Nicholas M Ong » Archive » Who I Will Put My Money on in 2008

It’s the New Year Eve afternoon here in Singapore and 2007 has proved to be an interesting year. The sub-prime mortgage mess in the U.S. caused many investors and financial institutions to take a big hit.
One such institution is none other than Swiss banking giant UBS AG. The bank said on last Friday it had dropped plans to acquire a mutual fund management business in India from the British group Standard Chartered. UBS announced a net loss of 830 million Swiss francs for the third quarter after having to absorb asset write-downs totaling 9.3 billion euros because of its exposure to the US housing market crisis. The bank could now end 2007 with a loss for the first time in its history. This news came after The Government of Singapore Investment Corporation (GIC) and the Swiss bank reach a deal to pump in US$10bn to bail UBS from it’s sub-prime mortgage crisis write downs.

Not to be out done by it’s bigger sibling, Temasek Holdings was next in line to jump on the bandwagon of what analyst are now calling a hedging strategy by Singapore sovereign funds. Temasek announced that it is now in the advanced stage of acquiring a US$5 billion stake in the Wall Street Firm who is expecting a US$16 billion loss this year due to the sub-prime mortgage crisis.

Hedging strategy or not, the fact of the matter is in the last 2 months, I have witnessed the boldest move yet by the Singapore Government (or at least to the extent of my knowledge). First it was Asia. Then the Middle East. Now, the Singapore Government extends it’s reach to the West. If someone asked me for the one thing that I love about Singapore, guess what would my answer be?

Apart from being one of the safest place in the world to live in (no natural disasters ie: earthquake, tsunami, tornado, volcanic activity etc.). Besides the fact that an average Singaporean lives in a pigeon hole up to 50 stories above ground. Besides the fact that it costs between SG$70,000 to SG$100,000 to buy a decent sized family car. Where a pack of cigarettes will set you back by as much as SG$12. I could ramble on really but I have to say I’m very impressed with the Singapore Government’s investment strategy. High-risk or not, if you have the available resources, why not?

I recall myself and CT having a conversation a couple of months back with regards to the financial markets. The both of us work very closely with major financial institutions around the world. As a result, we keep ourselves updated to the ups and downs, ins and outs of the world markets. When I asked him what was his outlook for China? His respond to me was as long as I’m in profit, I shouldn’t worry about it too much. Whether I choose to continue with the exposure will have to depend on my risk appetite. It is true that entering China now is extremely risky. In fact, on a scale of 1 to 10 (10 being the highest risk), I will rate it at 11. You have to be crazy. If you are exposed, how long should you hold on to your investments? Just before the Chinese Lunar New Year? Through the Beijing Olympics? Into 2009?

Apart from equities, CT suggested I keep a lookout for indices. With the sub-prime mortgage crisis, there isn’t a better time to start diversifying my portfolio. If you have the available assets, Apple is one that I would get involved in. Of all my investments, S&P 500 is still in rather good shape while my HGIF CHINA EQUITIES has taken quite a beating. In addition to those, Emerging Markets and Commodities are high on my list.

Though some have advice against it, I fall into the category of ‘crazy’ on the risk appetite scale. The price of gold has been on the rise. Even since last weekend, where the price of gold closed at approximately US$ 813 per oz, gold is currently valued at US$ 841.60 per oz. Crude oil is of course hovering close to US$100 per barrel and has been ‘popping’ along. If you have played the ‘hit the mole’ game in the amusement center, you will know what I mean. Like DS mentioned, both are very high-risk and volatile.

Gold at USD 841.60 per oz

So where will put my money in 2008? Well, if I had the extra cash, I would put it with Temasek for sure. I cannot help but think that jealousy is in the air just south. For Aceh and East Timor. For the Bali bombings. For the Tsunami. What’s up with the Indonesian Government anyway? This KPPU nonsense is just amazing. Temasek is not letting this one go easily. That said, I’m going with the following:

To ensure that I’m still sane and do not die of a major heart arrest, I’m going with these too:

DISCLAIMER: The author is in no manner offering any financial advice through this article. Investors should research various investment vehicles before making any financial decision.

More articles and tips on investments and trading are available at NoBSInvest.

Quoted from http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3085495.ece:

Merrill Lynch looks for $5bn bailout from Singapore fund - Times Online

From The Times December 22, 2007

Merrill Lynch looks for $5bn bailout from Singapore fund

Tom Bawden, Miles Costello and Leo Lewis

Merrill Lynch is in advanced talks to sell a $5 billion (£2.5 billion) stake to Singapore as the Wall Street firm seeks to boost its cash reserves in the face of expected losses of $16 billion on high-risk sub-prime mortgage investments this year.

The deal with the Singapore Government’s Temasek vehicle, which could yet fall apart, would be the first decisive move by John Thain since he took the helm of Merrill Lynch last month.

It comes after multibillion-dollar bailouts of rival banks, such as Citigroup, Morgan Stanley, Bear Stearns and UBS, by governments in Asia and the Middle East, as Wall Street banks reel from America’s mortgage meltdown.

It also highlights the rising influence of state-backed investment funds, or sovereign wealth funds, from export-rich countries that are taking advantage of the credit crisis to buy stakes in the West’s largest banks. There were reports last night that Saudi Arabia is planning to launch a $900 billion fund, the largest ever.

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An arm of Saudi Arabia’s Government is thought to be the unnamed party behind part of a proposed $11.26 billion capital injection unveiled by UBS, the beleaguered Swiss bank, this week. Some shareholders are perturbed by UBS’s reluctance to identify the investor and are threatening to vote against the dilutive new issue at an emergency meeting in February.

Although details of the deal between Merrill Lynch and Temasek have yet to be finalised, analysts expect the agreement to be similar to other recent banking bailouts. This would see Merrill Lynch sell convertible bonds that can be swapped for a stake of 5 to 10 per cent of the group for about $5 billion.

A source at Merrill said the cash infusion was unlikely to be kept as a “purely passive investment”, suggesting that Temasek might back a potential sale of Merrill’s 49 per cent stake in BlackRock, an asset manager, if the bank’s capital reserves decline further. As well as the BlackRock stake, worth $12 billion, Merrill owns a fifth of Bloomberg, the financial data group, which could be worth $4 billion.

Merrill’s need for a cash injection has risen substantially this month as it became increasingly clear that the jump in sub-prime related investment writedowns recorded by many Wall Street firms in the third quarter will be at least as high in the fourth quarter and may continue well into next year.

Merrill declared its biggest quarterly loss, of $2.24 billion, in the third quarter as it took an $8.4 billion writedown that led to the ousting of Stan O’Neal as chief executive.

Securities backed by sub-prime mortgages are continuing to lose value as defaults on the underlying home loans keep rising and investors become increasingly wary of buying debt. At the same time, insurers that guarantee bond interest payments in the event of default on the underlying assets, face such high claims that they may not be able to finance all their claims.

— Lloyd Blankfein, chairman and chief executive of Goldman Sachs, has been awarded a $67.9 million bonus for 2007, according to documents filed late last night. The sum, which will be paid with $26.8 million of cash and $41.1 million worth of shares and options, sets a record on Wall Street, and makes him the world’s best-paid investment banker.