Shorting Our Future

When an investor goes long on an investment, it means that he or she is buying a stock with the belief that its trading price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price.

Muddy Waters founder Carson Block is betting against commodities supplier Olam International Ltd (16 percent owned by Temasek Holdings) because it believes the firm is at risk of insolvency and has been too aggressive in booking future so-called biological gains.  Latter allows it to record future gains from plantations and dairy farms i.e. book earnings not yet realized. Like what Enron did with its gas futures, this accounting practice and debt exposure can turn ugly in a hurry.

Temasek is backing Olam's bid to raise US$1.25 billion to "shore up confidence". Block is saying Olam needs US$3 billion to stay afloat. By injecting equity, Temasek and participating shareholders are effectively diluting Olam's share price. The fund raising exercise will also cost Olam at least 10 percent in interest each year, putting further downward pressure on its stock. And benefiting short-sellers like Muddy Waters.

Block told The Wall Street Journal that Olam's plan to raise funds to allay fears about its balance sheet "solves nothing" and will merely delay its collapse. Once again, good money is thrown after bad. Our money.

The corollary here is that the prime minister is still insisting on diluting our national stake holding with the influx of foreigners. Reuters say expatriates make up more than 90 percent of Dubai's population, a future that's definitely not tenable for Singaporeans born here. Especially for those who have spent two years in Temasek green, risking life and limb for a losing cause.

The prime minister says, "We listen, but we have to lead". But, puh-leez, don't lead us into muddy waters. Like the jack-up rig at Jurong Shipyard, a failed braking system can tilt a whole superstructure. The little red dot is more vulnerable.

Wait For The Numbers

It was the fog of war that clouded the initial reports of what happened at Benghazi, an act of terror that turned out to be a terrorist attack. That happens when an incident takes place in a foreign country thousands of miles away. But why can't the local media get their details right when something occurs within our own doorsteps?

The number of Chinese nationals involved in the SMRT strike went from 200 to 171, and at last count could actually be 184 (4 charged, 1 sentenced, 29 deported, 150 given a "severe warning"). It was not just semantics at play in the first strike in 26 years (according to the manpower ministry the last strike in Singapore was staged in 1986 by shipyard workers, ignoring the bus strike of 1955), the reporting seems to be malleable to political direction.

The number of casualties at Jurong Shipyard, subsidiary of offshore engineering group Sembcorp Marine, where the jack up legs of a platform were being tested while other workers were still onboard, is currently listed as 89. The ministry says the injured workers were taken to hospitals and 80 were later discharged, with 3 remaining in an emergency ward. They are probably trying to come up with an appropriate adjective for the state of well-being of the balance of 6 humans at risk.

The numbers matter. Expensive overheads like Tan Chuan-Jin depended on data from TODAY and Lianhe Zaobao to account to parliament for the percentages of local workers employed by the two Integrated Resorts (IRs). That's the euphemism used for the gambling joints at Resorts World Sentosa (RWS) and Marina Bay Sands (MBS). Tan is obviously not prepared to be caught by the number of jobs promised (36,000? 24,000?) that was used to justify the construction of the dens of iniquity. Then chairman of the People's Action Party (PAP), Lim Boon Heng, cried on  national tv while explaining that he agreed on the casino issue only because it had brought jobs to Singapore,  "It is a difficult one for me, because I do not like the idea of using gambling as an industry for Singapore and using that as a means of earning an income."

There is good reason be prudent with the reporting of the major industrial accident at Jurong.  The spot light has just been shone on the welfare of the foreign workers, the (lack of) safety precautions at the shipyards will have to be carefully aired. Brigadier General and Acting Minister of Manpower Tan will probably reprise his line for the SMRT debacle, "The labelling of industrial action such as this is not trivial.. it would then open up  a series of actions that would follow thereafter." The souls at Bukit Brown must be rolling over in their graves.

Selective History

In his speech to the PAP activists at their party conference on Sunday, Lee Hsien Loong certainly airbrushed history when he said, "It was this very principle of equal opportunity and meritocracy that Singapore left Malaysia." The hard truth, be it from Toh Chin Chye or Goh Keng Swee, will tell you that Singapore was turfed out of Malaysia. Both will agree with James Minchin, who wrote in his book "No Man Is An Island", that "careful research makes it hard to avoid laying much of the blame at Lee's feet".

From late 1963 to the fateful day of separation of Singapore from Malaysia, he recorded, there was no stopping the deterioration of relations between Lee and the Tunku and their respective confidants. The timeless prose of Mohamad Haji Salleh provides rare insight of the difference of views:

DO NOT SAY

do not say my people are lazy
because you do not know.
you are only a critic, an looker.
you cannot know or judge,
passing the kampong in your car,
staring at the economic data.

do not think my people are weak
because they are gentle,
because they do not build skyscrapers.
have you ever worked in a ladang,
or danced the ronggeng?
can you sing the dondang sayang?
do not think that we have only music
because we love life.

do not write that we have no literature, culture,
have you ever listened to the sajak or pantun
stayed a night at the bangsawan?
have you read the epic shairs
or the theological theses?
how many times have you wondered about history in the blade
and ancestry in the middle of the keris.
or felt the pattern of the songket?
have you lived in a kampong?

do not condemn us as poor
because we have very few banks.
see, here the richness of our people,
the brimful hearts that do not grab or grapple.
we collect humanity from sun and rain and man,
transcending the business and the money.

do not tell us how to live
or organise such nice associations and bodies.
our society was an entity
before the advent of political philosophy.

do no say -
because you do not know.

