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Lehman Brothers Afterthought - Peter Lye 11 Oct 2008

Lehman Brothers Afterthought - Peter Lye 11 Oct 2008 - lkypeter.blogspot.com

On September 28, I wrote an article on whether the financial meltdown and concluded that it was mainly a regulatory failure. I would like to further this cause by examining some the of events in the past that could have contributed to the melt down and whether there was possibility in averting this crisis by having the right party make the break glass warning soon enough. I am a free market proponent and have Milton Freeman and Alan Greenspan as gentlemen for which I admire much for their thoughts and actions in their professional space. However, the unfolding of the recent events has lead me to re-think on the sufficiency and adequacy of the free market system in all things sundry and how then do we decide what should or should not come under heavier scrutiny and control. I can still remember vividly that Milton Freeman said that the best thing that the government can help the economy is by staying out of it in his book Free to Choose.I am not proposing a communistic state of affairs but that our free market system near perfect but not perfect and might need some fundamental adjustment for it to be relevant in the coming centuries.

One thing that occupies my mind these couple of weeks is Lehman Brothers and whether the ensuing action and in action might have contributed to the crisis. The American government stand on not being held hostage because a bank is to big to fail is a good policy to hold onto as it can set the wrong precedent and cause a larger breakdown of our financial systems. The various financial melt downs in the past has indeed shown that some of these institutions are too big to fail with wide ranging ramifications on the public at large but we must never never yield to this as the equity of the entire rescue no matter how hard we try will be very very inequitable to the population at large.

The Lehman collapse have a few special ramifications that could have contributed to the credit crunch as follows:

1.AIG is on of the major originators of credit default swaps that is estimated to run into the trillions based on its par value but AIG actual exposure could be a fraction of it. In this case, it is anxiety of how big this fraction is that can kill the market system of trust.

2.These credit default swaps does not have an orderly clearing house to ensure that trades are properly settled and this brings to bear that most of these are bilateral contracts that are kept out of the purview of the public especially on exposure to such instruments. Therefore, we can get current situation of trust no one leading to a credit squeeze. Although the central banks have done a great job in bring down their respective discount rates and windows and through open market operations to re-purchased their own sovereign bonds to increase the money supply. However, both of these are not working as we witness the normal con-tango relationship between discount rates and inter bank rates going in almost opposite directions. The LIOBR overnight, and shorter term 1 -3 months rates has sky rocketed in-spite of lowering of the discount rates. My explanation for this gap is not a case of simple demand and supply but that the counter-party risks has increased tremendously and the differential to a large extend represent this risk premium. No banks are saying they are not exposed neither are they saying they are. So the free market makes a guess and this is reflected in the risk premium it tags on them.

3.It is bad enough that the credit default swaps does not have a clearing house, to add injury to the whole episode, neither does it have a formal exchange either so that the prices are open and there is a fairer valuation of the instruments. Price disclosure is also not as transparent in exchange traded instruments. Price opacity does not help in these times as well.

Given the situation above having the benefit of a rear view mirror that the policy makers largely did not have, would I have recommended a rescue of Lehman instead of letting nature takes its course into bankruptcy? The answer is a resounding no to the rescue as it would create too much of a precedent. We are now eating the bitter pill of its consequence but the market will heal in time as these instruments are de-leveraged in due course and we can then separate the wolves in sheep clothing from the sheep and get rid of them again with some more pain before the market reaches some equilibrium.

In 1993, the much respected Alan Greenspan went before the US Congress to testify that in his capacity as chairman of the Fed that the government should leave the credit derivative market to its own devices as serves to transfer risk from those who cannot afford to carry it to those are willing to take the risk for a price. I do not think that Greenspan was wrong in the second instance but I am not so sure about the first instance of leaving the credit derivates market to its own device. We should not throw away the baby away together with the bath water. Credit derivates does have a role to play in risk transference however as it grows to such proportions, we should perhaps consider having an exchange to improve transparency and also a clearing house whereby trades can be cleared in an orderly fashion and prevent a bubble effect.

Last but not least, we have to decide how the credit rating agencies which have tremendous market and pricing power in ensuring their fair and proper participation in the market. It cannot be like the stock analyst in the stock market as their pens are much much more powerful than that of the stock analyst.

I do not have all the answers or even part of it but write this with a view that encourages communal participation in shaping our children's future as ours might already be too late as these reform takes time to materialize.

Peter Lye aka lkypeter.blogspot.com

Safe Harbor. Please note that information contained in these pages are of a personal nature and does not necessarily reflect that of any companies, organizations or individuals. In addition, some of these opinions are of a forward looking nature. Lastly the facts and opinions contained in these pages might not have been verified for correctness, so please use with caution. Happy Reading. Peter Lye

The US Financial Meltdown: A sign of systemic failure of the capitalistic system? Peter Lye-28 September 2008

As the financial crisis unfolds itself over the last 14 months starting with the sub-prime mortgage crisis and cumulating to the recent almost complete annihilation of the once mighty investment banking community with Merrill Lynch selling itself out to Bank of America that once vowed never to step into this arena of banking, Lehman Brothers folding into chapter 11 bankruptcy and the last two remaining pillars

of the industry, Morgan Stanley and Goldman Sachs giving up the freedom under investment banking into the regulatory arms of the Feds by metamorphosing itself into a bank holding company to tap a larger source of funds not available to them as investment banks. The need to separate investment bank into separate entity was created by the Glass-Steagall act of 1933 partly to prevent a conflict of interest from arising between the differing activities as well as to protect the smaller depositors from the relatively higher risk propensity of investment banks. Has this act served its purpose in the light of today’s crisis or has it helped to provide the fertile environment for brewing this crisis by exchanging greater business latitude with narrower source of funding? Are there lessons that we should have learnt from the hedge fund crisis in its handling of derivative instruments that resulted in the frightful demise of LTCM and a near panic in the financial markets then? Are all these a sign of systemic failure of our capitalistic system and deludes a trumpet call for shift in course away from capitalism or a major re-engineering of what defines capitalism for it to function healthily as no system is perfect?

