Investment in UBS by GIC – a Chronicle of a Disaster in the Making
February 8th, 2010 | 
Author: By Damon Yeo
It was mid-December 2007 [A] when the Government of Singapore Investment Corp. (GIC) made a whooping 11 billion Swiss francs (S$13.8 billion) investment in UBS.
There was news earlier in the summer of 2007 about how the US housing market was showing signs of slowing down, but some of the major financial institutions were still raking in record profits and numerous equity indices were nearing their all-time highs.
UBS was amongst the first of the banks to show signs of cracking. A day before GIC announced its investment, the bank had just announced a write-down of US$10billion[1] and the money raised was necessary to maintain its capital ratio and ease market fears of its stability.
As GIC became the largest single shareholder of the Swiss giant (circa 9%), deputy chairman and executive director Dr Tony Tan said in a statement that GIC had “confidence in the long-term growth potential of UBS’s business, particularly in the global wealth management business”.[2]
The word “long-term” does not have a fixed definition, but in the world of finance and markets, anything longer than five years is generally considered “long-term”.
With UBS it never rains – it pours
Since that fateful day for GIC, UBS’s fortunes had gone from bad to worse.
Throughout 2008, rival banks began to report massive losses, but very few had worse results than UBS. The Board reacted by changing the management team and the new management team introduced cuts across the board, from staff numbers to bonuses.
All the cuts had very little impact and in April 2008 [B], the bank’s ratings were downgraded by major rating agencies. This essentially increased the bank’s borrowing costs in the open market and further damaged its reputation of being a stable Swiss bank. The losses were mainly from its investment banking and trading arm, but alarmed customers in its wealth management division were leaving the bank.
In October, the bank had little choice but to turn to the Swiss central bank for assistance. [C] In an unprecedented move, the usually non-interventional Swiss Central Bank technically bailed out UBS via an agreement to ‘ring-fence’ US$60billion of UBS’s illiquid (and poor quality) assets.[3]
By then it was clearer to the markets – UBS has dabbled in the US sub-prime mortgage markets more actively than any other of their European rivals and was hurting from it.
For the entire 2008 financial year, the bank lost a total US$17billion, the largest loss in Swiss corporate history. Only Citibank, Wachovia, Merrill Lynch and Bank of America had lost more in this crisis.[4]
An Imminent Collapse?
While the losses were staggering, it still can be said that with the backing of the Swiss government, UBS remains stable financially, at least in the short term.
However, the viability of the bank’s business model in the long run was thrown into uncertainty in Feb 2009.[D]
It was announced that that the bank had been made liable to pay a $780million to the taxman in the United States to settle an investigation into its operations.[5] They had also initially agreed to divulge the identities of some of their clients who had used the bank to park their wealth offshore to evade taxes in the US.
Since the Middles Ages, Swiss banks had leveraged on their reputation to protect identities of their clients to lure wealthy customers, who are willing pay huge fees to the bank. UBS, in particular, was a massive player in the murky world of private wealth management. By helping rich Americans set up offshore accounts right under the noses of the taxman, the bank had approximately earned over $200million annually.
At time of writing, the case between the US tax authorities and UBS is still ongoing. The American government wants the bank to reveal all of the clients they had ever helped to evade tax, but UBS is negotiating to only disclose some of these Americans and not all. This high profile case had involved the governments from both countries and is now turning into a diplomatic issue.
This is a classic case of a catch-22 for UBS. On one hand, if they do back down and hand in the details of their clients to the US government, they will lose more customers in its wealth management business. They can no longer charge higher fees than their rivals because they no longer have that competitive edge over them. In business terms, the bank’s critical success factor will be lost. The bank may almost have to restart its wealth management business from scratch, in a market already saturated with other banks.
On the other, if UBS decides not to co-operate, the US Courts may revoke their banking licence in the country all together. No statistics and figures are required to show how a global bank like UBS will suffer if they are not allowed to trade and operate in the world’s largest economy.
Last week, Swiss Justice Minster warned that UBS may fail if no agreement was reached.[E][6] The headlines may be sensational, but she may not be exaggerating. If UBS does not suggessfully negotiate past this hurdle in the short-term, there will be no “long-term” future to talk about and Dr Tony Tan’s words will haunt GIC forever.
