the nclave

a little enclave for me in the vast ocean of the web. here's hoping i'll look back on all these someday, and be glad for it.

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Location: Singapore

Monday, February 09, 2009

Barstool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20 saving,' declared the sixth man. He pointed to the tenth man,' but he got $10!'
'Yeah, that's right', exclaimed the fifth man. 'I only saved adollar, too. It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh man.

'Why should he get $10 back when I got only two? The wealthy get all the breaks!'
'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact,they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

Friday, October 31, 2008

Enough is enough

Spotted in today's ST:

"Risks listed in bold, but...

Investors went ahead despite clear warnings

By Lorna Tan

MUCH has been written about the sad plight of investors who have suffered hefty losses after buying doomed investment products linked to bankrupt US investment bank Lehman Brothers.

But little so far has been mentioned of the warnings of the risks involved which were printed clearly and unequivocally on key documents provided to investors.

Of course, it is devastating for an investor to be told his nest egg is now worth nothing, or close to nothing. After all, the main motivation behind making an investment decision is to make money.

At the height of a stock market bull run, it is easy to get caught up in the euphoria of snagging a seemingly sure bet - and just as easy to play down or even ignore potential risks. The rude reality sets in only when one realises, albeit too late, that the investment was not as it seemed.

One question being asked is whether warnings that came with products like DBS Bank's High Notes and Lehman's Minibond series were clear enough. And if they were, can financial institutions really rely on them to absolve themselves of blame?

On the first issue, a close look at the marketing material for these products shows investors could have claimed ignorance of the risks only if they had simply not read the literature.

Many consumers generally dislike reading the thick prospectuses or instruction manuals that come with most sales transactions.

But in the case of these failed investment products, there was no need to plough through pages or to scrutinise the fine print, to learn about the risks.

For instance, this was on the front cover and first page of the DBS High Notes 5 pricing statement: 'If a Credit Event or a Constellation Event occurs before the Maturity Date, investors may lose their entire investment and may not receive any principal amount on the Notes'.

In other words, the investment could become worthless under certain circumstances.

To attract the attention of investors, it was even printed in bold.

Also, on page four under the scenario analyses segment of the same document, this was stated for the worst scenario of a credit event occurring under their reference notes: 'If a credit event, for example, bankruptcy, occurs under the reference notes on the day...the Notes will terminate immediately and the investor will receive zero payout.'

This is part of the main text on a page by itself along with two other scenarios relating to early redemption and if the notes were held to maturity, respectively. There was a similar layout for the Chinese version of the product description.

A similar warning was printed on the cover of the pricing statement of Lehman Minibond Series 3: 'There will be no guarantee from any entity to you that you will recover any amount payable under the Notes and you could lose all or a substantial part of your investment in the Notes.'

And on page three of the same document, it said 'the Notes are not principal protected nor capital guaranteed'.

As we now know, the worst case scenario has happened - the bankruptcy of Lehman Brothers and the triggering of credit events that have subsequently made these investments almost worthless.

To be fair, the risk and its consequences would have been plain to see for investors who took the trouble to read a few pages of the literature.

So why didn't they? Why did investors go ahead with these investments despite the warning labels?

The answer goes to the heart of the current debate about who or what is exactly to blame for the investors' predicament, and whether the presence of these clearly labelled risks alone absolves financial institutions of wrongdoing.

Here are some possible reasons:

· According to some investors, the product prospectus and pricing statement were given only after the point of sale when the customer was already convinced to buy.

· Investors have also said that they trusted their relationships managers so much that they simply went with whatever was recommended and did not bother to read the documentation.

· Others say the risk of the worst case scenario happening was played down by relationship managers who genuinely believed at the point of sale that the possibility of a credit event was close to zero.

· Finally, it is possible that investors were aware of the risks but decided to go ahead as they themselves believed that the possibility of a credit event or the product issuer collapsing is very low.

Whatever the reason and whoever is to blame, the lesson here is that investors need to take their investment decisions more seriously.

Investment advisers routinely offer these basic tips: Firstly, understand your own investment objectives and risk appetite and ask yourself if the product is for you.