The Glass-Steagall act of 1993 was enacted to prevent private banks whose main activities is investment business from owning deposit taking banks and thereby protect the depositors from being exposed to the more risky stance of investment banks. It also sets out to limit the type of related transactions that can be done between bank holding companies and investment bank to plug potential loop holes from being exploited. This was how most of the investment banks ended up as private entities until the recent decade or so which witness many of them going public to tap a larger source of capital. The last major investment bank to go public was Goldman Sachs amidst much fun fare on its stock market debut. This has the effect regulatory wise in placing these publicly traded investment banks initially from the Feds to full autonomy following the Glass-Steagall act and onto the arms of the SEC on their debut on the stock market. What dimension does regulation have on the behavior of these entities?

First of all, in my mind, regulation is like all things in life besides death and taxes for there is no absolute surety. The business arena is like the battle field that soldiers fight on. We can and must expect casualties. However, there must be enough safeguards in place to prevent catastrophic events like the 2 nuclear events that resulted in systemic wide failures or its financial parallel of the massive run on banks leading to a near collapse of the banking system in 1930s. Regulation is there to provide a framework to facilitate the business of risk taking and equitable risk reward for market participants.

Secondly, regulation is there to ensure an acceptable level of market transparency to facilitate business transaction. Chief amongst these is perfect price information as the Holy Grail underlying the capitalistic system. Even in today’s advancement in telecommunication that enables almost instantaneous dissemination of information worldwide, total transparency is still very much like a mirage in the desert; it seems to be there but it is not there. Some of the impediments to total transparency are product and supplier/customer differentiation, sufficient market liquidity in terms of having sufficient market participants in the product, human behavior and regulation itself which sometimes impedes transparency in the interest of achieving it by narrowing the conduits by which information can be released. Human behaviors like insider trading and market cornering is very anti-thematic to fair play and there are legislation in place to discourage such behavior by punitive measures when caught including jail time and leveling discovery and prosecution process through things like burden of proof, and rule of evidence as such crimes are not only difficult to discover but also difficult to proof beyond reasonable doubt as the gold standard required by our legislative framework. There is an ongoing joke that an acquittal does not equal innocence but that there is insufficiency evidence to proof guiltiness beyond reasonable doubt.

Thirdly, regulation is there to provide orderly clearance of trades executed in the market. This is done differently to suit the differing markets. On one end of the spectrum we have exchange traded products like stock and shares to provide almost perfect certainty in trade completion and payment without any concern about counterparty risks as the exchange and clearing house sort of provides the buffers. At mid-point where most physical trades take place, we have non-exchange traded products that uses currency as a value proxy of the product exchanged for. Stability of currency exchange rates and a good legal framework for dispute resolution is important to create market certainty. On the opposite end of the spectrum, we have the age old barter trade that does not involving any currency. A poignant observation about this financial meltdown is a partial breakdown of the trade execution resulting in a very fast downward price spiral of unprecedented velocity as most of these instruments are not even cleared through an exchange and ability to complete the trades is dependant on perception of counterparty risks one of the major factor in selectivity over counterparty and thereby narrowing the market and price in the process. We should re-examine whether an exchange should be setup for some of the instruments that are traded on a bilateral basis to avoid a repeat of such incidence.

Fourthly, although much has been argued about governmental rescue plans like the US$700 billion dollar life line proposed by US Treasury Secretary Paul Hanson and seconded by Fed chief Ben Bernake could create a wrong precedent in the future for companies that view themselves as being too big to fail like banks and insurance companies from behaving responsibly, I believe that the rescue is not likely to perpetuate such behavior if done with enough punitive measures on current owners and managers. However, I do have a concern over the equity of such a life line as it tend to favor the richer who has reaped the benefits and now want someone to help pay for their loses. This could be an inevitable situation as a collapse of the economy will inadvertently affect the poorer sector of the population. As to who would ultimately shoulder the cost of the lifeline, in the case of the USA, I believe that it is more likely to be under written by almost everyone world wide as the direct or in-direct holding in the dollar is so widespread that US will be tempted to monetized the debt in more ways than one. You could argue that you do not hold any US$ but whichever currency you are holding, your central bank is likely hold part of their reserves in US$ to back the currency. We are lucky that in the past decade of so, we have an additional reserve currency in the form of the Euro which is less open to manipulation being controlled by many financial secretaries within EEC.

I tend to conclude therefore that the recent ongoing financial meltdown is more of a regulatory failure than a failure of the capitalistic system and therefore it is not time to resurrect the Berlin wall as such.

Peter Lye aka lkypeter

Societal Equity, Mobility, Meritocracy and The Population Question: A Singaporean Perspective

I must begin this note with what it means to be a Singaporean. I am born and bred in Singapore but I do get questions about my nationality now and then and I wonder why. Perhaps it is my mannerism, intonation of my speech or some strange gene in me. This has set me thinking about what defines being Singaporean means to me and the populace at large.

I grew up in a Housing and Development Board (HDB) housing for most part of my life like about 80% of the population. HDB is government subsidized housing which is made affordable by the government through a series of selective grants ( based on a range of factors like income, marital status, family size etc and a clever structuring to funnel part of personal retirement fund called Central Provident Fund (CPF) to pay for part of it. Actually, it can be generally safe to say that the 80% that live in HDB in Singapore is mostly in the bottom portion of the 80% of the population. The 20% that does not live in HDB are generally and mostly the richer lot who can afford private housing or the destitute that live everywhere on the other end of the spectrum.

