest of our time enjoy life. Fast forward to now, we are far from that 15-hour workweek. The shortest workweek in the world is about double that 15-hour (Europe), Asia and America is about three times that (averaging 45 hours).

Recommended Post: Top News in 2016 that might affect 2017

An MIT professor, Professor Erik Brynjolfsson, argued for several years that technological advancement (e.g.; Artificial Intelligence and Automation) have destroyed more jobs than it has created since the start of the 21st century. He foresees a future where even more jobs will be lost to machines, not just in the manufacturing sector, but also in professions like law, finance, and medicine.

Professor Brynjolfsson's research showed that between WWII and the 21st century, productivity gains have coincided with jobs growth. But since the beginning of 2000, the 2 lines have diverged, with productivity continue rising but jobs growth stagnating.

Weak job growth is not the only problem caused by technological advancement. Another problem caused by technological advancement is a stagnating median household income. Median household income since the 1980s has not risen as much as the GDP per capita. GDP per capita in the 2000s is almost double that of 1975. Median household income, however, is barely 30% higher than 1975's level. The internet phenomenon begun only in the 2000s, this means that technological advancement (not just the internet) have not benefited the average household by raising their income at a rate comparable to GDP growth.

Solution to Jobs Growth?
Global population is expected to reach 9 billion in 2050 (a 20% growth from current 7.5 billion).
Suppose everything remains as its current state, productivity growth continues at its current pace while jobs growth remains stagnant. We may soon have 1.5 billion people unemployed - and that's a serious problem economically and politically.

With jobs growth on stagnating or declining, maybe the way to re-creating jobs is to reduce the working hours set by the law closer towards the "goal" set by Keynes. Productivity has increased multifold over the years, one man is now able to do the work that required several men to perform in the past - but has his/her salary went up by that many times?

It is simple mathematics:
1 man produces 1 output in 1 hour.
In a 8 hours shift with 4 men, a total of 32 outputs are produced.
Suppose a machine allows 1 man to produce 4 output in 1 hour.
In an 8-hour shift, 1 man with 1 machine can produce 32 outputs.
Now the company can fire the other 3 men.
Fairly harsh right?
What if, the working hours were changed.
Instead of 8 hours, now we work for only 4 hours.
In a 4-hour shift, 2 man with 2 machines produces 32 outputs.
Now we saved 1 man's job.

If we were never created to sloth our whole life, maybe the working hours should shift a little?
If we have become more productive, maybe we should share the gains of that productivity by working fewer hours. In fact, there has been research and studies that show humans work best when we clock 30 hours or so in work. Of course, this drastic measure is too shocking and damaging to our economy if it were to be implemented immediately. Instead, a gradual shift is required by the to slowly reduce our working hours to 30 plus hours per week.

Recommended Post: Singapore Retirement, Re-Employment, CPF Withdrawal Age

Opposition to the Idea that Technology Kills Jobs:
Of course, there are economists who claim that the evidence provided does not fully support the idea the technological advancement. The period of study, particularly from the beginning of this century, happens to coincide with the Dot-Com bubble and the Great Recession, which economists claim could be distorted as data from the 2000s are not compared against post-Great-Depression period.

The Technology Review article can be read HERE.
The Keynes 15 hours work week can be read HERE.

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Thursday, 19 January 2017

CPF Home Loan or Bank Loan?

11:40 Posted by cheez , No comments
Buying a HDB flat for the first time can be an intimidating experience. It is probably the first big ticket purchase in your life that will take the next couple of decades to pay off, so you would definitely want to rake in as much savings as you can.

Perhaps you have not really thought about what kind of loan to take up. If you do not already know, you have a choice between taking up a HDB loan or a bank loan, provided you are eligible for them.

You might want to hold on to your cash and pay off your home loans using your CPF, but did you know that taking up a bank loan allows you to pay less interest? This is because bank interest rates are lower as compared to the CPF Ordinary Account (OA) interest rate which home loans are pegged to.