GIC has no management involvement in UBS, so will not be directly implicated in this court case. However, if UBS does fail, the entire S$13.8bn invested will likely go down the drain (less any amounts recovered upon liquidation).
S$13.8bn. That is nearly S$3,000 for every man, woman and child from Tuas to Changi in the island of Singapore.
Table 1: UBS share price since Dec 2007
(A) GIC invests in UBS
(B) UBS credit ratings cut
(C) Swiss Central Bank intervention
(D) Announcement of UBS legal case VS US Tax authorities
(E) Swiss Justice Minister warns of UBS collapse
[1] www.msnbc.msn.com
[2] Forbes
[3] Times Online
[4] www.thebanker.com
[5] NY Times
[6] Times Online
Other articles by Damon Yeo:
>> GIC’s investment in Stuyvesant Town: Unraveling the mystery
>> The demise of Dubai: How the mighty have fallen
>> The minimum wage: pros and cons
>> HDB’s 2 billion dollar deficit: More questions than answers
>> DBS and a series of ‘unfortunate events’
>> Sale of Chartered – An Anatomy
>> 3rd most competitive nation in the world and what it means to the average worker
About the Author:
Damon is a proud graduate of Nanyang Technological University with a degree in Accountancy. He is currently working in the finance department of a UK Bank
Posted in 75 Responses to “Investment in UBS by GIC – a Chronicle of a Disaster in the Making”
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That’s the reason why
1.) transport costs keep going up regardless the oil prices has come down
2.) power bills keep going up regardless the oil prices has come down
3.) older age to withdraw CPF
4.) HDB price keeps going up
to pay all these failed investments?
Err, just curious what are the things that have gone down? I think the answer is low-earners’ wages.
“The notes must be exchanged for UBS shares by the time they mature on March 5, 2010. GIC’s portion of the 13 billion franc investment means that it would receive some 228.83 million UBS shares when the notes are converted.”
Now the value is just 3.2 billions francs.
http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20090821-162340.html
“Temasek to sell $1b of bonds” – ST
Fund raising time!
The problem is the people who are making the decisions to invest, are not trained in economics and business. They are there by virtue of studying hard and not being street smart or affiliated to the PAP or Lee family. On top of being surrounded by ‘YES-Men’ who dare not speak up even though they know the risks involved.
Without transparency and culpability, we will never know how the decisions were made.
It’s high time the STUPID gahmen of Singapore should pay for their crimes in mis-management and misappropriating in Singapore citizen’s funds.
We the citizens of Singapore have the rights to know what happened to our money and explaination on their investments.
THE TRUTH AND NOTHING BUT THE TRUTH!
Is this our CPF?
End of the day, the sad truth is, THERE IS NOTHING WE CAN DO. Period.
Honestly I’m sure that there are local law makers who have parked their money there too.. Not surprise… not surprise…
But when comes to UBS shares.. unless theres some big change in their regulations. Their investment in UBS will most likely be profitable.
I’m not too sure of their “long term” strategy in selling off aka de-risk their stake in Merrill Lynch when it was bought high sold low.
Dr Tony Tay: “we are in good shape and we are fairly liquid”
swiss govt says they will not leave ubs in lurch, are they going to arm-twist the judiciary to rule in ubs favour? it remains to be seen.
However, with the latest news that someone is selling swiss bank accounts data to other countries like germany,uk means that the franchise of swiss bank secrecy is under challenge.
Treacherous road indeed for Swiss banks and GIC, just pray for the best and prepare for the worst.
if they lose money again,i doubt the ignorant public will trust them again.
Is this our CPF?
what do you think? can’t you see why cpf board keeps coming out with all sorts of plan A to Z trying to con you folks into all kinds of so-called investments by giving you that high interest just to keep you from asking them back your money, mind you people out there still thinking your cpf is still around???
I think just get any tom, dick or harry to throw at a dart board…some money actually made…rather then “stupid” over-qualified “world-class” edu certs but no common sense and no humility and no real business/economical mind-set…sucks…
http://www.quotationspage.com/subjects/stupidity/
The best of the best were stupid in 2007…also in 2008…omgiswash koo koo bird time again in 2009…
…and yet again, they did the stupids stupids again in 2010…
When will the “stupidity” stops…when! Gawdddddd.