I am also a Chinese race wise but has been labeled openly by my Chinese teacher as a yellow banana that is yellow ( Chinese generally have a yellowish tone to their skin colour) on the outside and white on the inside meaning Anglo Saxon in orientation. I actually do not blame them at all for doing so as I have had occasions during my late teens of not only scoring terribly in my Chinese language tests like in the range of 10 to 20 marks out of a perfect score of 100. To add injury to it, there was once where I scored 11 /100 and wrote my Chinese name wrongly on the test script. When the teacher scolded me in front of the entire class, there wasn't even a shred of remorse in me as the whole class broke out in laughter and I found it hilarious as well. He told me that I ought to be absolutely ashamed of not being able to write my own Chinese name correctly at 15 years old but I could not stop laughing with the rest of the class. I tried to explain to my Chinese teacher that I am far from being a yellow banana but am very Chinese in my outlook and love and appreciate Chinese culture, history and music having acquired these by reading about them from books about Chinese culture written in English. Language of music is very universal anyway. I also challenged him that a good handle or weak handle of the language does not necessarily equal to ignorance or dis-taste of the culture.

I just have a mental block when it came to working with block wordings of the Chinese language and was more in tune with the Romanic letter of the English language. I am not ignoring the fact that language, culture and politics are deeply inter-twined but the relationship is more complex than a simple contingo parallel. Anyway, I only need to convince myself and did not feel the need to justify to those around me about my orientation or the seeming lack of it where the Chinese language is concerned.

The deal breaker came when the academic results were out for the year and my Chinese language teacher was my form ( mentor ) teacher. I was fourth in class overall but I scored 35/100 for Chinese. I was accorded the honor of being personally invited to his office for a preview of my results before it was made public to all. He asked me a trying question on how he should fill out the form teacher comments. I told him that I would rather have his opinion of me in the raw be it positive or negative and he thought that was a dis-respectful and cheeky response but I looked him straight in the eyes that I meant it. He asked me if I had purposely failed his subject out of spite as I had shown promising results in almost all other subjects. I told him respectfully and factually that it was an improvement as my earlier score for Chinese language was 11/100 and he did not take that very well. A form teacher comment of something very factual that I have done well generally but have to work harder on my Chinese sounds reasonable. I left his office feeling happy that I have done well as I could not be bothered about my Chinese language performance at all. I have given up long ago and was prepared to face the prospect that a University education in Singapore was near impossible as passing Chinese language or your mother tongue was a pre-requisite for entrance into University then but the ruling has since been changed. I did feel bitter about it initially on a personal front and thought that the government could afford a wider spectrum of measurement on University entrance but was prepared to pay the price since I have made a conscious decision to not to pass the Chinese language and there was enough forewarning on this for me not to feel victimized although such feelings do run through me at times. Anyway, I secured a polytechnic education and thereafter went through some trouble to get to University without any remorse and all smiles.

I think I qualify to brand myself a Singaporean Chinese and proud to be a son of Singapore.

Of late, there has been very livid debate in our otherwise morsel reporting on Singapore matters in our media on the topic of equity, mobility, meritocracy and our population or the forthcoming lack of it in our society. This got me very interested as I was on the verge of ending my subscription to the our english language daily newspaper called the Straits Times as a means of dealing with inflation to fuel my Coke habit. Some say I have a blood type of neither A,B,AB or O but C for Coke.

Firstly on societal equity. Here, I do not think in terms of the simplistic far left communist or the far right capitalist or the undecided socialist. I believe that the concept is far more mutli-dimensional to be measured along a single continuum.

It is my belief that first of all, it is both a macro viewpoint and collectively measures effort/reward outcomes. On a personal level, it is the level of justice, compassion and humanity that exists in the deep recesses of our being that propels us to equalize it. So what does all these means?

Chief amongst them are justice, compassion and firm belief that all men should be born equal although experientially, it seems otherwise. The key operative is should and therefore a need for going beyond birth rights to have in place mechanisms to make the playing field more just and level for all. The less endowed generally have a stronger motivation to overcome their inherited disadvantages. The privileged might in some instance have an equally strong motivation to maintain their lead save for the altruistic ones who would lobby for better societal justice or equity mostly out of their generosity and philanthropic bias.

Last but not least, the politicians are also very mindful that one level of wealth for all as in the communist system nor the large rich/poor gap that the capitalistic system tend to produce will do. There has to be some equalization that has to be done to narrow the rich/poor gap as it tend to create cracks in the society that could make way for widespread revolutions that could cripple a society. This is my starting point for societal equity in my limited intellectual brilliance. It is not meant to be comprehensive but serve as a macro shot into important and defining parts of the picture.

Social mobility is a great dream maker for the under dog in a society to propel forward and can be a nightmare for the elite not to regress from their high point. I have learnt very early that the concept of wealth and poverty are at times a relative concept rather than a absolute one. For example, a person that has started the race with little living in a poor neighborhood would start to feel very elated as his material dimension improves while still staying in the poor neighborhood but with relatively better house fittings, clothes, food compared to his neighbors. However, should he elect to move to a richer neighborhood for which he has marginally afforded to purchase with a slew of loan instruments that could leave him cash strapped, the feeling could be different. In this new surrounding, he is not likely to ace the neighborhood in terms of material well being as he is now a new entrant to this class and most probably at the bottom of the pecking order of this neighborhood. There could be a sense of regressive feeling wealth/poverty wise which is largely relative rather than absolute in nature.

Meritocracy is a very noble and just concept in that it pre-supposes no bias whatsoever but pure and blind pursuit of it could result in the opposite. Entrance census of students in ivy league schools that largely operate on a meritocratic basis have proven that a disproportionally large part of the students are from family with better background as indicated by things like income, housing district, paternal/maternal education level etc compared to the general mix of such factors in the general population. Why is this so? Some frame the debate along the lines or nature ( meaning better genes ) or nurture ( better upbringing ). No matter what the reason be it nature or nurture, a dichotomy has happen in terms of ill matching profile. Some recommend affirmative action to keep things in check. I have no easy answers and give it some thought and you be your own judge.