Recommended Read: Misconception of Re-Employment Age Extension

And while the down payment required to take up a bank loan may be higher (at 20%, with at least 5% paid in cash) as compared to a HDB loan (10%, fully payable with your CPF), you get to enjoy greater flexibility in retaining your savings in your CPF OA. Conversely, upon the collection of keys to your new home, HDB will wipe out your CPF OA balance to reduce the loan quantum required for you to service.

In the following infographic, we run through the main factors to consider while taking up a home loan for your HDB flat, and the main differences between taking up a HDB loan and a bank loan.

Click HERE to see the full infograph.

Recommended Read: Singapore Stock Market: Outlook

Infograph provider:
The team at Redbrick Mortgage Advisory has more than 60 years of banking experience and is proficient in structuring and sourcing for the best financing terms for both residential and commercial real estate in Singapore, Malaysia, USA, UK, Japan, Thailand and Australia.

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Monday, 16 January 2017

Singapore Retirement Age, Re-Employment Age and CPF Withdrawal Age

11:51 Posted by cheez , 2 comments
As a follow up to our previous post on the Misconception Singaporeans have on the Re-Employment Age, we decided to go further and explain the difference between Singapore's Retirement Age, Re-Employment Age and CPF Withdrawal Age.

Singapore Retirement Age
Singapore's Retirement Age is set at 62.
This means that your employer cannot ask you to retire before you reach 62.
This does not mean that you can only retire at age 62.
YOU CAN RETIRE ANY TIME YOU WANT, you just have to say "I QUIT" to your boss.

Recommended Read: Genting Singapore: A Possible Rekindled Flame?

Singapore Re-Employment Age
Singapore's Re-Employment Age is currently set at 65, and will be raised to 67 in July 2017.
Once you reach the retirement age (62), your employer is required to continue to employ you if you wish to and am healthy to continue working.
It ensures that if you are 62 but would like to continue working, your employer is not allowed to fire you.
This is similar to raising the Retirement Age EXCEPT it looks better policy-wise because raising retirement age is often badly received by the public - read our misconception post to know why.
The Re-Employment Age gives it a much better packaging of "you can retire if you want to at 62, or you can continue to work if you would like to" instead of "the retirement age is now 67" which gives people an impression that they can only retire at age 67.

Singapore CPF Withdrawal Age
Singapore's CPF Withdrawal Age is set at 55.
This is the age you can start withdrawing money out of your CPF account.
You can only withdraw money above the Full Retirement Sum (FRS) or $5,000 (which ever is higher).
Subsequently at age 65, you can choose your CPF LIFE plan (CPF LIFE) and start receiving monthly payouts until you pass away.
You also have the option to start your CPF LIFE payouts later, up to age 70.
Example: you can choose to start receiving payouts anytime between age 65 and age 70 (eg when you reach age 67), but the latest age to start is 70. For each year deferred, your future CPF LIFE monthly payouts may increase by up to 7%.

Recommended Read: Singapore Stock Market: Outlook

Share this knowledge with your family and friends who tell you that the Government is making them work until 67!
Sharing is Caring!

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Friday, 13 January 2017

Genting Singapore: a possible rekindled flame?

06:00 Posted by szcszc No comments
Back in December 2016, the Japanese government has passed a law that allows casino gambling in integrated resorts which includes hotels and entertainment lodges. Despite the long-standing proposal of this bill, Mr Shinzo Abe was determined to be the one to carry it through and this has certainly hit his public popularity whereby it was stated by a poll from Kyodo news agency, public approval rating fell from 60.7% in November to 54.8% in December for Mr Abe's government. In my opinion, this is could be a potential case of "doing what is right for the nation instead of what is popular", as we all recall the familiar phrase taught in Social Studies back in Secondary School. It is definitely reasonable to deduce that the Japanese government is trying to replicate the success of the local integrated resorts where income is increased while the negative social impacts are being controlled. This can be seen whereby gambling addiction prevention legislation could be submitted this year, similar to the processes that we had in Singapore when casinos are approved to be included in the 2 integrated resorts.

