Spending my year end bonus

I just received my annual payslip and was pleasantly surprised to know that I have earned a gross annual income of $80,000 this year, $10,000 more last year. I expect next year’s income to be around this region or at most $2,000 more, assuming I stay on to my current job. As I did not travel overseas, I decided to spend more on buying material goods for my family, close friends and myself.

Some of the purchases were in the grey region of needs and wants. For instance, a comprehensive health checkup is a need and I have signed up for SPA and gym to improve my overall health being. It can be justified that it is a “need” I want.

Same goes with humidifier, which improves my sleep (and health); new clothes are definitely “wants”, yet necessary spending “needs” for working people.

Fortunately, I have applied for some credit cards that come with cash rebates helped to defray my costs.

I have calculated that I have a budget deficit of about $1,000 after adjusting for a cancelled $2,400 travel expenses. I guess the additional $1,000 will have to come from my dividends and additional bonus. No harm to exceed the budget as long as you know where the money is going.

I shall work harder to earn and save more in 2009!

Merry Christmas!!

Wishing all my readers Merry Christmas!! May you enjoy the season of sharing with your friends and love ones!

Liu Chien

For the past few months, I often find myself glued to Channel 56 for the Magic Show. One of the judges, Liu Chien left a very deep impression on me. Based on Liu’s performances, dialogues with contestants and past accolades, I find him (among other professional magicians) to be the most humble yet highest skilled magician.

Some of the magician judges are downright arrogant (though it may be for show), humorous (but mediocre in magic) or is simply there for the sake of money.

If you have watched Liu Chien’s criticism towards contestants, you would find several commendable traits in him:

He is absolutely a master in his profession.

He takes A LOT of pride in his job and expects others to respect this occupation as well.

His criticisms towards contestants are meant to educate and reform, rather than impress and entertain, which many other judges (non magicians as well) are guilty of.

He looks beyond every magical performance and gives recognition to contestants who put in rigour and heart into their preparation, though the performance may be a flop.

He is an articulate speaker and his words are often apt and concise, backed with strong convictions.

He is respectful towards any performer on the stage even though some of the contestants are really crappy.

The above traits are worth learning. How many people, being a master in a subject can still be humble, patient towards other learners?

Liu Chien actually did not aspire to be a professional magician. After graduating from university with a Japanese language major, all he wanted was to work in a Japanese MNC or become a translator. However, due to unfavourable circumstances, he couldn’t find any company willing to take him in.

Liu Chien decided that perhaps he could give magic a try, since it is something he is good at from young

The rest is history.

Liu Chien’s career accomplishment is a classic textbook example of pursuing one’s passion /finding one’s niche/ pursing one’s dreams/ when one door closes, the other (or bigger one) open etc.

I am quite inspired by his one size fits all classic example. Finance being my passion could possibly be my next career path. Do not be surprise if you find SBC writing analyst reports on SBC!! Haha! Do look out for my classic superman logo though!!

If you have never seen Liu Chien or you are curious how he looks like and his brief history, check it out below. He will perform a illusion at the 3rd minute. Do let me know if you know how it is done!

Mandatory block leave: My Retirement Preview

I am put on mandatory block leave to clear my outstanding leave from last week till early next year. I do not quite like the idea as holidays at the end of the year are packed with people and much more expensive. My working friends would prefer to travel during the off peak season, which unfortunately does not coincide with my working schedule. Hence, instead of going to Japan or Hong Kong this year, I have decided to skip my overseas holidays and stimulate the economy by spending and holidaying here!

My leave period was quite a retirement preview. A typical day will be as follows:

8am: Wake up, shower, papers (headlines)

8.30am: Watch Channel 8 Morning Express for local and international news, including overnight US markets closing data and analysis.

10am: Light breakfast together with reading newspapers.

12pm: Swim or hitting the gym (just sign up) for weights and treadmill.

1.30pm: A bit of TV, DVD (rental), reading of The Edge, car magazines, surfing net, afternoon shopping (where crowd is tolerable) and hitting the library to pass my afternoon. I usually do not do lunch but instead will have a more filling tea break, consisting of waffles, tea, cakes or donuts. Napping is a wonderful occasional affair.