“The notes must be exchanged for UBS shares by the time they mature on March 5, 2010. GIC’s portion of the 13 billion franc investment means that it would receive some 228.83 million UBS shares when the notes are converted.”
Now the value is just 3.2 billions francs.
And that is another 10billions francs of our cpf down the drain, GIC goodbye easy come happy go investment . .
Nothing we can do. We cannot see GIC accounts, cannot question them, heck can you even name the board that sits GIC short of the BIG LORD OF SINGAPORE.
nope our money is use to fund all these things… too bad. election does not change anything.
Why is HDB pricing still a mystery?
This is not an appropriate title.
It should have been crisis made.
An article on crisis in the making should have been the bond issue in US$ by TH.
That’s a crisis in the making because US$ against Sing is weak now. Who know if it will stay this low forever.
The Asian Financial Crisis was made by a currency run.
The German is also seriously considering of obtaining info on 1,500 germans tax evasion account with UBS from reliable source.
This will certainly bring UBS in direct confrontation with the German authority.
Kiss GIC goodbye.
Domestically, you squeezed Singaporeans but others squeeze you between the legs.
You are the biggest joker on earth.
Don’t ever believe in the official statement made by Junior HDB staff now.
There was a show on TV where one HDB woman claimed that the property prices were driven (HDB ones) by Singaporeans.
The correct statement should have been “driven by new immigrants/PR turned Singaporeans”.
Don’t believe, go around asking the hdb flats under renovation to see if any they were bought by new immigrants turned Singaporeans or some native Singaporeans.
Also, the show claimed that the large COV were forked out mainly by people who sold their private property to live in HDB.
This is another lie for 2 reasons:
1. the property (private) peaked in 2007 and is now down by 40%.
How are those owners going to sell at a huge profit to pay these fantastic COV? Are they that many?
2. There is a HDB rule which states that if you sell a private property, you cannot buy HDB within 2 years.
I wonder how many recent private property buyer (2 years ago) would be able to sell at a profit then and wait for 2 years to buy hdb now to generate this run on the COV.
In any case, the volatility in COV is obvious. to claim that we cannot have a COV ceiling or an auction method is irresponsible.
Talents? I hope all this high flying civil servants in GIC read what is said here. I am sure they are so thick skinned that they still work day in day out GIC as if nothing has happened. Still get their SIX FIGURE salary and drive big cars live big house. These ASS**** should become GIG**** to work and repay the amount they loss. It is the people’s money not theirs to lose in such a way.
Draculas
You are wrong. You said that “at the end of the day, the sad truth is, THERE IS NOTHING WE CAN DO.” You only mentioned day. You forgot to mention night.
You should get out at night and frighten the shit out of them with your fangs !
Hehe.
What GIC got inside the skull?
Using 2 fingers tapping on the forehead….thinking.
Its actually EMPTY.
This is something which Cambridge, Oxford and Harvard didn’t teach them.
Making money!
UBS has caught GIC with its pants down.
Both, GIC and Temasek Holding have tarnished Singapore’s long standing good reputation, and brought it down a few notches.
GIC stupid investment in UBS has badly affected every Singaporean
In China, they will be rounded up and face the firing squad.
Surely die….”Fire! Fire! Fire!”
The minister of trade and industry that objected to Ong Teng Cheong’s approved strike is Lee Hsien Loong.
Demonstration:
In January 1986, Ong Teng Cheong sanctioned a strike in the shipping industry, the first for about a decade in Singapore, without telling the cabinet. He said that he did not inform the cabinet or the government because they would probably stop him from going ahead with the strike. There was a major corporate and Cabinet backlash against his decision; however, the strike lasted only two days, and a deal was struck.
Lee Hsien Loong was appointed Minister of State in the Ministry of Trade and Industry and the Ministry of Defence in December 1984 by his father, Lee Kuan Yew, and was subsequently promoted to Acting Minister for Trade and Industry in 1986, and the Second Minister for Defence.
http://en.wikipedia.org/wiki/Ong_Teng_Cheong
http://en.wikipedia.org/wiki/Lee_Hsien_Loong
Perhaps they should buy Liverpool or Man U. Probably work out to be a better deal in the “long term”. Instant global branding for a fraction of the price they paid on all these other “long term growth potential” disasters.