As we all know, Japan has been suffering from many years of stagnation and poor economic performance. Even with the implementation of Abenomics, results have been disappointing. Hence, I believe Japan will need all kinds of boosts that it is capable for generating to propel it away from its current plight. One of them is the Casino Bill. 

Japan is certainly not new to the gambling industry where "Pachinko" (pinball parlours) can be prominently found in cities. I can personally vouch that when I was touring in Tokyo! With this bill, Japan would likely see an increase in tourism, earnings from the gambling taxes and foreign investments on tourist facilities to capitalise on this opportunity. This could then be used as additional coffer to supplement its existing streams of income. 

With these in mind, it is natural to turn our area of focus to integrated resorts developers which includes Genting Singapore, that is conveniently listed on the Singapore Exchange. It can also be seen that the share price of Genting has been slowly creeping upwards since the announcement. The question though is: How likely is Genting Singapore able to come out on top of its competitors and secure the license?

Balance Sheet Strength
A logical requirement of building an integrated resort is money. By that, I mean, loads and loads of money. Looking at Genting Singapore's balance sheet, it is comfortable to say that it has a decent hoard of cash and cash equivalents, totaling of $5B, considering that it has a market capitalisation of $11B. This would likely give them a comfortable financial padding if they do undertake the project. A comparison to a competitor, Las Vegas Sands, which has an estimated of $3B in cash and cash equivalents, this does put Genting Singapore in a better position.

Experience Level
However, the mention of Singapore being a role model for the Japanese Government will not give Genting Singapore more advantages compared to Las Vegas Sands as both have Integrated Resorts in Singapore and are equally experienced developers. In fact, Genting's declining market share is instead proving to be more of a worry. 

Likelihood of securing the project
Given that there are multiple potential sites that integrated resorts could be implemented, this does help Genting in terms of increasing its chances of securing one project. 

Future Growth Opportunity
Nonetheless, with more openings of integrated resorts, there are also more competitors within the country fighting for both local and foreign market shares.

The upcoming restraining gambling legislation on locals may also limit the potential of the local market. This is also observed as a crippling factor in Singapore and there is not much steps or actions that the developers can do to sidestep its impact.

One comforting factor is that the Japan integrated resorts are projected to overtake Singapore, making it the second largest in global gaming market. Hence the pie could be big enough to accommodate 2 to 3 players.

Genting Singapore is definitely within the leagues of being a serious player in the Japanese market given its financial strength and relative reputation standing. Its future earnings potential could be limited and would likely follow the muted performance in medium term of 5 years after the novelty effects wear off. It will still give better returns on Genting's current large position of cash. The first few good years would also give its investors a run reflected in its share price, though I doubt it will last. This is of course subjected to whether Genting is able to obtain the casino license.

All in all, Genting Singapore is still a good option for investment due to its large cash pool but risks follow in terms of how the management will utilise it if it fails to obtain the license.

Wednesday, 11 January 2017

Misconception of Re-Employment Age Extension

Singapore Parliament have recently made changes to the Retirement and Re-employment Act, these changes will act to protect and encourage older workers to participate in Singapore's economy.

Some of the changes made includes:
  1. Companies must now offer employees the eligibility to work until 67. Previously it was until 65.
  2. Companies are not allowed to reduce the salary of employees who turn 60 from July onwards.
  3. If the company is unable to find work for the older employee, the company can
    • transfer the older employees to their subsidiaries 
    • transfer the older employees to other companies if the employee agrees to the transfer
  4. If companies cannot continue employing the older employee at age 62, the company is required to pay a one-time Employment Assistance Payment to that employee, pegged at 3.5 times the employee's monthly salary.
Recommended Read: Singapore Stock Market: Outlook

Common Misconceptions: Re-employment age increased from 65 to 67. This means I have to work until I am 67 before I can retire
You can retire at any age. You can retire the minute you strike 4D or Toto, there is no need to wait until 67 or 65 before you can retire. The Government has not shifted the retirement goal post further away from you. Instead, it mandates that if you wish to work and am fit to work, your company is REQUIRED BY LAW to keep you as an employee until you reach the age of 67.