Secondly, never put all your eggs in one basket.

Last but not least, find out what is the worst- case scenario and ask yourself honestly if you can stomach that risk.

And the answer to that is definitely worth a read.
" (emphasis added)

I am sick and tired of the whining. Quit whining. Seriously. Ok, you lost your money - boo hoo. But the fact of the matter is, unless you can prove that the pricing statement was not given to you before you purchased the product, or that you are illiterate (and not just poorly educated) and the relationship manager did not explain the risks to you, then you should not come crying over spilt milk.

I sympathise with you and I'm sorry to hear about your loss. Really. But that's all. Save in the two circumstances laid out above, there is no basis for people to now cry foul and demand for compensation from the banks or the government. Why should the banks or the taxpayers be subsidising your own unfortunate decision to buy a product with the risks clearly spelt out? You chose to take the risk, so be gracious and accept the loss.

There is always risk in investment. If you go to a casino and lose all your money, are you then in a position to demand that the casino or the government compensates you? Surely not. And the same applies to this situation. You lost the gamble. Sorry. If you are literate and didn't bother to read the pricing statements, then too bad for you. People slog to draft these things, and if you can't be bothered to read, then you can't expect anyone to bother with your whining when you lose.

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Tuesday, October 21, 2008

Respond, respond! :)

I want to know 36 things about you. I don't care if we never talk, or if we already know everything about each other. Short and sweet is fine...I want to know you better!

Comment with your answers.

01) Are you currently in a serious relationship?
02) What was your dream growing up?
03) What talent do you wish you had?
04) If I bought you a drink what would it be?
05) Favorite vegetable?
06) What was the last book you read?
07) What zodiac sign are you?
08) Any Tattoos and/or Piercings? Explain where.
09) Worst Habit?
10) If you saw me walking down the street would you offer me a ride?
11) What is your favorite sport?
12) Do you have a Pessimistic or Optimistic attitude?
13) What would you do if you were stuck in an elevator with me?
14) Worst thing to ever happen to you?
15) Tell me one weird fact about you.
16) Do you have any pets?
17) What if I showed up at your house unexpectedly?
18) What was your first impression of me?
19) Do you think clowns are cute or scary?
20) If you could change one thing about how you look, what would it be?
21) Would you be my crime partner or my conscience?
22) What color eyes do you have?
23) Ever been arrested?
24) Bottle or can soda?
25) If you won $10,000 today, what would you do with it?
27) What's your favorite place to hang out at?
28) Do you believe in ghosts?
29) Favorite thing to do in your spare time?
30) Do you swear a lot?
31) Biggest pet peeve?
32) In one word, how would you describe yourself?
33) Do you believe/appreciate romance?
34) Favourite and least favourite food?
35) Do you believe in God?
36) Will you repost this so I can fill it out and do the same for you?

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Monday, October 06, 2008

a loooong hiatus

It's been some time, yes?
Somehow I get lazy with this blogging thing, and let it slip for a few months at a time. :(
Anyway, let's see if we can get it back on track for a bit....hmm....

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Tuesday, July 08, 2008

why not?

Stolen from the grace_vine:
"I came across this online – a theory a mathematician had about God:


"He [Pascal] asked: "God is, or he is not. Which way should we incline?"


Reason, Pascal thought, could never establish definitively whether God exists. For Pascal, believing in God could have two outcomes, depending on whether God exists. If God doesn't exist, nothing will happen to the believer. If God does exist, the believer will be blessed with eternal salvation. The nonbeliever also faces two possible outcomes. If God doesn't exist, he will suffer no consequences. If God does exist, the nonbeliever will face eternal damnation. The nonbeliever faces either no consequences or hell; the believer looks at no consequences or heaven. Faced with heaven or hell, Pascal reasoned, it makes sense to open oneself to faith.


Simply put, you have nothing to lose and everything to gain by believing.


Fer sure, that isn't why I believe. I first believed cos I felt God's touch…and I continue to believe cos I have experienced God's goodness. But by Pascal's theory, why would anyone NOT believe?"