Sometimes I meet up with ex-colleagues or friends for lunch and the day will fly by amidst our chatter and laughter at a heartland café and a movie thereafter.

6.00pm: Dinner and watching 6.30pm News (OR Meeting friends for dinner, shopping and I will catch up the Channel 55 drama serials on the following day afternoon).

8pm: Watching Channel 55 drama serials.

10pm: News

10.30pm: Bedtime music and reading OR Supper with the usual kakis

12am: Lights Off!

Now, that’s retirement!

When I am at home for the past 2 weeks, I realized that many of my variable spending during a typical day is actually quite affordable. I can happily pass a day by spending about $20 (on average, mainly on food and transport). However, the unseen costs are things like rent (or mortgage), utilities, club memberships, phone bills, internet, cable TV, personal effects, insurance, property and road tax together with other fixed costs all add up to a hefty amount. Moreover, we also need to set aside cash for less common things like gifts, repairs, overseas travel and even parking summons too!

I would think that to lead a modest retirement lifestyle, a $2,000 monthly retirement budget (in 2008 dollars) is likely to be sufficient if one’s mortgage is fully paid up.

I guess I will need to work harder to accumulate more savings and increase my passive income to retire comfortably!

DBS Rights Issue. To subscribe or not?

DBS announced that they will raise $4 billion of capital through a rights issue. Every two shares that a shareholder owns will entitle/her to subscribe for a DBS share at a price of $5.42.

The shares trade ex-rights date will be 29th December 2008 from 9am.

This is not exactly a good time to issue rights, as it sends mixed signals to the investors. Is DBS in dire need for cash that they need to issue rights to shore up capital? Has loans default rate increased?

If you are a DBS shareholder, will you be subscribing to the rights?

If you are holding only 1,000 shares (like myself), you have several options:

A) Buy another 1,000 DBS shares so that you can have 1,000 rights to purchase an additional 1,000 DBS shares @ $5,420 (you will end up with 3,000 DBS shares).

B) Buy 500 rights on the exchange so that you are entitled to buy 1,000 DBS shares @ $5,420 (you will end up with 2,000 DBS shares).

C) Sell away your 500 rights to people interested in purchasing DBS shares @ $5.42 (you will end up with slightly above $1,000 cash but your share in DBS will be diluted and price of DBS will fall more than $1 upon XR).

What will my option be? Very simple, I need to do some guess work and attempt to choose the most economical option. A simple calculation will be as below:

I am willing to purchase DBS in the open market for $8.80 to earn an additional 500 rights. Hence, at the end of the day, I will spend $8,800 (DBS shares) + $5,420 (subscribing to DBS rights shares)= $14,220 (which will end me up with 3,000 DBS shares).

If I were to purchase an additional 1,500 rights in the open market, how much will each right cost to justify my purchase?

By purchasing 1,500 rights, I will also end up with 3,000 DBS shares (including my 500 rights as well). Hence, I will need to spend $5,420 x 2 (to get 2,000 DBS rights shares issue) + cost of 1,500 rights= or lesser than $14,220. Hence each right will be worth buying if it costs less than (14,220-5,420 x 2)/1500 rights= $2.25

However, take note that rights can only be traded after DBS goes XR, or else it will be like trading derivatives.

Personally I might buy an additional DBS lot @ $8.80, sell away my rights above $2.30 and attempt to purchase DBS later @ $5 instead.

Stress and Cancer

Why are you stressed? Work? Money? Irritating colleagues? Unreasonable demands or expectations from your spouse or partner? Ailing parents?

Beware, all the above will cause cancer, although it is not proven. Dr. Ang Peng Tiam, my favourite regular medical columnist shares his insights:

Proof is key to science, which can thereby make a lot of demands. As a doctor, I do subscribe, by and large, to evidence-based medicine - the practice of rigorous and repeated tests, clinical trials and journal reviews.