Recommended Read: Top News in 2016 that might affect 2017
For more details on the changes, click HERE.

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Saturday, 31 December 2016

Top World News in 2016

As we near the end of the year, it is the time we recap the major news that occurred during this period. It is probably not a very good year. We started with Zika and ended with President Barrack Obama leaving the White House (bad to worse). But of course, there are some moments in 2016 that are worth rejoicing about - or at least there is ONE!

February: Zika Virus Epidemic
The World Health Organisation (WHO) declared Zika Virus outbreak as a Public Health Emergency of International Concern after it started spreading like wildfire in Latin America, America, Europe and parts of Asia. It was a huge concern because pregnant mothers infected with the virus would give birth to deformed babies. It has resulted in Governments in several countries advising its citizens to delay their intention to have a child and also advise their people not to travel to affected countries.
Although the WHO declared the end of the Zika outbreak in November 2016, many countries are still closely monitoring its citizens' health condition to ensure that Zika does not result in another epidemic again.

March: Artificial Intelligence beats human in Chess
An Artificial Intelligence (AI) developed by Google defeated the best chess player in the world. While we are often defeated by the AI in mobile chess Apps, this one is different in several ways.

1) The chess game Go is not just another chess game. It is one of the most complicated chess game in the world, requiring intuitive, strategic and creative thinking. Most chess games are "pre-programmed" certain steps to ensure victory. But for Go, it is impossible to "pre-program" because the number of possibilities is almost endless (2.08 x 10^170 to be exact).
2) Instead of "pre-programming" all possible moves in Go into the computer, the AI is instead fed with a huge amount of gameplay to "learn" how to play Go. The AI was also made to play against itself as part of its "learning process".

We are now another step closer towards a future where robots and AI perform tasks while humans enjoy the fruits of it. Of course, the opposite is also true: a future where humans are put out of jobs by robots and AI

FYI: the creators of this AI has no idea how the AI evaluate its every move. Isn't is just magical (or scary?)

April: Panama Papers Revealed
Panama Papers, or documents of confidential financial information that were leaked to the world in April. It contains the personal financial information of rich, famous and influential people around the world, from government officials like then President of UAE Khalifa bin Zayed Al Nahyan and relatives of government officials, to sports stars like Lionel Messi and billionaires like Seydou Kane. The documents were first made known to the Journalism world in 2015, and it underwent a year of analysis before being made public in 2016.

The Panama Papers reveals the major loophole in our current tax system, allowing much rich and/or influential people to hide their money away from tax authorities (evade taxes). Although this is not illegal, it is considered by many to be immoral because these people are not paying their fair share of tax despite benefiting from their host country. Personally, I do not see it as immoral but simply a flaw in our current global tax system. Then again, can we expect change when there are people in government who are benefiting from such shady and unclear tax laws?

June: Brexit, Britain votes to leave EU
Britain held a referendum and Britons voted to leave the European Union - which they regret almost immediately after the results were out and many wanted another chance to vote to stay in EU. Many had expected the Britons to vote to remain in the EU because it was a wise choice politically and economically. As it turns out, Britons did not wish to adhere to conventional wisdom, choosing to leave EU and fund their own fiscal budget with the money that was supposed to be for the EU.

