Temasek Bonds

Ok, I am not an economics expert but I do not feel comfortable about the following article:

Temasek to issue US$1.5b 10-year notes due in 2019 with 4.3% coupon (By Irene Chan, Channel NewsAsia | Posted: 20 October 2009 1307 hrs)

My first understanding of Bonds are those of public bonds. That is, Bonds are typically issued to raise money for public projects that require a high start-up cost. Or start a war. This article prompted me to find out that there are actually private bonds (makes sense). These tend to be used to finance a project for the same reasons, high start-up cost.

So, what bugs me about this Temasek offering (other that I am a raving anti-PAP government lunatic)?

Net proceeds from the offering will be provided to Temasek and its subsidiary companies to fund their ordinary course of business.

Temasek is an investment firm. We have already been told that its business is none of our business. So, as far as I can discern, it is taking this money raised to invest. Why does this feel wrong to me? It feels like a ponzi scheme ... "invest your money with me, so I can invest some more".

To be fair, given Temasek's record, it *should* be able to get returns on the money above the 4.3% it is offering to people buying this bond offer, so as a practical matter it seems sound. I guess I'm just more fiscally conservative ... I expect the raising of money from bonds to contribute to some clearly defined project, so investors in those bonds know exactly what they are getting themselves into. Right now, anyone buying these bonds will only know Temasek will invest it somewhere else ...

Why Low Thia Khiang was wrong. Now, nobody has any clue what LUP is about.

This is really for archival purposes only. The response by the Ministry of National Development to Mr. Low Thia Khiang's quip about LUP does not square with anything previously discussed within the public domain:

"Ministry: MP Low wrong on lift upgrading" (Straits Times Forum, Oct 13, 2009).

Once I find some time, I'll try to dig up all prior discussion on the topic to attempt to properly make sense of this. Right now, this letter seems to contradict everything that has been said before ... why we have town councils, why town councils are required to maintain reserves, what are CDCs for, the suggestion that Potong Pasir's S$4.5M sinking fund cannot handle LUP for a few blocks etc ...

Meanwhile, the contents of the article are found below.

I REFER to last Saturday's letter by Member of Parliament for Hougang Low Thia Khiang, 'No basis for MP not to announce lift upgrading'.

The joint letter last Friday by the Housing and Development Board (HDB) and the People's Association ('Why grassroots advisers announce lift upgrading') should be read in conjunction with Minister for National Development Mah Bow Tan's explanation to the media last Wednesday.

As Mr Mah highlighted, HDB's upgrading programmes are carried out and funded by the Government. This is no different from other government programmes such as the building of roads and schools.

These programmes have to be implemented through government channels. In the case of HDB upgrading, this channel is the advisers to grassroots organisations, who are appointed by the Government. Opposition MPs are not answerable to the Government, nor are they obliged to carry out and explain the Government's policies.

The Government pays up to 90 per cent of the cost of the Lift Upgrading Programme (LUP), with the rest shared between the residents (5 per cent) and the town councils (5 per cent). Funding for LUP is possible only because of the Government and the Budget surpluses it has generated through prudent policies.

Opposition MPs are not responsible for generating budget surpluses. There is therefore no basis for opposition MPs to lead the LUP - a national programme funded mainly by the Government. Mr Low is mistaken when he cites the 'will of the people' expressed in general elections to justify why he should play a leading role in the LUP in Hougang. The will of the people expressed in general elections is to elect a government for the country as a whole; and not to elect separate local governments for each constituency.

Singapore has a one-level system of government. MPs, whether People's Action Party or opposition, do not constitute a local government in their constituency.

However, MPs do have a role in running town councils. Their role in town management and maintenance is clearly defined in the Town Councils Act, and does not extend to implementing government programmes such as the LUP.

Lim Yuin Chien
Press Secretary to the
Minister for National Development

Mah Bow Tan needs to be slapped ...

... for making me waste time to blog yet another entry because of him :P.

That little good-for-nothing minister is hiding behind nice-looking statistics that tell us *absolutely nothing* about the state of affairs in HDB housing. Here is what he says (I'll even cite this from the PAP website rather than the news) - "Hard to get that first flat? Not so" : National Development Minister Mah Bow Tan sets records straight on claims by couples.

1) He quotes 3 different pieces of data from 3 different data points. This is what he tells us:

Data Point #1 (Oct 7 2009) - 80% first try applicants offered BTO flat. 96% second try applicants offered BTO flat.

Data Point #2 (2007) - 67% of first try applicants reject offer.

Data Point #3 (May 2008) - 52% of first try applicants reject offer.

What conclusions can you draw? Absolutely nothing, unless you make assumptions about the relevant pieces of data for each data point.

2) His conclusions from the skimpy data above require huge leaps of logic, typical of PAP claims that "if the percentage of the problem is small, then there is no problem". Let me do part of his homework for him (he, or someone else, will need to fill in the blanks):

For any given application period,
F = first try applicants.
S = second try applicants.
O = other applicants.
X = flats offered.
Y = flats taken.

Using just Oct 7 data:
X = 0.8F + 0.96S + pO where p = fraction of other applicants who are successful.

Assuming May 2008 data applies to Oct 7:
Y = 0.48x0.8F + aSx0.96F + aOxpO
where aS = acceptance fraction of 2nd try,
aO = acceptance fraction of others.

Flats remaining available for next cycle = X - Y (assuming the decision based on demand is to build).
Number of first tries with no flat at the end of this cycle = 0.2F + 0.52x0.8F = 0.616F.

To make his conclusion, one needs to know at least F and S. If the numbers are small, then maybe it really isn't a problem for the "innocent" rejectees. But if the numbers are large, then 0.2F could very well be a serious problem. Why? Because a fraction of 0.616F will go on to become the next round's S figure. Again, we have no clue what fraction that is.

How many people give up? What are the numbers for X, F, S, p, O, aS and aO for the application cycles over the last 5 years? What are the trends? Are the S and O figures growing, indicating flat supply is not keeping up with demand?
How many of the "bad" F (0.416F) applicants go on to reject their flats when they become the S figure on the next cycle?

Where the rejections are concerned, how many of F, S and O got their first-choice of flats? How many rejected the offer because they were offered their 3rd or worse choices they could pick? How many were offered choices they had not even opted for in the first place (as is typical with NUS undergrad applications)? I remember very unhappy friends who got shoved into NUS Comp Sci merely because it had showed up at the bottom of the list of choices for their study major. How many applicants were "picky"? How many were simply not offered any reasonable choice?

Come on, Mr Mah, I'm sure you and your staff can do a better job than that with statistical data! Show me the meat upon which we can have a far more meaningful discussion!