I hardly ever make a statement without scientific proof. However, I believe there is at least one notable exception: Stress causes cancer, even though I cannot prove it.

This is not from lack of trying. Others too have long tried to correlate stress to cancer.
Over the past 30 years, studies that examined the relationship between psychological factors (including stress) and cancer risk have been inconclusive. Although the results of some studies point to a link between various psychological factors and an increased risk of cancer, a direct cause-and-effect relationship has not been established.

With 26 years of medical experience, I offer some hypotheses, albeit without firm scientific proof.

Whenever one of my patients has cancer recurrence, I gently probe into what is going on in his or her life. Often, those who open up talk about unfaithful husbands, money problems, unhappiness at the workplace or problems with children and their studies.

Recently, a pleasant woman came to see me with her husband, after having been diagnosed with advanced stomach cancer. One of her questions was: 'Why did I get stomach cancer?'

There are many possible causes for this cancer, like preservatives in food, carcinogens from smoked or barbecued meats (which happens to be one of my favourite foods) or Helicobacter pylori (a bacterial infection of the stomach). I also suggested to her that stress might be a factor.

Although she did not say anything, the way she turned to look at her husband spoke volumes. Her husband nodded, agreeing that she was indeed going through a stressful time.

Such anecdotes are unscientific and I can understand why it is difficult to prove that stress causes cancer. After all, two individuals can be doing the same stressful work. Yet one may thrive on the excitement of the work intensity while the other struggles with the same workload.
I remember a conversation in 1992, when ProfessorSun Yan, a renowned oncologist from Beijing, visited Singapore. He was asked whether he believed that stress can cause cancer. Without hesitation, he said: 'Of course, stress definitely causes cancer.'

I was taken aback and asked him why he gave such a confident response. He went on to talk about the Cultural Revolution in China.

During that period, between 1965 and 1975, ordinary Chinese people came under tremendous psychological stress. Betrayal by friends and family, oppression of thought and mandatory and harsh new routines created an upheaval in their lives.

'During that period, I was already a doctor and there was a sudden rise in the number of cancer patients in all the hospitals,' Prof Sun related.

'We saw many more cancer patients. The common factor among them was the tremendous psychological stress they were all experiencing. That's why I'm sure that stress is one of the causes of cancer.'

At the time, I had doubted his conclusion. Today, after more than 20 years in the field of oncology, I am more inclined to believe him.

So how does stress cause cancer?

Evidence from animal and human studies has shown that chronic stress weakens the immune system which is responsible for constant surveillance within our bodies for infections and cancers.

This system seeks out and destroys abnormal cancer cells which may arise from time to time. When it fails, the cells can go undetected and grow into malignant tumours.

For the same reason, patients suffering from Acquired Immunodeficiency Syndrome, or post-kidney transplant patients on immunosuppressive drugs, are more prone to developing certain cancers.

There is also some data suggesting that cancer patients who feel helpless and have negative emotions tend to be worse off. The 'bad vibes' promote the growth or spread of cancer, although this relationship was not consistently seen in all the studies.

So how can anyone, particularly a cancer patient, cope with stress?

Faith in God is one way. By entrusting one's life to a supreme being, the burden is taken off oneself. Exercise, meditation, leisure activities, counselling and use of anti-anxiety drugs may all help in improving one's psychological well-being too.

Even though I sometimes struggle to see the many patients waiting to see me, I constantly remind myself to practise what I preach: 'Be happy and live each day to its fullest'.

You don't need science to tell you that.

angpt@parkwaycancercentre.com

Dr Ang, the medical director of Parkway Cancer Centre, has been treating cancer patients for nearly 20 years. In 1996, he was awarded Singapore's National Science Award for his outstanding contributions to medical research.

http://www.straitstimes.com/Mind%2BYour%2BBody/Health%2BHelp/Story/STIStory_315507.html

Dr. Ang has written clearly that although there is insufficient empirical evidence to prove that stress causes cancer, he believes that it is possibly one of the main causes.