The last topic pertains to breeding or population or the the lack of it as our birth rate goes into deep dive from a population replacement ratio of 2.1. A whole slew of economic incentives have been dished out by the government to encourage pro-creation. However, if we examine the package as a whole, there seems to be some form of selective breeding in terms of better incentives directed at certain quarters of society. In the name of equity and diversity, I feel strongly that we should remove all such bias for possible selective breeding. The magic of human kind lies partially in its diversity and this could be why incest is an almost universally pungent and criminal act.

Peter Lye aka lkypeter

Technology Stuff and Technology Staff

As technology becomes more pervasive in our daily living, it is not uncommon for technology stuff to fail, technology staff supporting the technology stuff takes a beating.

Technology Stuff created by Technology Staff who are not perfect will not be perfect either. We seems to rest upon the false belief that Technology Stuff is perfect when in truth, it is as good as their maker save for their consistency which means it can be consistently right or consistently wrong.

Peter Lye

JS Bach Air on G String BWV 1068

This is a classic example how the son became more famous than the father. You see, JS Bach did not compose Air on G String. The piece was taken out of the second movement of his third orchestra suite which was keyed in D major.

Somewhere along the line, someone discovered that if the this second movement were to be transposed from D major to G major, the entire piece could be played on a single G string on the violin and there comes the name Air on G String.

To bring further insult to JS Bach, Air on G String is normally played without any reference to its original composer nor his original intent.

Air on G String is an absolute lyrical piece and I would urge those that enjoy explore further by listening to the entire third orchestra suites in its original key in D major. There are only a total of 5 movements and it will be worth it.

Last but not least, I believe that G String panties which some would like to associate the piece Air on G String was furthest from JS BACH thought when he first composed it in D major. :)

Sibelius Violin Concerto Op. 47

Was listening to Sibelius Violin Concerto and really am surprised that the concerto conveyed so much emotional warmth for someone that lives in the Nordic countries where the weather is mostly cold. The versions that I have are as follows. All versions are of the final 1905 versions except the one Leonidas Kavakos for which I have both the original 1903/04 versions and the 1905 versions.

1.Hilary Hahn with Esa-Pekka Salonen conducting Swedish Radio Symphony Orchestra(DG)

2.Kwung Wha Chung with Andre Previn conducting London Symphony Orchestra(DECCA)

3.Itzhak Perlman with Erich Leinsdorf conducting Boston Symphony Orchestra(RCA)

4.Leonidas Kavakos with Osmo Vanska conducting Lahti Symphony Orchestra(BIS)-Both the 1903/04 original version and the 1905 final version

5.Jascha Heifetz- with Walter Hendl conducting Chicago Symphony Orchestra(RCA)-Old recording that is almost technically faultless and some say lacking in depth.

Of which only the Kavakos is of Nordic stock. If you get to compare the various interpretation, let me know your preference. I like the version by Perlman which was recorded when he was younger as a child prodigy for its technical interpretation. Perhaps his later recording might encompass more emotional maturity having walked more of life experiences. This is my normal findings when comparing earlier and later recordings by child prodigy that like wine, their later recordings are better. My next review would likely be about Bach Violin Concertos.

Cheers,,, Pete

British Conversations

The brits are generally more gentry in their ways as well as speech. Sometimes, it gets so diplomatic that both the speaker and the audience end up confused especially if both sides are brits. I really meant both. The speaker in his quest for form over matter has forgotten about the matter altogether. The poor audience is of course left to distill the facts out of the speech. And of course also to preserve a sense of self-respect, the audience, if they are brits as well, would be too proud to clarify as always.

©An original joke by Peter Lye

Mstislav Rostropovich

He is not only a great cello master but also very passionate about his beliefs. He lost his Soviet citizenship for his actions but was re-instated later. He died peacefully in his homeland which shows he has a great love for it. He was there playing his cello by the Berlin Wall when it came down to show his political affinity in-spite of the risks. A great man.

My NOL Story

I bought some NOL share last week and sold out today. Following is an edited excerpt of my emails with my friend in Jakarta. No conflict of interest as I do not hold any position in NOL now. I am not always that accurate...Cheers,, Pete

7 August 2008 12:38am

I did sometime in LCL shipping at Votainer which was one of the largest LCL carrier worldwide but was acquired Air Express and now is part of DHL. My dissertation was about LCL business.

I was tempted to think that the market has priced in the share dilution with the forthcoming hapag lloyd acquisition if NOL is successful.

With world trade possibly thinning out and a directionless oil price situation and a possible over capacity on the carrier market, NOL does have an uncertain future. It was partially brought down by the bad showing of its competitor OOCL.

Actually, what I am looking for is a formidable management team to steer clear this cycle and it would be ready to ride the next. One of my bets is that most yards have converted to oil based vessels and with a limited built out of container carriers, the over capacity is likely to be shorter term. If an up turn in trade happens within next 18 months, the capacity over hang could turn into a shortage giving the carriers better pricing power.

APL's largely trans pacific and trans atlantic routes which are highly regulated by tariff filing by FTC in US could make the price adjustment slower than on un-regulated routes. The OOCL bad showing does worry me a bit as it is largely intra asia with good chinese political support and tung chee wah behind it did not help much. Hmmm.....

Actually, I am tired of trading in and out of market and looking for medium term place to park funds.....

My last caveat is that nol is largely a temasek cornered play and market price transparency is more opaque.

7 August 2008 7:50pm

After writing such a long story on NOL to you. I decided to buy NOL today when it broke record low of 2.51 but I landed most lots at 2.52 which is OK. There is a .04 dividend payment soon so not so bad.

