Don’t over-stretch yourselves: MM Lee

Financial prudence in periods of boom will enable S’poreans to ride out bad times

MINISTER Mentor Lee Kuan Yew last night urged Singaporeans not to over-stretch themselves financially in a period of boom, so that in the event of bad times, they would be better able to ride out the cycle.

Describing the effect of the property cycle, he warned that property prices go in cycles and will not keep going up all the time.

‘They go up, then they go down,’ he said. ‘So when they go up, don’t believe that it’s going to go up further and further, and you start buying bigger and bigger, and mortgage for bigger and bigger amounts. Because the day it starts to fall, the cycle goes around, you will find yourself with a negative value asset.’

It is by such prudent attitude that the government has refrained from spending the hundreds of billions of dollars of reserves that it has built up over the decades. Pointing to the recent investments made by the Government of Singapore Investment Corp and Temasek Holdings, Mr Lee said the two agencies were able to increase the value of their assets because they hang on in a recession, and sell part of their assets and keep cash when the boom becomes too intoxicating. The strategy ensured that when international banks like UBS, Citigroup and Merrill Lynch needed cash, GIC and Temasek would have the cash to invest in them.

Mr Lee was speaking at the Tanjong Pagar GRC Chinese New Year dinner when he made those comments. The constituency dinner, held at Farrer Park Primary School, was attended by some 1,200 residents and guests.

At the event, Mr Lee also cautioned against failing to plan for old age, saying: ‘The government will not allow anybody to die of starvation, but we are not going to cover you for your indiscretions.’

Along with the guarded tone in his message, he spoke of a bright outlook for Singapore. While the rise in food and energy prices and the widening income gap are causes for concern, he said Singapore can mitigate these problems.

‘But we must press ahead and maximise our chances to break through in the coming five to 10 years to reach a higher quality of development,’ he said. ‘We are now into a period of steady growth and transformation.’

Apart from the massive foreign infrastructure investments Singapore has attracted, the Republic is also spending about $28 billion in new MRT lines and a new expressway. The city centre is undergoing a makeover with the upcoming integrated resorts, the soon-to-be-completed Marina Barrage, and a Formula One night race.

Mr Lee said that Singapore has become successful thus far ‘because we have assumed individual responsibility for our lives’. Without natural resources, the way Singapore has managed to attract investors has been to keep taxes low, and offer a highly efficient, non-corrupt system and an industrial climate where workers, employers and government can work together.

‘And that is the basis on which we have huge investments coming in, because they (investors) know that this system will ensure that there will be no sudden dive down,’ he said.

‘I therefore urge everyone to remember, individual responsibility and family responsibility for each other is the way to go forward and the way to build one of the best cities in the tropics.’

 

Source: Business Times 12 Feb 08

MEDIA & MARKETING: Newspapers still among top media platforms

Despite hype over Internet, traditional forms of advertising still have edge: Poll

DESPITE the buzz and hype surrounding advertising on social networking and other Internet sites, newspapers still trounced other media as the most effective marketing platform last year.

This is because newspapers and other traditional forms of media still have a far wider reach, said the Fournaise Marketing Group in a recent survey.

The Singapore-based firm is one of the world’s top trackers of marketing effectiveness.

Its Marketing Effectiveness Report for last year, issued earlier this month, contained the results of a poll of more than 3,000 business-to-business and business-to-consumer marketing professionals working for small and medium-sized enterprises as well as larger firms, in Britain, Australia, China, India and Singapore.

Among the key findings was the fact that newspapers still easily beat other media in terms of marketing effectiveness despite the rise of online advertising.

Globally, newspapers ranked third behind direct marketing and public relations in terms of effectiveness in reaching out to target markets, ahead of online e-mail messages, referrals and display ads.

In booming economies such as Singapore, India and China, newspapers topped the list ahead of television and outdoor advertising.

Fournaise chief executive officer Jerome Fontaine said this was not surprising.

‘In markets which are growing fast, companies are still keen to build awareness and interest in their brands.

‘A big draw for established media such as newspapers is the fact that they still have a relatively wide and established reach.

‘Another attraction is that there are avenues for them to be audited externally, unlike many online forms of marketing. This allows marketeers to know precisely what they are getting for their money.’

The report also showed that for every $100 spent on marketing by businesses around the world as they tried to reach out to customers last year, a whopping $65 was likely to have been wasted.

The level of wastage was lower in high-growth centres such as Singapore, it found.

But the problem that marketeers face in getting their message through is universal: lots of media clutter, along with savvy and sophisticated customers and an extremely competitive marketing environment.

The survey concluded that marketeers around the world believe the marketing wastage rate for businesses trying to sell their wares to consumers was a significant 65 per cent. It was a lower 45 per cent for business-to-business firms.