We do not know the formula that concocts cancer. It could be stress (20%), diet (20%), exercise (or the lack of; 20%), genetic (20%), being happy (20%) or other parameters as well. Other than genetic reasons that cannot be controlled, I think 80% of cancer factors are possibly within our means to control.

If you feel that your work is too stressful, change it.

If you have no exercise regimen, start one.

If you are feeling unhappy, it is time to pick up your old hobby or start a new one. Watching some Channel 56 variety shows help too!

Eat the canned, fried, oil, fatty, sweet and alcoholic food in moderation. Go for more organic, steam, fresh and nutritious food. Spending more by eating better food is actually another form of insurance!

Actually it can be stressful to pursue happiness if we equate happiness with having lots of money. Sometimes it is the thought of having lots of money that gives us the misconception that diving into a sea of gold coins daily is a luxury (Reference: Duck Tales). Yet it is often the penniless kids (duck nephews) that are often happier than the adults (uncle scrooge).

The key is really to find the optimal balance of family, friends, finance and personal interests

I do hope Dr. Ang writes more medical column to educate us on health matters. After all, prevention is always better than cure.

But I do hope that I never have to see him for business one day!

Good health is still true wealth!

Market thoughts

Today as I browse through the Straits Times Recruit, it reminds me scarily of the SARS period. Recruit was packed with little jobs’ advertisements, mainly hailing from statutory and government agencies. It is apparent that the private sector has little interest in hiring new employees now. What does it translate to the stock market?

Refer to the below graph:

During the 9/11 and SARS period, STI bottomed around 1200 points. However, the problem we are seeing now is more difficult and perhaps even more prolonged.

Where would the bottom level be then?

Many analysts are calling the situation with conviction that things will turn for the better from 1H 09. Respectable economists (local and overseas) believe that economy will recover in 1Q 2010.

My personal view after reading all the reports and statistics so far is that the downturn has only begun. Recovery for the job market and economy is likely to come earliest in 2010 or 2011.

Stocks being forward looking may only pick up (earliest) from 2H 09 onwards. Hence, if my assumption is right, from now till 2H 09, stocks will experience a bottoming process. Hedge funds still have a lot of redemption orders on their cards. In Jan and March 09, there might be carnage of equity sales.

I still prefer to resume buying blue chips when STI falls to 1400 points or below. There is a strong margin of safety at this level. It might go lower, perhaps even to 900. But I am not betting on such distress.

Take note however, that there are still a lot of uncertainties going on. Will the US motor industry fail, merge or become state owned? What policies will Obama bring to stimulate the economy? How will China tackle the yuan appreciation problem, which has cause many export firms to fold? With US external debt ballooning, and the only way to repay debt is by borrowing, is the US the ultimate Ponzi scam? Will Madoff cause further deleveraging, massive redemption and demise of hedge funds (Madoff effect)? The deferred payment scheme (DPS) will definitely create some fire sales in the property market. What kind of ripples will be sent down to our local stock market?

With a million uncertainties, it is still better to hold cash and invest when one is prepared to see paper losses of 30% or more. The risk is high, but it might take another 10 years to see another crisis. So, don’t rush into it but don’t waste it either.

IPPT and Investment

Yesterday I secured another 200 bucks for Christmas shopping as I obtained a silver award in IPPT (Individual Physical Proficiency Test). It was money well deserved! I had spent the past 4 months training 2.4km and chin ups. My training regimen was simple, running 4km thrice a week and doing chin ups or sit-ups after every run. There is no fanciful gym or treadmill training but just disciplined scheduled workouts at the stadium or jogging tracks.

In order for me to ensure I pass my IPPT, I “invested” in an electronic watch (costing $50). By spending money on the watch, I force myself to commit into taking my 2.4km timing thrice a week in order to “recoup” my investment.

What has this got to do with investment? Plenty!

Time

During the 4 months of training, there are times I really felt like giving up. Running at 8pm isn’t exactly pleasant, especially after a long day’s work. However, the prospect of attending remedial training (2 weekdays evening and 1 weekend afternoon) was simply too daunting to any salaried worker. My work, leisure and social life would be terribly affected, not to mention my self confidence when entertaining questions such as “how come you cannot pass?”, “you mean you failed?” and other “friendly” comments.

