Lee Kuan Yew is all over the news today, talking about GIC’s 25% loss. In particular, he has been defending GIC’s investments in the banks. I’ve written extensively about these investments, but MM Lee’s latest attempts and defending GIC are some of the crappiest shit I’ve seen in a while.
Damn it – I’m just absolutely fed up with Lee’s crap. For goodness sake already, just own up and admit that GIC did not have a clue.
’We became cash-rich and when the market fell, we went into UBS and Citi,’ he said. ‘But we went in too early. That’s part of the ride.’
…
‘How could we have known this was the extent of the damage? You look at all the big-name banks – they have gone down, misjudged the situation, ruined their careers,’ Mr Lee said.
Here’s the octogenerian politician, trying to wriggle his way out by claiming that GIC could not have known the extent of the damage. He blames the big-name bankers for ruining their careers, and says its all “part of the ride”.
Well, thats a bucketload of bullcrap.
You want to know how you could have “known the extent of the damage”, Mr Lee?? I’ll Tell You HOW!!!
In news just out, GIC has agreed to convert its preferred stake in Citigroup to Common Equity, to go along with the US government’s continued bailout plan for the company.
GIC converts preferred notes in Citigroup to common shares
By May Wong, Channel NewsAsia | Posted: 27 February 2009 2026 hrs
SINGAPORE: The Government of Singapore Investment Corp (GIC) has said it will convert its convertible preferred notes in the US lender Citigroup to common stock in a bid to help shore up the troubled US lender.
The exchange price is US$3.25 a share – a 32 per cent premium to Citigroup’s closing price on Thursday. The price is way under the conversion price of US$26.35 a share under the original terms of the investment. Read the rest of this entry »
Singapore’s MTI recently released the country’s Q4 2008 economic statistics. The numbers are, quite simply, absolutely dismal.
Singapore’s economy shrinks 16.4% annualized rate in Q4
By Chris Oliver
Last update: 9:33 p.m. EST Feb. 25, 2009
HONG KONG (MarketWatch) — Singapore’s economy contracted at an annualized 16.4% in the October-to-December quarter, its sharpest pace of contraction in 33 years, according to revised figures released Thursday by the Ministry of Trade and Industry. For the whole of 2008, the economy grew 1.1%, after expanding 7.8% the preceding year, the ministry said in the 169-page Economic Survey of Singapore report. The manufacturing sector declined 10.7% in the fourth quarter on year, while the services sector was down 1.3%. Initial estimates published in January were for a 16.9% annualized contraction in the fourth quarter.
Think that’s bad?
Wait until you compare this contraction with other economies around the world, and you’ll see how bad it really is.The following image, courtesy of the Business Times, tells a thousand words.
In April 2008, this blogger took note of Lee Kuan Yew’s comments in an interview with Bloomberg. The octogenarian Minister Mentor was defending GIC, the Singaporean sovereign weath fund of which he is Chairman, which had made investments in UBS and Citigroup just months before. I have previously dealt with Citigroup and the prospect of its equity investors being wiped out due to nationalisation. But for this post, the subject of my analysis is UBS.
The Minister Mentor went on the record complimenting the private banking franchise of UBS, citing this as the reason why GIC made a significant investment in the famous Swiss bank:
“The franchise of the banks, the expertise that they have, under proper leadership, they will be able to recover and rise again … Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it.” -MM Lee, in a Bloomberg Interview, Apr 08
Well well, things are getting exciting. All of us know that GIC is reported to have incurred losses of US$33 Billion. All of us know that the government keeps on saying that GIC & Temasek are long term investors. And guess what, the press reported that GIC expects long-term returns from its bank investments (and I think, that’s what Temasek expects as well)
Singapore’s GIC Loses $33 Billion as Assets Tumble, WSJ Says By Andrea Tan and Chris Peterson
Feb. 17 (Bloomberg) — Government of Singapore Investment Corp., one of two sovereign wealth funds owned by the island, lost as much as S$50 billion ($33 billion) in 2008, the Wall Street Journal said, citing two people familiar with the matter.
The fund doesn’t plan to get rid of its investments including in Citigroup Inc. and UBS AG even as asset values plummet, the newspaper said. GIC expects the two banks to provide substantial long-term returns, according to the report.
Sovereign wealth funds in Asia and the Middle East have pumped money into global financial institutions to help replenish capital eroded by writedowns and losses that have topped $1 trillion globally. GIC, overseeing more than $100 billion of reserves, has invested about $18 billion in UBS and Citigroup since December 2007.
I think few people truly appreciate what is going on in the global economy today. Many people think that what we are going through is just a short-term recession, like those of the last decade. They think that after a short period of contraction, our economy will bounce back quickly. They think that the stock market will start rising soon and that the housing market will recover soon.
But very few people alive today have lived through an economic deterioration of today’s proportions. Very few people alive today will ever live through another economic downturn of today’s proportions. What we are looking at is a downturn of unprecedented proportions, unseen since the Great Depression of the 1930s. But don’t take my word for it. Take it from Alan Greenspan, take it from the IMF Chief, take it from investment heavyweights like Marc Faber.
My first quote comes from the IMF Chief, who warned earlier in January that the world faces a global crisis:
Some time ago, Singapore’s heavily export-oriented growth model came under fire. The Wall Street Journal published an opinion piece, criticising the lop-sided dependence on exports and the crowding out of the private sector by the government:
The export-led economy is falling on its face. Minister Tharman Shanmugaratnam predicts the city-state is “likely to experience” the deepest recession in its history. The government will tap its reserves to help pay for the stimulus package. Growth contracted 16.9% in the fourth quarter last year. The Ministry of Trade and Industry has revised down GDP forecasts twice this month already, and expects the city-state’s growth to contract 2% to 5% this year. The pain is now leaking into the domestic economy as consumers retrench.
Singapore’s economy would be more resilient if it were better balanced. Consumption composes only about 40% of GDP — far less than other developed Asian economies, nearer to 55%. Yesterday’s budget doesn’t do much to change long-term incentives to consume. The government announced a 20% income-tax rebate for one year, but no permanent cuts. Nor did it cut the 7% goods and services tax. Singaporean workers and businesses invest a total of 34.5% of wages into the state pension fund, but receive less than a 2% return from the government. That’s a measly payout compared to what private funds return over long investment periods.
These thoughts and others were echoed by many financial and economic analysts around the world. Naturally, however, Singapore’s government took a stand against its critics, and Tharman Shanmugaratnam was forced to declare that “Singapore’s Growth Model Works”, in defence of the government’s economic policies:
Government officials and Temasek executives have repeatedly held the line that Temasek’s portfolio performance should be evaluated, not simply the performance of individual investments. It is thus no surprise that Temasek’s latest unveiling of its recent portfolio performance has come under intense scrutiny, not just by Singaporeans, but by financial analysts all over the world.
This morning, the press reported a 31% drop in the market value of Temasek’s portfolio from March 08 to Nov 08. Under rigorous enquiry about the performance of Temasek, government officials retorted that Temasek’s performance has been ‘respectable’ compared to the performance of global investment indices, such as that of the MSCI world index.
The following charts highlight the performance of the MSCI over the last few years:
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