MOHAMAD HAJI SALLEH

A Day Of Infamy

The numbers keeping changing, as does the storyline

“Without the elected president and if there is a freak result, within two or three years, the army would have to come in and stop it” - Lee Kuan Yew on what would happen if a profligate opposition government touched Singapore’s vast monetary reserves. (Straits Times, Sept 16 2006)

We had sneak preview of how the generals would be deployed on Saturday December 1st, when the Ministry of Manpower announced in a statement that 29 Chinese national drivers' work permits had been revoked and immigration officials "will be repatriating them" for involvement in the 26th and 27th Nov two-day work stoppage to demand better pay and working conditions.

Brigadier-General Tan Chuan-Jin (wearing the hat of Acting Minister for Manpower) first declared on Tuesday 27 Nov that the no-show at work by SMRT PRC bus drivers was an “illegal strike”.  Earlier on Monday, even The Economist picked up the local media's reluctance to use the word "strike" and said, "... the Straits Times, a pro-government daily, termed it an “action”, “protest”, “episode” and “wage dispute”. Asked if the workers will be sacked or sent back to China, BG Tan refused to answer by saying police investigations are going on and the matter should be “left to due processes”.

Lieutenant-General Desmond Kuek (wearing the hat of SMRT President and CEO) in his first public appearance on Friday 30 Nov after returning from a nice holiday, said that if the drivers' action had been confined to Monday, there would not have been a police probe, implying that a one-day strike is not illegal in Singapore. Kuek did not confirm who in SMRT actually filed the police report, unless he did it via remote control since he claimed "I was constantly updated and made decisions collectively with my management team." He probably would have conducted a war similarly if he was still in uniform.

On Black Saturday the PRC bus drivers were rounded up from both the Woodlands and Serangoon foreign worker dormitories and escorted by police officers to Admiralty West Prison for immediate processing of their deportation on same day. As on Sunday morning 2 Dec, they are still locked up in the prison compound without due access to legal representation.

Brigadier-General Lee Hsien Loong is the current Prime Minister. Other ex-army officers and two Rear Admirals are also in the existing Cabinet, ever eager to be called to duty and flex their muscles.  Only one brigadier-general decided not to go against the flow after he met his Waterloo at Aljunied.

All Aboard The SMRT Gravy Train

According to Bloomberg, SMRT Corporation Ltd has seen their bottom line shrink from $161.1M to $119.9M despite an increase in revenues from $969.7M to $1.1B in 2012. An increase in the percentage of sales devoted to cost of goods sold from 53.00% to 55.93% was reported to be a key component of the falling profits in spite of the rise in ridership and revenues. The familiar looking "Other Operating Expenses" book keeping entry (shades of YOG accounting) also jumped from $161.1M to $188.0M. Is this where they post the compensation for the board of directors?

And exactly what kind of board has oversight of the business at SMRT? Well, it appears 9 board members have a total of 234 "relationships" with other companies. Between the 9, board members average 26 "relationships" with other organisations. Why are these board members so exceptionally "hard-working"?

Going by the example of Ong Ye Kung, the Executive Secretary of the National Transport Workers Union (NTWU), the largest transport union in Singapore, who wears another hat as a member of the Board of Directors of SMRT, collecting directorships can be quite lucrative. Based on SMRT’s 2011-2012 Annual Report, Ong's annual director fee was $80,000. Now imagine multiplying that by 26.

A study of 3,816 directors by National University of Singapore's Corporate Governance and Financial Reporting Centre (CGFRC) in 2008 found that some 84 per cent of directors in Singapore-listed companies hold just 1 seat. Some 14.5 per cent of directors hold between 2 and 5 positions in listed companies. This leaves less than 2 per cent of directors - 51 individuals in all - who sit on least 6 company boards. Most of the "popular candidates" have either government links or have accounting backgrounds. For example, among the 16 directors who have 8 or more posts, 10 are former or current members of Parliament (MPs), or former civil servants. Ex-PAP MP Wang Kai Yuen used to top the list with 12 directorships, but still he wasn't a happy man, grumbling to all who cared to hear, "some of the companies pay me as little as $10,000". Move over, Wong, your record has been broken several times over.

Professor Mak Yuen Teen, co-director of CGFRC, said that having "super busy" directors is a concern, "With due respect, I do wonder if they are there because of the good reputation of our government and civil service, and companies wanting to capitalise on this, than because of their perceived independence, personal competencies or commitment."

Meanwhile former chief of defence CEO Desmond Kuek, fresh from holidaying in the United States while turmoil reigned at the bus depot, told the press that SMRT has "deep-seated issues". Makes you wonder how many of those are seated on the board.