11 August 2008 12:42pm

My trading instincts have the better of me and I sold my NOL shares at 2.68 this morning which I bought at 2.52 last week for a good profit. I am back to looking for investment opportunities again. My sell rationale is AXA which is one of the funds that has majority stake has started accumulating from about 5% to 7% and I think the buying pressure will ease once they have gotten what they wanted. Secondly, the war in Georgia could cause an increase in oil prices which will affect NOL.

Tchaikovsky Violin Concerto in D Major Opus 35

This is the only known violin concerto written by Tchaikovsky. It is also one of my favourites that comes in three movements. I have heard the following versions and my vote goes to the version by Julia Fischer with Russian National Orchestra conducted by Yakov Kreizberg. I felt that this recording tug at my heart strings the most. This is a very personal opinion as the various artist plays at various speeds.

1. Julia Fischer with Yakov Kreizberg conducting Russian National Orchestra(PentaTone)

2.Kwung-Wha Chung with LSO conducted by Andre Pervin(DECCA)

3.Sarah Chang with LSO conducted by Sir Colin Davis (EMI)

4.Gil Shaham with SSO conducted by Lan Shui-(CanaryClassics)

5.Akiko Suwani with Czech Philharmonic Orchestra conducted by Vladimir Ashkenazy(DECCA)

6.Zino Vinnikov with The Royal Philharmonic Orchestra conducted Yeudhi Menuhin(MEMBRAN)

7.Vadim Gluzman with Bergen Philharmonic Orchestra conducted by Andrew Litton(BIS)

One of the unique thing about this violin concerto is that it is self introducing. The quite normal concerto form would have the orchestra followed by the solo by this one starts off with the soloist.

Incidentally, Tchaikovsky had a very unusual ending in that he took his own life.

Peter Lye aka lkypeter
lkypeter@gmail.com Safe Harbor. Please note that information contained in these pages are of a personal nature and does not necessarily reflect that of any companies, organizations or individuals. In addition, some of these opinions are of a forward looking nature. Lastly the facts and opinions contained in these pages might not have been verified for correctness, so please use with caution. Happy Reading. Peter Lye (c) Peter Lye 2014

The Final Departure

I received an interesting book one Christmas from a friend entitled Tuesdays with Morley. She told me that she hope that I do not mind it as the book details the final journey of a man from the time he was pronounced with a terminal illness till he breathe his last. I did not mind it as I believe that the surest thing after our birth is our departure from this earth. This statement only reflects my mental comprehension and by no means tells of my readiness to deal with my end life situation.

Star Wars/SUN & IBM

Episode 1 The Phantom Menance The SUN Menance
Episode 2 Attack of the Clones Attack of the BIG BLUE
Episode 3 Revenge of the Sith Revenge of the SUN
Episode 4 A New Hope A New Hope
Episode 5 The Empire Strikes Back The SUN Strikes Back
Episode 6 Return of the Jedi Return of the P Series

Email, PushMail, BushMail and BUll SHit Mail

In the office, we get E mails.
Outside the office, we get PUSH mail.
At the White House, they get the BUSH mail.
This might be the reason for the spate of resignations last of which was Treasury Secretary Snow which cannot stand the BUll SHit (BUSH) mails anymore

The Singapore Election Diaspora by Peter Lye (lkypeter@gmail.com)

The Singapore leadership is grappling with the twin issue of a falling birthrate that has gone way below the universal population replacement ratio of 2.1 and the increasing number of Singaporean that have decided to leave Singapore and start life anew in greener pastures elsewhere. A thunder bolt of idea flash by me that sets me thinking about how the electoral process is inter connected with this twin issue. It is too simplistic to use the electoral process as the only microscope to examine these two issues but lets do this so that we can give the perspective a more focused look.

The incumbent ruling party; Peoples Action Party (PAP), has been ruling this nation state for more than 30 years. For a large part of this period, the PAP has managed to set an unprecedented electoral miracle. In a few general elections, the victory is complete in that they have managed to win every single electoral seat. Of late, this record has been broken by scarce victories by the opposition in 1 to 2 seats out of a total of over 70 seats. Under this backdrop, a few notable developments have also happened which might or might not be related to the electoral process. You be the judge.

Firstly, the electoral process underwent a fundamental change with the introduction of the Group Representation Constituency (GRC). Most Singaporeans would know the basic framework of GPC but I would describe it briefly for those who might not. Essentially, the GRC would group a portion of the electoral seats into a GRC which would consists of between 4 to 6 individual seats. With this change, political parties would have to field that number of candidates to contest in a GRC electoral boundary instead of individually. While there are many merits for introducing GRC like enabling better servitude of the constituency as there are a few representatives instead of a single one to turn to, some of the unintended or intended effect of this new ruling are as follows. Firstly, independent candidates are also not allowed to contest in a GRC by virtue of the fact that they are a one man band. Secondly, this is likely to make it more difficult for the opposition to contest effectively because they now need to field a team instead. Let the results speaks for itself. No opposition party has won any GRC since its introduction. If this is the case, why has the GRC bill pass into law?

Secondly, PAP not only have the simple majority needed to pass most bills but also a two third majority to pass bills that could change the basic fundamental rule in our nation state. Being a parliamentary system, there is a further advantage to the ruling party in terms of the party whip that will force PAP representatives that have views contrary to their party from voting according to their conscience. This has the effect of appropriating additional authority to the ruling party. The party whip can be lifted if the party so chooses to do so but the question is whether it is in interest of the ruling party to do something to reduce their authority? An additional last safe guard which was introduced lately to accord the elected president with veto power to block the passage of bills that the elected president deems as being against the interest of our society at large. However, this power of the elected presidency is being curtailed by the presidential council of 3. My question is why have an elected presidency with electoral mandate and subject him to a presidential council without any electoral mandate?