Well said. ;)

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Wednesday, May 14, 2008

path to reconciliation

Spotted in today's ST Online:


"Search for alien life does not negate belief in God: Vatican


VATICAN CITY - ALIENS could be out there, and believing that the universe may contain extraterrestrial life does not contradict a faith in God, the Vatican's chief astronomer said in an interview published on Tuesday.


The vastness of the universe - with its hundred billion galaxies and trillions of stars - means there could be other forms of life outside Earth, even intelligent ones, the Rev Jose Gabriel Funes, a Jesuit who directs the Vatican Observatory, was quoted as saying.


'How can we rule out that life may have developed elsewhere?'


Rev Funes said in the interview in Vatican newspaper L'Osservatore Romano, which was headlined: 'The extraterrestrial is my brother.'


'Just as there is a multitude of creatures on Earth, there could be other beings, even intelligent ones, created by God. This does not contradict our faith, because we cannot put limits on God's creative freedom,' he was quoted as saying.


'Just as we consider earthly creatures as 'a brother,' and 'sister,' why should we not talk about an 'extraterrestrial brother'? It would still be part of creation.'


The full-page interview - printed in a question-and-answer format - ranged from discussions about the relationship between the Roman Catholic Church and science, to the theological implications of the existence of alien life.


Rev Funes mused that aliens would not have been visited by Jesus, because his 'incarnation was a unique and unrepeatable event.'


However, 'I am sure that they too, in some way, would have the possibility to benefit from God's mercy,' he said.


Rev Funes said that science, especially astronomy, does not contradict religion, touching on a theme often dealt with by Pope Benedict XVI, who has made exploring the relationship between faith and reason a key aspect of his papacy.


The Bible 'is not a science book' and looking for scientific facts on the universe and its origin doesn't cast doubt on God's role in its creation, Rev Funes was quoted as saying.


As an example, he said he believes the Big Bang theory is the most 'reasonable' explanation of the creation of the universe. The theory says the universe began billions of years ago in the explosion of a single, super-dense point that contained all matter.


And yet, 'I continue to believe that God is the creator of the universe and that we are not the result of chance,' the interview quoted Rev Funes as saying.


He urged the Church and the scientific community to leave behind divisions caused by the Galileo affair nearly 400 years ago, often cited as an instance of Church hostility toward science.


'This incident has caused wounds,' he said. 'The Church has somehow recognised its mistakes. Maybe it could have done it better, but now it's time to heal those wounds and this can be done through calm dialogue and collaboration.'


In 1633, Galileo Galilei was tried as a heretic and forced to recant his theory that the Earth revolves around the sun. Church teaching at the time placed Earth at the center of the universe.

Pope John Paul declared in 1992 that the ruling against Galileo was an error resulting from 'tragic mutual incomprehension.'


The Vatican Observatory has been at the forefront of efforts to bridge the gap between religion and science. Its scientist-clerics have generated top-notch research and its meteorite collection is considered one of the world's best.


The observatory, founded by Pope Leo XIII in 1891, is based in Castel Gandolfo, a lakeside town in the hills outside Rome where the pope has his summer residence. It also conducts research at an observatory at the University of Arizona, in Tucson. – AP"



Cool. :)

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Tuesday, April 29, 2008

Most aghast (Part 2)

Yes, I am so aghast (see previous post below) that I have sent the email below to the Traffic Police. (No, I am not very free - it's just that I have finished my work and am waiting for counterparties/clients to revert.)


"Dear Sirs

I refer to the road traffic incident reported in The New Paper on 29 April 2008. A copy of the relevant article is attached for your reference.

It was reported in the article that the driver had been penalised with only a fine of S$200 and 9 demerit points. Based on the penalties described, I have inferred that he was charged with an offence under Section 65 of the Road Traffic Act (Cap. 276) ("RTA"), and that the offence had been compounded under Section 135 of the RTA, as permitted under Rule 2(a) of the Road Traffic (Composition of Offences) Rules (Cap. 276, Section 135(2)) ("Rule 2(a)").