Similarly in investment, our ultimate aim is to accumulate a comfortable buffer of assets so that we can do what we like eventually. The motivation to invest also stems from the daunting prospect of having to work till the very day you hit grave, isn’t it? I am sure you wouldn’t want to entertain queries like “how come you don’t want to retire?” and “You mean you still haven’t repaid your mortgage?”

We are effectively spending more time now to free up even more time in the future.

Pace

It took me 4 months to train effectively for IPPT. Initially, my 2.4km timings never went below 15 minutes for the first month. However, it did not deter me to give up. Usually, I will try to run as fast as possible for the first 2.4km, followed by a slow jog to complete the remaining 1.6km. I paced myself and listened to my body. Failing IPPT was the worst thing to happen, but if I had pushed myself to the extreme for faster results, I might have been dead. Hence, always strive to be in a manageable pace when pursuing your objective or you might end up being killed by it.

While saving for retirement, we often hear people taking unnecessary investment risks in derivatives (eg accumulators and warrants) or simply investing blindly (eg Lehman mini bonds and structured products). If you do not know where your money is going, you have lost pace of it. It is as dangerous as training without knowing where your body is heading.

The results can be disastrous.

Hence, do not be in a hurry to accumulate wealth and work 20 hours a day, losing your health in the process. Pace yourself, slowly but surely reaching your destination.

Obstacles

As I mentioned earlier, there were a lot of obstacles along the way to my silver award. There are times where I felt disillusioned that after 2 months of training, when my fastest 2.4km timing was still 14 minutes. If I were to miss training for a week, my timing will revert back to 15 minutes! I have to give up dinner meetings, favourite tv shows and eat sparingly to control my weight. Fast food, snacks and chocolates have to give way to IPPT training.

During my investment journey, I do have a fair share of obstacles. I do stumble upon the allure of luxury goods. I feel the “need” to have that “want”. There are times I would just want to break my bond, quit my job and pay a year of salary to my employer. The hottest stock in town has risen 500% in a week, I feel like buying it after it has corrected 20% (when eventually it will correct 90%). My colleagues change car so frequently that my trusty Japanese car seems to have more value if I trade it in with the antique shop.

The above obstacles will stray us away from the investment path and only by focusing on the original objective will we be guided back to the initial path.

Margin of safety

Eventually, I finished my 2.4km run in 11 minutes together with 10 chin ups. It was a far cry from my initial 16 minutes and 4 chin ups history. Nearing my IPPT date, I was pretty sure I can pass and possibly obtain a silver award. However, I continued to push myself, climb steps and increase my training hours, even though I can bag a silver award just by doing 7 chin ups and running 2.4km in 12.00 minutes.

However, I do not want to merely scrap through a silver but persevered to improve on a decent set of results. In fact, there was a rather heavy rain yesterday during the run. If I had not trained harder, I might have missed the silver award. Having a margin of safety here allows me to comfortably enjoy the IPPT process without fear of missing my target.

In investment, the margin of safety concept has been repeated so frequently that even the cows know it. Thus, I will not dwell on it here for now.

Rewards

The rewards of meeting your objective are sometimes beyond your expectations. I am healthier, more confident (after losing weight), more discipline and basically a happier person after passing my IPPT.

If I were to meet my financial objective now, I am sure other non tangible rewards would follow. Perhaps I have more time to study, enhance family ties, exercise (even more), travel the world, volunteer and do stuffs that make me a happier person.

Who says IPPT and investment are different?

Earn $20,000 monthly easily

Beware! If you believe my title, you might be the next victim.

Warren Buffet earns only US$100,000 (less than US$9,000 monthly) as a CEO in Berkshire Hathaway today.

His job is not easy.

Source:

http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_312691.html?vgnmr=1

AN UNEMPLOYED man who cheated four women he came to know on Internet chatlines of nearly $40,000 was jailed for 27 months on Wednesday.