In countries with relatively low economic growth, such as in North America, Britain and Australia, the estimated overall wastage rate is 60 per cent, compared to 40 per cent in countries with higher levels of growth such as Singapore, India and China.

Top 10 platforms

THE most effective marketing platforms of 2007 according to Fournaise’s report:

1. Direct marketing

2. Public relations

3. Newspapers

4. Online e-mail messages

5. Outdoor

6. Online (referrals)

7. Online (display ads)

8. Television

9. Sponsorships

10. Endorsements

 

Source: The Straits Times 12 Feb 08

Little-known trader made billions from sub-prime bust

THE big losers in the United States sub-prime crisis are well-known – Citigroup, Merrill Lynch and UBS.

But probably the biggest winner is Mr John Paulson, a little-known hedge fund manager who made an estimated US$3 billion to US$4 billion (S$4.3 billion to S$5.7 billion) for himself from the crisis – believed to be the largest one-year payday in Wall Street history.

Ironically, his hedge fund company, Paulson & Co, that has profited most from the bursting of the US housing bubble hired as adviser this week the man widely blamed for inflating it in the first place – former Federal Reserve chairman Alan Greenspan.

Mr Paulson smelled trouble in the market for risky home loans two years ago and devised what proved to be a wildly profitable strategy for betting against the housing market, The Wall Street Journal said on Tuesday in a profile of the man.

Like many legendary market killings, such as Mr Warren Buffett’s takeovers of small companies in the 1970s, Mr Paulson’s sprang from defying conventional wisdom, said the Journal.

In early 2006, the wisdom was that while loose lending standards might be of some concern, deep trouble in the housing and mortgage markets was unlikely.

A lot of big Wall Street players were in this camp, as seen by the giant mortgage-market losses they are now disclosing.

‘Most people told us house prices never go down on a national level, and that there had never been a default of an investment grade-rated mortgage bond,’ Mr Paulson told the Journal.

He also devised a technical way to bet against the housing and mortgage markets.

Also key: Mr Paulson did not turn bearish too early.

Some close students of the housing market did just that: investing for a downturn years ago, only to suffer painful losses waiting for a collapse that they finally unwound their bearish bets, said the Journal.

The low-key Mr Paulson, who grew up in New York, began his career working for another legendary investor, Mr Leon Levy of Odyssey Partners.

Now 51, Mr Paulson has benefited from an earlier housing slump 15 years ago, buying houses in foreclosure sales. In 1994, he started his own hedge fund with US$2 million and built it up to US$500 million by 2002.

In January 2006, he launched a hedge fund solely to bet against risky mortgages. The result: Funds run by him were up US$15 billion last year. His investment gains have boosted the total amount his firm manages to US$28 billion, making it one of the world’s largest.

 

Source: The Straits Times 17 Jan 08

It’s confirmed; S’pore to host first F1 night race

PARIS – SINGAPORE will host its first Formula One race next season – and it will be the sport’s first at night.

The World Motor Sport Council released the 2008 F1 schedule on Wednesday, and Singapore was listed as the 15th event on the 18-race calendar. It will be held on a street circuit in the Republic on Sept 28.

The 2008 season calendar has a few minor changes, many of which were already known. The European GP will be on a street circuit in Valencia, Spain, and the Turkish GP has been pushed forward to May 11.

The 2008 season will begin in Melbourne, Australia, on March 13.

The calendar also includes 10 races in Europe, along with others in Malaysia, Bahrain, Canada, Japan, China and Brazil.

Mclaren to pay fine in Dec

Mclaren will pay more than half of its record US$100 million (S$147 million) fine to auto racing’s world governing body in December.

FIA, which fined the Formula One team in September for possessing confidential documents belonging to rival Ferrari, said Wednesday the ’sum in excess of US$50 million’ would be used to promote safety in the sport around the world.

‘Especially in countries where the motor sport infrastructure is in need of support,’ FIA said in a statement on its Web site.

The US$100 million fine included McLaren’s expected loss of income. The team was also disqualified from this season’s F1 constructors’ championship, which was eventually won by Ferrari.

Freeze on engine development

FIA also said there would be a 10-year freeze on engine development, starting in 2008.

‘A change can be made after five years but only with the unanimous agreement of all stakeholders and following a further two-year notice period,’ FIA said. ‘Total freeze means that there will be no exceptions for development of certain parts of the engine, as is the case under the current regulations.’

Ferrari’s request to supply two teams with engines in the 2008-09 seasons was also approved, and Spyker’s request to change its name to Force India was accepted.

The calendar for the World Rally Championship was also released, with the season opening on Jan 27 in Monte Carlo and finishing on Nov. 30 with the Wales GP.

 

Source: AP (The Straits Times 25 Oct 07)