I have witnessed on numerous occasions similar incidents where a motorist jams his brakes before an ERP gantry, presumably to insert his cashcard. On each occasion, the vehicles behind the errant driver have had to similarly jam their brakes, narrowly avoiding an accident in each case. In these cases, accidents were avoided not because the errant drivers' actions were not dangerous enough, but only by reason of the alertness of the drivers behind them.

Given the aggravating factors in the reported case, where an innocent woman had sustained serious injuries (as defined in Section 47D of the RTA) by reason of the dangerous manner in which Mr Lim had driven his vehicle, a penalty of S$200 fine and 9 demerit points is merely a slap on the wrist, which may have no lasting consequence on Mr Lim, or any impact at all.

For public policy reasons, such as the deterrence of such dangerous behaviour, it is important for the Traffic Police to send a strong signal to the public that stopping suddenly before an ERP gantry (or anywhere along an expressway for no good reason) cannot be tolerated on our roads. This is especially when the LTA had specially reduced the penalty for passing through an ERP gantry without a valid cashcard inserted to a mere S$10 administration fee (which is reduced further to S$8 if paid electronically).

While the prosecutorial discretion lies entirely in the hands of the Traffic Police and the AGC, it is my respectful opinion that an injustice has been done in this case, and that subsequent offenders who cause accidents by jamming their brakes before an ERP gantry should be dealt with more severely.

In particular, using Mr Lim as an example, he should have been charged under Section 64(1) of the RTA, for driving in a manner which is dangerous to the public, having regard to all the circumstances of the case, including the nature, condition and use of the road, and the amount of traffic which is actually at the time, or which might reasonably be expected to be, on the road. Not only does this carry a higher penalty than Section 65 of the RTA, it is also not compoundable under Section 135 of the RTA (see Rule 2(a)). In addition, the court would have had discretion to disqualify Mr Lim from driving, under Section 42(1) of the RTA. A mere 9 demerit points (for Section 65) is unlikely to have a big impact on Mr Lim, if at all.

At the very least, the charge under Section 65 should not have been compounded under Section 135 of the RTA (composition is discretionary, not mandatory).

With the light penalty imposed on Mr Lim and his obvious lack of remorse (which is also an aggravating factor), it is likely that he would not hesitate to repeat the offence if he happens to forget his cashcard again. The light penalty is also an unfortunate signal to Miss Tiong and her family that her injuries were not sufficient to constitute an aggravating factor.

I hope that in light of the above feedback, the Traffic Police may exercise its prosecutorial discretion to reflect the gravity of the consequences and other aggravating factors in subsequent cases.

Best regards"

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Most aghast

Spotted in yesterday's New Paper:

"'It's Not My Fault'

29 April 2008

HE stopped his car abruptly on the fast lane of a busy highway to insert his CashCard.

And it caused an accident that left a woman seriously injured.

But to Mr Lim Huang Khim, 45, it was the 'natural thing' to do. He does not think he did anything wrong.

This, despite being fined for his inconsiderate driving that caused a motorcyclist to slam into the car behind him - which had braked in time to avoid hitting Mr Lim's car.

This, despite a judge ruling in a civil suit that Mr Lim was 50 per cent liable for the accident.

The motorcyclist, Miss Tiong Zhen Cheng, 33, was flung more than 20m and landed beside Mr Lim's car.

The sales executive was warded in the intensive care unit and spent about a week in hospital. She still suffers pain and some memory loss.

Miss Tiong ended up being sued by the driver of the second car, Mr Lye Chiew Meng, for the damage to his Toyota.

His rear windscreen was shattered and the repair bill came to $7,000.

But her insurance company felt Mr Lim should also be liable and he was named as the third party in the civil suit.


Earlier this month, Mr Lim, who works as a driver, insisted he was not to blame and smiled several times as he recounted the accident on the stand.

He was chided by District Judge Lim Wee Meng for his cavalier attitude.

Judge Lim said: 'I don't think it's funny. Someone was seriously injured and I don't think it's funny at all.'

The accident happened around 7.50pm on 29 Nov 2006 on the Central Expressway, just before the Electronic Road Pricing (ERP) gantry near the Braddell exit.

Mr Lim was driving a rented silver Mitsubishi car and was travelling on the extreme right lane on his way home with his wife and four children.