1. Was it not the hairy one who said qualifications is everything for ‘Talent’? And to the extent of “Graduate-Mother Scheme”! So now who and what level in GIC “HAVE The GUMPTION” to ANSWER TO US Singaporeans? Since GIC HAD BRAGGED back in 2007 THAT They “Took ONLY TEN DAYS To DECIDE ON Investing in UBS”!!!
2. Another botched investment job and “WE, THE CITIZENS OF Singapore are now CALLED Daft”. Meaning FOOLS!!! I suppose there some truth in that since as they “claimed” 66% victory on the last GE, then if that 66% is true bearing in mind how they arrived at it, then they ARE right in THAT SENSE, 66% ARe DAFT!!!
3. So much for ‘wisdom’ going to the wind!!! As with ABSOLUTELY no one to ’sincerely’ praise them and he, them just Self-Praise as the only ‘other’ way!!! How else to get Flattery? Not that FLATtery is of any more meaning or worth anyway!!!
What is this idiot doing?
Citi almost gone
UBS in the coffin
Merrill Lynch RIP
Stuyvesant Town RIP
abc Learning RIP
anymore?
I thought Temasek’s loss of US$4.6b in Merrill(bank of america) was bad enough, this is even worst based on the last traded price(7pm s’pore time) of UBS US$13.11. Total loss:S$13.8b-(228.83×13.11×1.42) = S$9.54b
http://www.cnbc.com/id/15840232?play=1&video=1124895352
see also: http://www.businessday.com.au/business/world-business/singapore-fund-may-book-6b-loss-on-bank-stake-20090516-b6e6.html?page=-1
I am going to get all my possible CPF money out ASAP.
S’pore may become like the US where the taxpayer bears the mistakes of those in power. The pap govt. has always think its the only smart guy in town maybe because of the huge salaries they draw. They think nobody else can govern better than them.
Here’s the excuse :
“When we invest, we are investing for 10, 15, 20 years. You may look as if you are making a big loss today, but you have not borrowed money to invest. You will ride the storm, the company recovers, your shares go up.”
http://www.channelnewsasia.com/stories/singaporelocalnews/view/407319/1/.html
It’s for the long term,Singapore….THAT’S WHAT WE ARE TOLD.
The Truth is, in the long term we will all be dead…and it’s going to be our children who will bear the brunt of the present mistakes.
still want to vote them ? Heads should already be rolling now . Is this the reason why GOODYEAR did not take up the offer ? who is the scapegoat now ?
This alone , we should sack the whole team .
Do you guys noticed all this big time losses only started to occur AFTER Ho Ching got into Temasek ?
When she was at Singapore Technologies Group before joining Temasek, the same thing happened. ST made a loss exceeding $300m from its takeover of US hardware manufacturer Acropolis, which was later dumped after holding it for 2.5 years. The inapt part was that they had put their money into Acropolis when the world was already moving into contract manufacturing and outsourcing. Worst still, while the government was doing hard selling to convince Compaq to retain its manufacturing base here with a lot of incentives, Temasek was on the side trying to drive them away by undermining Compaq’s business with direct competition coming from Acropolis.
I say, we definitely need a big shake out in the management in Temasek and GIC as well. And we got to do it right now, not wait and let another greater bomb to be dropped on us. This time we managed to survive, the next time this little red dot may be wiped clean.
the singapore pap is cursed to failed this time. temasek and gic have lost the investment money, yet they are still trying to raise money. more will be lost.
this is what i called retribution. singapore will fail before the lky dies. montary worth of singapore is getting worse, poltically needless to said, most singaporeans hated the pap ft policy.
The investment in UBS could be driven by self interest due to the secrecy of the swiss bank. Who knows what kind of stakes UBS may be holding in its vaults that are related to Singapore?
Something to bear in mind.
The story of Chen Shui Bian comes to mind when i hear about GIC’s early investments in UBS or hear about USA and Germany seeking out tax evaders in swiss banks.