Tan Sze Leong, 29, who pleaded guilty last Friday to seven of 19 charges, boasted that he came from a wealthy family, was living in Bukit Timah and had a personal driver.

Two of his victims, Ms Jiang Wei Yeow, 33, and Ms Ivy Teo Mei Ling, 35, were conned after he said he was looking for a personal assistant who would get $15,000 to $20,000 a month to run his errands.

But Tan said the personal assistant had to pay for his expenses first and be reimbursed later. They volunteered their services.

A district court heard that Ms Teo came to know Tan from the the internet chatline in February last year. He used nicknames 'wealthy guy' and 'rich guy' online and identified himself as 'Barry''.

About five months later after she had volunteered to be his personal assistant, Tan asked her to prepare $5,000 for his entertainment expenses for a client.

Ms Teo, believing that he was a rich man's son, borrowed the sum from her sister and handed the cash to him.

As for Ms Jiang, Tan told her over the 'Singapore 30 Plus'' chatline that he was looking for a personal assistant to run errands and provide sexual services.

He claimed that he ran a company and that the $20,000 monthly salary would be paid through his banker.

Ms Jiang was deceived into buying two Gucci bags, a Louis Vuitton handbag and 18 sets of mobile phones totalling $19,345 which were handed to Tan between June 15 and 17.
Tan gave the branded handbags to his girlfriend.

The other two victims, Ms Marina Wong May Li, 29, and Ms Bai Huiting, 19, were cheated of their mobile phone and laptop respectively. The items were recovered.

The ABCD of this story:

Apply common sense in life.

Be cautious of what others tell you and do not believe it wholesale.

Curb your greed.

Do not expect shortcut in life.

Reading

Reading is an enriching activity that can never be overdone. I always keep track of the books I have read in a word file to remind myself the need to increase the running numbers. Below are some books relevant to investment that I have read over the years:

1) Intelligent investor / Benjamin Graham, commentary by Jason Zweig

2) A random walk down wall street / Milkiel Burton

3) Show me the money. Volume 1, Practical readings for investors in Singapore / Teh Hooi Ling

4) Show me the money. Volume 2, Practical readings for investors in Singapore / Teh Hooi Ling

5) One up on wall street, how to use what you already know to make money in the market / Peter Lynch with John Rothchild. Peter Lynch

6) Your money and your brain: how the new science of neuroeconomics can help make you rich / Jason Zweig.

7) Technical analysis explained: the successful investor's guide to spotting investment trends and turning points / Martin J. Pring.

8) Secrets of millionare investors: how you can build a million-dollar net worth by investing in the stock markets / Adam Khoo & Conrad Alvin Lim.

9) Mind Set! / John Naisbitt.

10) The oil factor / Stephen Leeb

11) Who took my money / Kiyosaki, Robert T.

12) The essential Buffett / Robert G.Hagstrom

13) The philosophical investor / Curtis J. Montgomery

14) The prehistoric investor / Curtis J. Montgomery

15) The Ultimate Dividend Playbook / Josh Peters

16) The logic of life / Harford Tim

I seldom blog on investment books’ review as it is too subjective at times to objectively pen down my thoughts. After all, the wisdoms I extract from any book have to be complimented with my actual life experiences before it integrates and forms part of me. In a nutshell, how I perceive investment and life after digesting the books may only be relevant to I, me and myself only.

However, I have been reading lesser investment books these days and am spending more time catching up on current market affairs. Most of the investment books pretty converge to the same theme one way or another. The “trick” is to just package the ideas into different examples or personifications. Essentially, books on fundamental analysis cook the same broth for hungry value investors wannabes.

Following current affairs closely enable me to be forward looking and anticipate the trend ahead. Are we facing an energy crisis in the wake of tumbling oil prices? Or are we looking at a global depression that will wipe off massive wealth and bring banking to its basic mode? What will the world be in the next three to five years? What will be the next bubble? Finance, medical, education, sports and tourism hubs. Can Singapore be a hub of all trades? How can the skills I have be part of the evolving global shift? How do I stay relevant and what additional skills do I need? Is there a future to even stay here?? These are just some of the many questions that I have been querying over the past few months.