Although UK's new Prime Minister has voiced her intention to leave the EU, the whole process of leaving take around 2 years to achieve. The EU was created to push Europe, a continent with a history of wars with one another, towards unity and cooperation. Brexit has paved a way for Europe's disintegration after 20 years of effort towards integration. As nationalistic populists continue to gain foot in European politics, government and citizens putting their own country's interest above Europe's interest, a much more divided Europe is not impossible in the next 10 years.

July: Pokemon Go Launches 
With all the unpleasant event that occurred in 2016, many must be glad that this was also the year the long awaited Pokemon Go was released! The craze lasted several months before it finally settled down, created its fair share of accidents, mishap, and misadventures, it also brought many fun moments, especially when it bonded families together to go on a Pokemon adventure and when it became a better motivator for people to walk than any other measures.

Financially, the game's popularity sent Nintendo's share rising more than double before settling at current levels of 25,000 yen per share, a 66% rise from a pre-PokemonGo price. Nintendo has also released Mario Run on Apple's App Store and is set to release event more games in 2017. Does it mean more potential upside for Nintendo's shares?

August: Brazil impeaches its President
Brazil's Senate voted to oust their President Dilma Rousseff out after months of debate over her alleged corruption charges and ineffectiveness in uplifting Brazil's economy. The President was suspected of falsifying the government's accounts. The impeachment process started in April and was only able to achieve the majority vote required to impeach President Rousseff in August. Under Brazilian laws, the country's Vice-President will take over the role of as interim President until an election is carried out and a new President elected - which is now scheduled to be in 2018.

The impeachment of President Rousseff has divided the country into 2 camps: those who support her and those who do not. A divided nation is not going to help pull Brazil's economy back from the dead. GDP has fallen for 6 consecutive quarters (worse since the Great Depression) and a Presidential scandal only made matters worse. But now that the political arena is sorted out, maybe the government can focus on what matters to the Brazilian people: a thriving economy and jobs!

September: US & China signs the Paris Global Climate Agreement
The US and China combine produce around 40% of the world's carbon emission. Their participation in being willing to cut their emission represents a huge step forward for the world to address climate change. Previously, both countries had been unwilling to join the Paris Agreement because both of them felt that it would be detrimental to their respective countries' economy if the other party did not join. The fact that both of them are now in the Agreement shows that the 2 biggest economies in the world agree and realise that climate change is real and has to be rectified; and two, are willing to communicate to achieve certain goals despite their differences.

Under the Agreement, countries are required to cut their carbon emissions EXCEPT there is no hard rule on how much to reduce (1% drop is also allowed). But of course, countries that joined the Agreement have agreed to cut by at least 10% on average. That is a good step forward towards a better world. With countries pushing their green agenda forward, the renewable energy field is going to see a much larger boom and financing in the future! Looks like Telsa bought SolarCity fairly cheap now doesn't it?

October: Death of Thai's King
On October 13, the passing of Thailand's beloved King made headlines in most of Asia's newspaper. The Thai Prime Minister declared that Thailand would mourn for its King for a year. Without the revered King serving as an icon of unity in deeply divided Thailand, it might not be long before clashes occur in Thailand between the 2 parties in Thailand (Red-shirt United Front for Democracy Against Dictatorship and the Yellow-shirt People's Alliance for Democracy).

The military might use the mourning of the King's death as an excuse to delay the elections in the country. The country has been under military rule since it ousted its previous government in 2014. This creates political uncertainty and instability within the country, which does not brood well for the country's worsening economy.

November: Donald Trump became the 45th US President
Donald J. Trump became the 45th President of the United States of America. While this came as a shock to most of the world, not all the shock was bad. While many are dumbfounded by how a man of his caliber could become the US President, others found him as a force of change in the White House. Financial markets, in particular, seemed absolutely happy that he won. The S&P500 rose 6% while the Dow rose 8.8% since after the election results were announced.

While it is good news that the financial markets are up, not all would be attributed to Donald Trump. Historically, there is evidence proving that in the year a Republican Presidential Nominee is elected, the stock markets ended positive. But the stock markets tanked in the year the Republican Nominee is inaugurated. We will just have to see if this is true in 2017.