Thirdly, the issue of political apathy of our society has been so bad that it has become a national concern. It is difficult to understand the psyche of the ruling party on this issue. Are they playing masquerade? It is not uncommon to see a marked increase in court room drama casting the incumbent politicians and political wannabes. The right to legal redress should be available to all including people in high office. However, one should also consider the micro issues with the larger macro issue at hand. Because of the high profile of the caste involved in the court room battle, some coloration by the populace will be the order of the day. What is legal might not be right. The ruling party might have won the court room battle but with regards to winning the war for the hearts and soul of the populace, you decide.

With these behind us, we shall examine the likely behavior of the populace. To be more adventurous, we shall stretched our imagination further a field and come down to earth thereafter for a more balanced view.

Firstly, the basic premise of a democratic system is to have the will of the populace represented by the majority in regular election whereby potential candidates offer themselves for election. The essential ingredient is entrance of potential candidates. While there is a need to exercise a certain level of safeguards to prevent real rouge from offering themselves, such safe guards should be the based on the bare minimum as they would have to pass through the rigid electoral process of the populace and therefore there is sufficient check and balance in place already. In Singapore, some additional requirements like not having a conviction that attracts a certain level of sentence might be too rigid. Like what stock analyst like to say that past performance is no insurance of future performance, it cuts both ways in that a clean record does not guarantee crime free future and a stained record that now necessarily equal to a repeat offender. On this note, as our society matures, we ought to have the concept that there is a differential between the effectiveness of the office bearer and his moral high ground. I am not suggesting that we should have a crook for a leader but some level of tolerance ought to be in place as nobody is perfect and everyone has some skeleton in one’s closet. Although I do not condone what Bill Clinton has done in the private life but it is a fact that the then leader of the Democrat did a fantastic job on the US economy.

Secondly, on the need to impose OB markers on freedom of press, we have grown up as a nation and the racial and religious flashpoint of yesteryears no longer applies. If it does, why is the ruling party concerned with the level of political apathy? The populace is also no so gullible and is able to give the proper gravity to the issues at hand than just take it at face value. The wisdom of yesterday being that the press can incite social unrest but I in today’s society, I believe that suppression is more likely to result in sudden outburst of societal unrest as the suppressed pressure would ultimately need release. It would be better for issues to have an outlet and discussed openly so that misnomers can be addressed.

Lastly, I would like to introduce the concept of Fight, Flight and Silent Anarchy. The first two is common to us in that placed in an uncomfortable or unlikable situation, we would either fight it off or flight away. What one chooses is a complex of many factors including the power differential, perceived chances of winning, perceived level of damage and tolerance for damage, perceived level of losing, possibility of flight etc. As we can see that the option of flight is not open to all but to the select for which there is demand for their wealth or talent. The majority would have to contend with staying put. For those that do stay put, if they do not see the possibility of winning a fight, they are likely to follow the path of evolution and take on the veil of what I call silent anarchy. On the outside, it looks good but on the inside , values that national pride, patriotism and societal altruism ranks way down. Economic success is important but it is not the only measure of success.

With a heritage of a largely immigrant society, we ought to value building of national pride, patriotism and a strong value ( not economic ones ) that galvanized the society together. For the Americans, it is freedom, respect and the pursuit of happiness. For us, we need to and must first create a more inclusive society first that shares a certain strong value system ( not promoted by campaign as campaign fatigue is the order of the day here ) that would galvanized us or we would polarize as a society. If even Hong Kong that had the highest rating for political apathy can slowly but surely achieve that, so can we and so must we.

Urban Poor in Singapore

I was walking along a street on the eastern side of Singapore on my way home from work. It was the early part of the evening. A lady whom I guess to be about mid 30s walked past me carrying a plastic bag full of empty aluminium drink cans. Soon after, her son of about 5 years old zoomed past me with a very cheerful disposition before he reached a small slope near the bus stop and started to play happily by sliding down the little slope. His face was one of contentment and happiness. His mum chided him to limit his mischief at which he smiled back. Little pleasures and simple pleasures indeed for the little boy.

For his mum, I saw a different facet of life. She headed for the dustbin and started to rampage the dustbin for used aluminium cans I guessed to sell to waste collectors in exchange for a paltry sum of money. Again, this is my guess that she needed the money to feed herself and her dependant.Although I know little of the mum and her son, the very sight has engraved a deep impression on me and sets me thinking about the following questions for which I do not have a ready answer to. It does not matter to me whether I have the answer or not but what matters to me is whether more can or should be done to help these people.

My very first thought is the yardstick by which we measure our society ought to be more holistic. It is common for us to make public our accomplishment of having the world's best this and that as a measure of our progress as a society. I stongly feel that society ought to be measured by what exits at both end of the spectrum of our society. What the elites could or has done as well as how well the bottom 5% of our society scrap a decent living for themselves. I am not proposing a communistic regime here but a social democratic framework that Singapore espoused herself as one. Jesus did say that he will measure us by how we treat the least amongst us.

My next port of call was the equality of opportunity. Lets not kid ourself that we have all the social and economic levellers to ensure equal opportuity for all children who are citizens of Singapore. I am glad that the government has instituted compulsory primary education in Singapore. This would at least provide a more level playing field to ensure that irregardless of the socio-economic background of our parents, we would not be too grossly disadvantaged and be given equal opportunity to primary education as a minimum. As I think deeper, equal opportunity actually means equal access to education on a standard provided by the government. Not equal opportunity really if we think deeper.

In closing, to be fair to Singapore government and also to most other governments, it is a difficult task to manage a society on metocratic basis with proper socio-economic equaliser to break the poverty trap and enhance socio-economic mobility both ways. They have done what they think is best for society without destroying the work ethos of the society that excessive welfarism could bring. I believe that for government, their hands are pretty tied as they have to operate within a frame work of policies and procedures that produces tranparency, fairness and predictability in outcome. However in so doing, the social safety net would inevitably miss people on the fringe of their policies. For these, private charities or charity on a personal level that have a more flexible and discretionary safety net could help. The recent spate of possible mis-management in some of the larger private charities has spawned a call for more transparency, accountability and check & balances to be in place. Let's not go over board and put the private charities into a straight jacket. We must remember their place in society and not throw away the baby together with the bath water.