Anyhow, The Edge magazine is a comprehensive weekly summary of market updates and investment periodicals. However, the volume of contents can be rather heavy going and I rarely read everything. Usually the new issue gets pile up before I finish 80% of the previous issue. I do get fresh perspectives on the emerging trends every time I digest an issue.

On a daily basis, I usually finish reading ST Money Section within an hour (first thing in the morning) and will make an effort to read the online business times (free after 6pm) at night. The night reading rarely turns out well, as I often (and hate to) read and forget. I prefer to read, think and rethink. It gives reading the real meaning.

Nowadays, I rely on word of mouth for recommendation of good books. I am on the lookout for books that predict future trends. Do drop me a comment if you have such good books to recommend!

Sky@Eleven: Possible defaults from deferred payment scheme (DPS)?

An international brokerage house recently reported that SPH may cut its dividend payout by 10 cents (or 36%) in 2009 as 100% of SPH property project, Sky@Eleven was sold 100% under deferred payment scheme.

This means that buyers typically put a 10%-20% down payment and would only seek bank funding nearing the TOP (end 2010) date. The average price sold during the launch was about $975. The highest price sold during the launch was $1,200 PSF. The project was sold out completely within 30 hours of the soft launch and the public weekend launch had to be cancelled immediately.

SPH would receive total revenue of more than $600M from the development and development costs would be within $200M.

A last check online showed that Sky@Eleven changed hands @ $900 PSF for a 2,713 sq feet unit. More than 90% of the units this year changed hands above $1,000 PSF, meaning if the seller was the 1st buyer, he would have still made money, up till Sept 08.

There is definitely cause for concerns as the last few transacted price can possibly be even lower than the initial launched price. If the market were to worsen further, we can even see the price falling below $800 PSF. This would mean that buyers who have bought Sky@Eleven (SE) at $1,000 PSF might simply realized a paper loss of 20% and forfeit their down payment. Afterall, they can purchase a new unit at a cheaper price immediately and property market might offer bigger bargains upon SE’s TOP.

Buyers who are reluctant to realized the paper loss may be forced to do so as banks would be valuing SE @ $800 PSF and would only be willing to grant a $640 PSF loan. The buyer might not be able or willing to cough up additional $160 PSF or $440,000 additional cash for a typical 2,713 sq feet unit.

What happens to SPH then? Is there any cause for alarm?

Personally I still feel that based on the last transacted price of $900 PSF, we should not be rushing to sell our SPH shares. Considering buyers who eventually default and forfeit their 20% (typical down payment) deposit, SPH can still price SE at $780 PSF and together with the earlier 20% deposit forfeited by buyers, they are still able to receive the same sales proceeds even after the buyers default. (Though there might not be ready buyers)

Alternatively, SPH can price SE at an even lower fire sale of $700 PSF to entice bargain hunters. The price would be a steal for a luxurious, district 11 freehold property. They would still be earning a cool $500M revenue from this project at this price, after adjusting for forfeited deposits (assuming 100% buyers default, 20% deposit forfeited and the project is sold 100% @ $700 PSF). They can also rent it out and wait for market recovery before selling it off above $800 PSF. The silver lining is that SPH core business is not property development and does not have other properties selling under DPS scheme. The land is freehold and construction costs are not highly leveraged.

Thus, SPH have a lot of flexibility to price and generate alternative income from this project, though I cannot say the same for other developers.

I have personally called and checked the selling price of a new property project, Lucida (2 Suffolk Road) today, which is located beside United Square. This freehold development by Novelty Group is selling its apartment at above $1,000 PSF. A 1066 sq ft 2-bed room unit is going for 1.2M.

The rental prospects of district 11 are still good, with the Novena medical centre and Singapore reputation as a medical hub. Hence I am still cautiously optimistic in SPH Sky@Eleven project.

I will be getting the 2 bedroom apartment at Lucida it if it falls to $650,000!