December: 3 rate hikes next year
The US Federal Reserve Chair(wo)man Janet Yellen announced that the Fed will increase interest rates for 3 times at least next year. Last year, Janet Yellen said that we will experience 4 rate hikes in 2016. However, the Fed only raised interest rates by 4 times this year, from 0.5% to 1.375%. So far we have only seen 1 rate hike from 0.5% to 0.75%. Will we really see 4 rate hikes in 2017? Pretty sure it will be the usual "subject to the economic data of the US".

While an increase in Fed rates will increase borrowing cost for borrowers, it will also benefit savers (who are suffering from record-low interest rates). Maybe this might encourage more people to save money for rainy days (saving rates around the world is falling and indebtedness level rising).

As we come to the end of 2016, from InvestmentStab, we wish you a Happy New Year and a wonderful financial journey in the next year!

Comment to us, or tell us, what are some of the big news that occur in 2016. Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?

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Wednesday, 28 December 2016

ShopBack: Save with Coupons, CashBack and more!

11:20 Posted by cheez No comments

While I was googling for alternatives to reduce my expenses, I realised that apart from reducing takeout and preparing my own meals, there was an on-going trend of online retailers dealing in all kinds of products. They vary from groceries to mass e-retailer Amazon. With the introduction of these e-retailers, consumers now enjoy an additional option when it comes to shopping! The fierce competition between these new entries and the old brick-and-mortar retail stores have resulted in lower prices - this only stands to benefit consumers! Furthermore, these new entries also periodically give out coupons or hold one-off sales event to attract shoppers. 

One of the ways that I found was to shop through websites that provide promotions, discounts, and other perks. One startup that particularly caught my attention was ShopBack and the services they offer. What caught my eye about them was:
  1. Cash back on most online purchases
  2. Discounts on products from a range of retailers
  3. Best deals in town for the products you are looking for
The most interesting part about it is that ShopBack offers not just cash backs on item purchases (clothes or electronics on sites like Taobao) but also on travel purchases and food purchases e.g. food delivery and groceries.

Shopback uses the commissions it derive from the retailers it helped referred to provide these great bargains to consumers. While these rebates range from product to product, they do help consumers save a considerable amount of money. You can even double down on the benefits by paying via your credit card, earning rewards from both ShopBack and the financial institutions!

ShopBack however, is not all about cash back. There’s a whole depository of information of great offers and deals here at ShopBack and these deals range from categories like promotions on electronic products and dining deals to seasonal sales event.

Hence, besides the norm of complimenting credit card promotions and store promotions, here are the new 3 rules of augmenting the upcoming online trend:

1. ALWAYS google search for Coupons or Promo Codes

There are numerous sites that collate free coupons or promo codes for potential customers to save more on their purchases. Credit card newsletters may also now send you an email to notify you on their upcoming joint effort with online stores. An example was OCBC, where they would sometimes work with Zalora and offer further discounts which you can use if you happened to have an OCBC credit/debit card. You can also find a coupon code on a whole host of online retailers at ShopBack that allows you to benefit from transactions for things like travel at Agoda or groceries at HonestBee.

2. Go for Group-Buy
More often than not, online stores offer group discounts. This is if you buy more than 1 items, there will usually be a bulk purchase discount. You may then relate this to the concept of Groupon. Many other individual sites also offer their own kind of similar sale whereby if you buy more of the same items, there will be a slight discount in terms of per-unit purchase.

3. Stack on Credit Card Discounts

As I said previously, banks and financial institutions are now working in tandem with online stores to offer greater savings for their customers. This might come as a regular promotion or an attempt to increase the use of their credit/debit card. This would often be stackable with other vendor promotions.

At the end of all this, we hope that this would be able to help our readers achieve their financial goals through savings and cashback.

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