Winston Churchill and Nancy Astor at Blenheim

Nancy Astor to Winston Churchill "If I were married to you, I would put poision in your coffee." to which Churchill replied "And if I were married to you, I would drink it."

I find this very amusing as it reflects a certain thought line that is uniquely dry and humourous.

Originating from an American captialist with an Anglo Saxon upbrining for Astor against the true British Aristoracy in Churchill shows who is more capable of having the last laugh.

Cheers, Peter Lye

Benito Mussolini

Came across a quotable from Benite Mussolini who was an ally of Hitler but I find the quote ( not the person) interesting.

Take advice from everybody, collaborate with some but be responsible and accountable only to a few.

Cheers, Pete

Singapore's Missing Stoke - An alternative viewpoint - Oct 2004

The Singapore government has prided itself for being efficient, clean, very forward looking and almost infallible. It was only during the tenure of our former PM Goh Chok Tong that he has encouraged a more open dialogue with the electorate.

In the case of population planning, we have started off in the 1960s and 1970s as one of controlling population growth to the current issue of a predicted population decline. Is this a case of administrative over sight or a symptom of the government's Planned Parenthood Department pursuing their mandate blindly without due consideration for the changing environmental landscape that they operate in.

The original mandate was clearly population control in the face of a possible population explosion problem. The stop at two irregardless of the gender was promoted everywhere and policies were put in place to discourage 3rd or subsequent child in the form of dis-incentives ranging from tax rebates, school admission etc. This was wildly successful for a couple of reasons swinging us to the other end of the spectrum. Firstly, credit must be due to the government for the campaign and policies. Secondly, the result could also be due to a stark change in the attitudes of the population towards pro-creation. Thirdly, the cost of raising children has gone up geometrically compared to the overall rise (or fall) in income levels. Fourthly, on the economic front, the job market has taken a very stark change. The high economic growth years of 1980s with almost full employment has taken sharp turn to slower economic growth and rising unemployment which could be partially structural. Job security becomes an issue for many as the market turns from generally from an employee's market to one where employer's is spoilt for choice. Keeping a job and finding one when one become unemployed became a pre-occupation for many. Coupled with a lack of a formidable social safety net in our meteoritic society could have affected the pro-creation choices for some of us as commitment to a child is a long term one of about 20 years.

How do we turn the pro-creation tide? This is by no means a simple task. Firstly, it is a very personal choice that is outside the purview of the government. Secondly, demographically, the time effectiveness is quite long as it takes about 18 years from gestation to economic productivity. Thirdly, with an aging population, the number of couple is also dwindling thereby compounding the issue further.

In my personal opinion, a basic change in the social safety net is necessary and most probably the most effective. I am not advocating a movement towards a social welfare state of affairs. I am in favor of one that is tailored to cover the young and consider it as a form of democraticism that provides our future generation a more equal opportunity in terms of access to education, career choices and their successful outcome in life that can quite independent of their parents' stature in society.

Singapore Elections Time Table - Crystal Ball Gazing October 2004

The handover of the Singapore Premiership from Goh Chok Tong in August this year has been executed with a level of finesse. It affords Goh Chok Tong, the outgoing PM the honor of addressing the nation on the eve of National Day for the last time as PM but left the all important national day rally speech to the new PM Lee Hsien Loong. Most know that the speech on the eve of national day is mainly ceremonial and short whereas the national day rally speech is substantial and water shed where key policies and strategies is shared.

A significant event that just took place is the opening of the electoral register for inspection. If past events were a good predictor of the future, it is likely for us to expect a general election before Sep 2005. On this note, it my guess that a likely window for the general election to happen is perhaps before the presentation of the next fiscal budget due in February and March 2005. The current year budget expires on 31st March 2005. The reasons for this window are manifold. Firstly, the new PM would most probably want to obtain a fresh mandate from the population to strengthen and consolidate his power base. This is even more likely if the new PM is going to announce key changes in the budget for the new fiscal year. This is most probably the likely scenario as the new PM is not known to be a status quo personality and the most predictable constant of the new PM is change. This is also evidenced by the recent cabinet level announced shortly after his appointment. Secondly, he might want to use the election to test the popularity of his new cabinet line-up or perhaps his.

My crystal ball tells me that the events would likely unfold as follows. Firstly, that the election would likely happen during the 6 weeks November/December 2004 school holidays or the one week school break in March 2005. The main reason for doing so is the convenience of using school premises as voting stations. Secondly, it is always prudent to time the election on the back of stellar economic performance as it lends credence to ruling party. On this note, the Singapore economy has been doing well of late with close to double digit growth. With economic cycles running shorter, the ruling party is also mindful to make full use of this window to stage a general election. Thirdly, due to the electoral process and the need to dissolve parliament prior to election, it would be challenging to have the election in March 2005 as there would not be enough time for parliament to approve the new budget. However, if the election were to happen in March 2005, the President could exercise his presidential decree to extend the operating budget for a month if the new budget has not been approved. This would allow the government to operate and avoid a government shutdown.

However, the capital budget might be held back in some ways. This might impact the economy somewhat and lead to a predictable slowdown that would catch up in due course of the same quarter. If elections were to happen during the November/December holidays, it would allow for a normal budget to be debated and approved before it becomes due. However, it is October now and time is running short for the November/December 2004 time table.

Perhaps Singapore would for once be more adventurous and experimental and prove my predictions wrong.