When he saw that the gantry was activated, he switched on the car's hazard lights and stopped to slot in his CashCard.

Mr Lye, a finance manager, who was behind him, managed to stop in time. But Miss Tiong's 400cc Honda motorbike crashed into Mr Lye's car.

When cross-examined by Miss Tiong's lawyer, Mr Lim maintained that he was not at fault.

Her lawyer, Mr William Chai, asked: 'A car was damaged, a person was severely and mentally injured, are you saying you are not responsible? Not even 1 per cent?'

Mr Lim replied: 'I'm saying that I'm totally not to be blamed.'

He told the court that he had not inserted his CashCard into the in-vehicle unit (IU) earlier because he did not know that the ERP gantry was activated at that time.

When asked if seeing the activated gantry was a big surprise, Mr Lim said he had seen it from afar and was trying to insert the CashCard in time.

He also told the court that he did not see Miss Tiong's bike behind Mr Lye's car.

He admitted that following the accident, he had purposely left out in his police report the reason for stopping his car as he knew that it was an offence.

Mr Lim, who has been driving for 24 years, was fined $200 by the Traffic Police for inconsiderate driving and given nine demerit points.

But in his affidavit tendered to the court, he said: 'I decided to pay the $200 out of convenience even though I do not believe that I should be responsible for the accident.

'I did not want the trouble to engage a lawyer to contest the claim because this would be time-consuming and the legal fees would definitely exceed $200.'

In contrast, Mr Lye was apologetic about what happened to Miss Tiong. His lawyer, Miss Bonnie Kwok, told the court: 'My client would like to extend his sympathies to Miss Tiong.'

She also said that while Mr Lye could clearly see the traffic conditions in front of him, Miss Tiong could not.

Said Miss Kwok: 'It's not a situation whereby the vehicles were approaching a traffic light junction, so there's no reason for Miss Tiong to anticipate a sudden stopping.

'Mr Lim had created a dangerous situation. I found it rather distasteful that Mr Lim's demeanour in court showed that he couldn't be bothered that Miss Tiong had suffered severe injuries and trauma.'

Before giving his verdict, the judge pointed out that Mr Lim could have gone through the ERP gantry and paid an administrative fee of $10 for not having a CashCard.


He ruled that Mr Lim and Miss Tiong were each 50 per cent liable for the damage caused to Mr Lye's car.

When contacted by The New Paper, Mr Lim insisted that he was not in the wrong.

He said in Mandarin: 'Are you a driver? Have you driven a car before?

'If you have, you should know that it's a driver's natural reaction (when you see an activated gantry).

'You can't say it's right or wrong because there's no right or wrong in such situations. I did switch on the hazard lights to warn the vehicles behind me.'

Mr Lim said that he felt sorry for the injured Miss Tiong, though he did not speak to her in court.

'She might think that I have an ulterior motive if I went up to her and apologised,' he said.

Just two days before the accident involving Miss Tiong, Mr Lim said he was involved in a similar accident along the East Coast Parkway.

Mr Lim told The New Paper that the car in front of his had slowed down suddenly.

'So I also braked and stopped my car to take a closer look at what the driver was up to and to take down his licence plate number,' he said.

'But the car behind me couldn't stop in time and ended up crashing into the rear of my car.'

Mr Lim said the first car then drove off. His car, a Honda Stream, ended up at the workshop for five days.

That was why he was driving a rented car, which did not have a CashCard in the IU.

Mr Lim added: 'If I was driving my car, this wouldn't have happened because I always have the CashCard inside the IU.'

I am MOST aghast. If I weren’t bound by laws and morality, I would seek out Mr Lim and beat the daylights out of him. And then do it again. Especially given that he appears to have no sense of morality whatsoever.

What is up with stopping on the extreme right lane of the expressway just to insert a cashcard?? It is dangerous, inconsiderate and very illegal. In fact, I am shocked he got away with a 200-dollar fine and 9 demerit points. It doesn’t even result in a suspension, which means he can continue terrorising other motorists with his cavalier attitude towards safety! Shall go do some research and lodged a complaint with the Traffic Police if there are grounds for a more severe penalty.

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