Investing in a troubled world

Given the uncertainty in the global financial and economic environment, how should ordinary people invest their long term savings to earn an adequate income and to cope with the higher rate of inflation expected in the next few years?

This is the question asked by many people. I like to give my views.

http://tankinlian.com/admin/file.aspx?id=582&PK=b608b34c4da6102f8aebde1ae83d78a1

Haircut on Greek Debt

Private investors will be asked to take a 60% haircut on their investments in Greek bonds. This is much higher than the 21% agreed in August. I expect that the final figure will probably be 40% to 50%.

http://www.cnbc.com//id/44992798

The question is - why are the European banks holding so much Greek bonds? Surely, the jobs of banks should be to provide banking services and give loans to businesses. They should not be an investment fund, using their money (taken from the Central Bank or credit creation) to speculate on this type of investments or to fund foreign governments?

And why is Greece, a country, not able to meet its obligations? Surely, the Government has assets that can be sold - to repay the debts? If Greece is allowed to get away with 60% of its obligations - what about other countries? This will set a bad precedent. Many countries will continue to be bad risks. What about USA? We can expect an uncertain future and more volatility! And the structure of the financial world will be quite different.

The answer to these questions are - there is something seriously wrong with the financial structure of our global system. Our financial system is based on the illusion of market values and is fed by greed, speculation and corruption.
  

Pay of Government Leaders

This table shows the pay of Government leaders, compared to GDP
http://sg.finance.yahoo.com/news/Top-10-Highest-Paid-investopedia-1388928230.html?x=0

Invest in an indexed fund

When you invest for the long term, invest in an index fund (such as an ETF that is based on a market index) and stop trying to pick the stocks to beat the market. There are a few other good tips in this article.

http://money.cnn.com/2011/10/21/pf/expert/investment_returns.moneymag/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Learn how to invest in an indexed fund. Attend the financial planning workshop organised by FISCA on 29 October. http://easyapps.sg/assn/Org/Event.aspx?id=5

Medicare in USA

The problem with Medicare in USA (i.e. the health care paid by the Government for retirees) is that it becomes very costly to give the best to the older people and the Government is bearing the cost. In Singapore, the Government wants the people to bear the cost - and they cannot afford it either. The solution? Educate people on what is necessary and what is wasteful and help them to find the right treatment at a cost that they can afford. 

http://money.cnn.com/2011/10/11/pf/medicare_programs.moneymag/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Small child who was street smart

A 2 year old girl, Yue Yue, was run over twice in Guangzhou, China. Many people passing by did not help her. Where were her parents?

I recall a horrifying experience some 20 years ago, also in Guangzhou. I stopped at a small town for dinner. After dinner, I was returning to the bus. I saw a small boy, also about 2 years old, on the opposite side trying to cross a busy road with many fast passing vehicles. There was no adults around to take care of the child. I was horrified that he could be hit by a passing vehicle, but there was nothing that I could do, as I was on the other side of a busy road.

After a while, the little boy saw a gap among the vehicles and run across the road safely to her parents who were nearby. I then realised that this boy, although very small, was street smart. He must have crossed the road many times safely. His parents knew that he could take care of himself.

This is so different from the over-protected children in Singapore!