Polarized versus Absolute Power - The Singapore Experience - Feb 2004

Writer of ANIMAL FARM once said that absolute power corrupts absolutely. The elder statesman of Singapore Lee Kuan Yew (LKY) whose political party Peoples Action Party (PAP) ruled the island state with more than 3/4 majority for over 30 years is of the opinion that this island state can only operate if the ruling party has absolute mandate. LKY has managed to persuade the electorate with his reasoning that Singapore is far too small to afford the due process of democracy in a western style democracy and that his brand of democracy works and works damn well in Singapore. Look at where Singapore was way back in 1965 and where Singapore is now. It is not practical to turn back the clock to conduct an experiment to see if a polarized power structure would have us in a better state but let's look forward to see what would be a better form of governance moving forward along the dimensions of social equality, economic progress and stability.

Authority and Power
Thus far we have used the term power but let's do some differentiation between power and authority. Authority is what is legitimately conferred upon a person and it can be operated upon formally and directly and is very positional. Power on the other hand is influence that a person holds informally for reasons other than his formal position. While power and authority has a lot of semblance, it is very different in terms of its source, operatives and principles of engagement. A person with a lot of power without much authority can be as important as his counterpart with more authority. In addition, authority can be controlled to a larger extent than power as the former operates on a more formal level whilst the latter operates on a more personal level. While the topic is one of power as it is more reflective of the ground reality, the changes that we are proposing would most probably operate on the more formal authority and hopefully, wisdom would rule the day on a personal level to affect the distribution of power.

There is no doubt here that elder statesman LKY wields a tremendous amount of power even though he is no longer in the authoritative premiership position held by Goh Chok Tong. On this note, I personally believe that even if LKY is no longer in the PAP, he would still hold considerable power so long as PAP, the vessel of his making, is still in power. In addition to this, he still has the eyes and ears of the electorate. Perhaps, the religious harmony bill should have a parallel with regards to out of office politicians in curtailing their influence on the electorate. The same argument he put forth for the existent of the bill that if you want to be in politics, declare your intentions, face the election, earn your stripe to office and then address the crowd.

Absolute Power
As an anti thesis to the animal farm paradigm, many organizational leadership theorem postulates that without sufficient power, leadership would falter and the organization might be headed towards failure. It is so easy to sell the maxim that weak leadership equal ineffective governance. It all seems that the day belongs to the absolute camp. On the scene in Singapore, LKY has argued somewhere along this line that Singapore is such a small island state that western brand of democracy is not relevant because the margin of error is so small that a mistake can wipe Singapore out. On the need to have a system of check and balance which is one of the key ingredients of democracy, PAP has maintained that the key is to bring in upright leaders of immaculate integrity. Basic premise being to focus on the quality of the input rather then doing then weeding along the way. Is this practical? You draw your own conclusions.

Perfecting the Imperfect
Democracy was borne out of a strong sense of social equality based on the one man one vote system and is one of the many social equalizers. Above that, it is very much like a perfect tool for an imperfect world. Let me explain this further. In an imperfect world where everything and anything is open to abuse, democracy uses consensus decision making in the form of a periodic appointment of the powers to be through the ballot box.

When a vote is caste for an individual, the voter is voting for a basket of values and ideas that he believes the candidates have and will possibly carry for the tenure of the office.

First, it is a vote of a collective manner in that he might not agree fully with everything the candidates represents but collectively, it is the best choice in his mind. Secondly, there is an element of crystal ball gazing into the future as the tenure is normally for a period of 4 to 6 years normally. Is it not practical to vote individually on each and every issue although separate referendum might be carried to seek populace mandate on very fundamental issues.

In addition, where power is distributed fairly even, there is less chances of an anarchy leading to political unrest as people tend to feel more in control and able to influence the process through legitimate means. However, where power is highly concentrated, there is strong temptation from those in power to abuse their position to stem out contrarians viewpoint. This can actually be in very legitimate forms like making changes to constitutions, laws, regulation an rules to weed out their opposition. Although a highly polarized power can also translate into a weak government, the absolute power situation might be a scarier position to be in. Perhaps, we should consider a change to limit the maximum length that a person can be in power for some key positions like the premiership and the presidency. I believe that Singapore has recognized this danger and has put the elected presidency into place with veto power but is this really effective enough as an instrument of check and balance?

Reality Check
Let's take a drive down Singapore's reality lane and see some of the situations that have gathered much controversy in the past. Firstly, it is not uncommon to see a string of legal suits being filed against the opposition after each election. I am totally convinced about the individual merits of each and every case but collectively, they do not paint a very good picture for Singapore. In established democracy, it is often taken as something that comes with the turf of holding public office and such action is normally taken on a very selective basis. There is a strong belief that the free press would create a balanced view as readers would also judge the merits against the writer's reputation and the ability to use the free press to defend one self also helps. Might be better to allow more latitude in the area of press freedom and let the situation correct itself than to seek legal redress although this is a personal right of everyone including politicians in power.
Connected to the first set of events, the independence of the judiciary was called into question not too long ago. The government had to defend this position and set the record straight very firmly as it is a very fundamental and important issue and the government did the right thing in doing so. However, it is my personal belief that there are less chances of this happening if the politicians have chosen to fight the battles on the open press instead of using the court room as the battle field.

Lastly, the creation of the group representation constituency to the electoral laws has also invited strong opinion about the motivation for doing so. While there are strong merits for making this change, it is no doubt that this change would dis-advantage the opposition party. The opposition already has problem enlisting enough candidates individually much less as a group in a populace that has grown so politically indifferent and numb over the years of simple majority party PAP rule. In addition, the re-zoning of electoral boundaries especially in wards with marginal wins has also not been seen favorably.

Although a polarized power structure might not be very efficient and effective compared to the current power structure in Singapore but it most probably provides better checks and balances and a perception of greater social equality in our society. Economic barometer is a very important measure as a hungry man can make little use of his freedom but it is not the only and ultimate measure of well being of a society. As a young nation like Singapore matures, the perception and yardstick will hopefully change too.