I am very impressed by singaporeans cooperative spirit supporting our leaders investing with our money by not questioning too much. This is good for our leaders to let them focus on what they do best – investing our money in all those things. By not questioning too much, they are not disturbed and distracted.
i dare say that there are very few, if any, other country people as cooperative as world renowned singaporeans. they are the real heroes. They silently support. eg. we hardly see people protesting or shouting questions in hl park asking to open the books for inspection. Thank goodness, there is no one like that.
like this for another 10 years. more good years.
Democracy! yeah!
I had wanted to say that LHL penchant for right wing politics is obvious in 1980s already.
He is the one who was mad when Ong Teng Cheong supported the strike which was legitimate.
So, you see he didn’t even bother to appreciate the fact that the employers were exploiting the workers then and the strike was legitimate.
Does it surprise you now that LHL let in so many foreigners to the detriment of the ordinary Singaporean worker? He removes the natural protection for workers.
OneTon Mee on Mon, 8th Feb 2010 7:03 pm said :
“Citi almost gone
UBS in the coffin
Merrill Lynch RIP
Stuyvesant Town RIP
abc Learning RIP
anymore?”
==============================
the short answer is, i do not have access to the books. I do not know.
Just vote the PAP out!
The lot of TONY TAN, DHANABALAN, HO CHING has to take responsibility and resign.
We have to VOTE OUT PAP if these people are still in either GIC or Temasek. They are setting a bad example for the people of Singapore.
Our leaders fronting GIC qnd Temasek are politicians, not
businessmen, and the managing Director of GIC Peter Ng is only
a tecnocrat who just follows instructions, and this explained
the investment plunders made.
Civil servants seem to be only paper warriors, very highly
qualified on paper, they seem to be only zi shang tan bin -
discuss army only on paper.
Mr. Yeo,
I’m not sure you understand the facts surrounding UBS.
First off the Swiss justice minister that you refer in the eighth paragraph of the section entitled “An imminent collapse” is a woman – Eveline Widmer-Schlumpf – and not a man. You refer to her as a “he”. Secondly her frequently quoted statement is clearly rhetoric aimed at the IRS. UBS is a systemically important institution and on account of its ~1.4 trillion in assets it will not fail. The Swiss would never let it fail nor would the USA because if it did, the fallout would take down many big American banks.
Secondly, you state that UBS will lose its “critical success factor” if it provides the US authorities with the names of clients who had been evading taxes in their respective countries. What is relevant, and a point that you do not even bring up, is that the John Doe summons brought against UBS in the Florida courts will be dropped if 10,000 UBS clients voluntarily give themselves up. To date, approx. 15,000 off-shore clients of all Swiss banks have turned themselves in. A large number of these will be UBS clients. You also assume that UBS’s critical success factor is banking secrecy. Banking secrecy is currently being redefined as “banking privacy” meaning that the old air tight secrecy can and will be breached in cases of clear tax evasion but not for any other reason. This, coupled with Switzerland’s natural advantages of being a politically stable country with a historic neutral stance means it will continue to be a home for private banking.
GIC has made what will prove to be some very astute investments. UBS will be very profitable in 3 to 5 year period. 4th quarter of fiscal 2009 was profitable and within the next year client flows will be positive.
It sounds to me like you have an axe to grind with GIC which is causing you to distort some facts and omit those that do not fit your narrative of “GIS makes terrible investment decisions”.
Considering your distortions and omissions, there is much cause for concern considering that you work in the finance department of a UK bank … for the sake of all of us, Mr. Yeo, I hope you’re not involved with producing P and L statements!
We need to demand accountability.
Mistakes are forgivable, even those of such magnitude. But the government’s complete refusal to acknowledge its errors–let alone its sad attempts to cover them up–should not go unpunished.
If the MIW won’t take the initiative to hold their own people accountable, then we the citizens of Singapore must do so at the polls.
DBS now wants to expand into vietnam and taiwan?
Apparantly it hasn’t learnt from its lesson on HK.
Hi John,
May I point out that although UBS has 1.4 trillion CHF in total assets (as of end-sep 09), it has only an equity base of 39.5B CHF. This means its total Asset/Equity (or leverage ratio in Du Pont context) ratio is 37x!
Lehman brother’s TA/E ratio was 24x (in end may 2008) and Merill Lynch TA/E ratio was 18.5x (in end 2008). Comparatively, our local bank UOB’s ratio is about 10-11x. I know banks typically measure their capital adequacy via the basel i/ii ratio, but the TA/E is quick acid test of how much leverage the bank is running.
Whilst I agree with you that UBS may not fail as in a bankruptcy, there is still possibility that it might be broken up and taken over piece-wise by its competitors. in that case, the equity holders of UBS might end up with the short end of the straw too.
At current, the estimated total return of GIC’s 11B CHF investment in UBS is about -56% (including the 2×9% coupon rcvd). If UBS share price falls further, the loss % could get worst. UBS problems are not over and they are not short-term problem, so it remains to be seen if it can be “very profitable” (as you put it) in 3-5 years’ time.
@ John,
When Lehman Brothers went under, they were holding $600 billion in assets. By any measure, they were too large to fail. Its failure did not take down any other banks with it either.
As to the rest of your points, I believe it is an issue of a different point of view. I concede mine may not be prophetic in nature.
As to whether UBS will be profitable in the next 3 years, it will be anybody’s guess. Only time can tell and like youself, I am entitled to make a guess with facts and figures presented to me at the moment.
On the error you stated regarding Eveline Widmer-Schlumpf, it is an oversight on my part, I have since corrected it. Thanks for pointing it out.
The world is interested to learn from Singapore, esp. how GIC able to lose so much money within such a short time?
Those Chinese and Russian wanted to know, who are those experts in-charge? And whats their salaries?
Both suggested either to send these ppl to labor camp or firing squad. Human has to be taught and be disciplined.
Hi Ho Ching rules,
I believe that over the long term GIC’s investment will be profitable, however I would say that their timing was far from perfect. Sheikh Mansour did far better with his stake in Barclays but that was a different situation. Every decision needs to be understood in the context of when it was made. There was so much liquidity sloshing around at the end of ‘07 people were just looking for places to stash it. GIC put a large amount in UBS when there was a dip in the market and they had a long-term perspective. Mansour was far more opportunistic with a shorter horizon.
The main risk to UBS is further shareholder dilution via deeper client outflows which restrict capital and necessitate further capital raising. I would not be surprised to see outflows accelerate in Q4 ‘09 on account of the Italian tax amnesty but it’s worth noting that Baer reported a slowdown of client inflows that one could reasonably argue was a result of less outflows at UBS (as Baer was a prime beneficiary as was CSG of UBS weakness) but we’ll know more tomorrow.
I would disagree with you about the usefulness of a/e ratio in the case of UBS and other financial institutions. Under that methodology, all large-cap financial institutions fall well short of the bar. I think that evaluating the exposure of a financial institution involves weighing various risks – a/e is a blunt instrument that doesn’t weigh risk as it assigns the same risk value for everything. In the case of UBS, the FINMA leverage ratio is helpful at measuring how successfully they have derisked the balance sheet – UBS’s FINMA ratio at 3.51 (Q3 ‘09) is not particularly good but certainly far better than 2.58 in Q4 ‘08.
I like John.
It is this kind of people who will buy my UBS share.
Where is The Auditor General?
Still waiting for Christmas? This is not serious enough?
The cancer is spreading fast and needs to be stopped immediately.
@John on Tue, 9th Feb 2010 12:05 am
Way to go on the personal attacks, really reinforces your points.
On your observation that GIC has made some very astute investments, I guess we the proletariat will never know will we as disclosure isn’t really GIC’s strong suit, we’ll just have to take their word on it.
The real issue is like Temasek, GIC are viewed by the public (at the govt’s promotion no less) as serving the greater Singaporean interest. Funny thing is that the average man in the street really hasn’t seen any tangible return on that investment, contrast that with million dollar ministerial salaries, hence the cynicism.
I’m sure one can make the arguments about structural employment stability via the GLCs under Temasek’s wing or how the managed float benefits us, but all such arguments ring hollow when the majority of the electorate has seen declining purchasing power and an increased debt burden.
Apart from a mission statement and frankly rather vague assurances of “checks and balances” (aren’t we sick of that phrase by now?), there is simply no way for the man in the street to know how his tax dollars are being employed (the ones that end up at GIC anyways).
“Just trust us ok.” – this refrain may have worked in the context of a rising economic tide in years past, but not in the current environment.
I would be the first to applaud the government for running efficiently enough to accumulate such reserves in years past for us to even have this discussion; but that doesn’t give it the right to treat it as private money. For some perspective, the demands of disclosure on a public company are more comprehensive when compared – such a dichotomy just feels … wrong.
Since we are in the business of making prophetic claims, any idiot who trades his own money understands the concept of escalation of commitment. The Swiss rumblings about UBS’s imminent collapse is just them trying to shake down “investors” for capital to shore up the books, it looks like at least the Swiss electorate has the gumption and sense to NOT give their politicos the mandate to spend their money willy nilly.
About banking secrecy, if anything Singapore should be happy about the shakedown, I won’t be surprised if the UBS stake was to ensure that UBS is “encouraged” to relocate here. A good strategy by all accounts, but ultimately one that just paints a big crosshair on our backs when the next global pitchfork party comes around.
You’d think that after a thousand plus years of human history of failed fiat currencies, overleveraged banking systems and sovereigns that we the people would learn that fiat and banking, though greatly beneficial to commerce, and by extension the economy at large; when left unchecked almost always results becoming a tool for wealth transfer from the masses to the ruling elite. This cycle is so consistent it is a wonder (or actually no wonder) that our leaders repeat the cycle again and again.
Average Singaporeans retired at age 55yo, so its not too early for our MM at 87yo now, to call it a day.
MM must seriously consider it for the sake of Singapore while he is still able. He should also relinquish his present position for the good of GIC. Its not because of GICs poor results or bad performance but more importantly, to revitalize and to provide continuity for GICs renewed long term strategy.
Since the ultimate process will still come at certain point, why not consider the move earlier while you still can.
Yours sincerely
15 years later after Suzhou, MBT re-enters China eco project market in Tainjin and CapLand bought into chinese real estates worth US$2.2 billion from Orient HK. when others are out.
Problem again by year end.
//DeepBlue C on Tue, 9th Feb 2010 6:22 am
22pc price fall for prime site in Shanghai
SCMP – Sandy Li
Feb 09, 2010
Beijing’s efforts to cool the mainland property market appear to be working, with a prime commercial site in Shanghai selling for 22 per cent less than the price it fetched nearly three years ago….
22% drop?
” This is not administration doing a job. This is entrepreneurship on a political stage on a national scale! ”
— GIC Chairman, Minister Mentor.
Fine, where is the accountability then?
Why do singapore’s “top” brains in GIC be allowed to explain away their LOSSES every time they made a boo-boo.
Every investment that is a loss is always claimed as for the “LONG RUN” but investemnts that made quick profits are quickly divested to lock in the “profits” which are then just as quickly assigned glorification?!
But for the common citizens,we don’t even seem to have fair second chances for the mistakes we sometimes inevitably made and are quickly dispelled as having no spurs in our hides and replaced very swiftly-without any second thought-by foreigners?
This is presposterous and is truly daft on the part of our top scholar-elites.
Most people would think that the small insignificant mistakes or faults of the common workers should be seen as less grievious compared to those huge costly listakes made by these elites that adds up to billions and bilions of dollars that, literally speaking, could have created countless decent jobs for our citizens.
So,could anyone of us try to explain away our mistakes and get to keep our jobs too???!!!
We pay our ministars millions to buy high sell low for us hor!
John,
“…GIC has made what will prove to be some very astute investments. UBS will be very profitable in 3 to 5 year period..”
You must be one of those who either was told/instructed by Temasek or GIC(or PAP) to rebuke any factual issues(especially those really got into their nerves) that raised by TR or other netizenforems, or you’re a highly educated(& highly paid) civil servant who like to impress your superior, or….
Forget about the fancy analyses that you learned from your MBA in finance and banking, men in the street, ah beng, ah seng included like to know why and how GIC incurred such a massive loss in this particular(and other mindboggling losses) investment.
Can anybody still remember how Hoax Jinx lost US$4.6b(not S$2-3b as reported by Shitty Times and Bullshit Times)? For those haven’t viewed this, pls do(watch from 2:15 to 03:11 of the clip)
http://www.cnbc.com/id/15840232?play=1&video=1124895352
I quote, one of the worst investment for one single investment…, unquote. She lost 4.6b out of 5.9b invested!! that’s -78% !!! i.e. she left 22c for every $ she put in ?!!
“UBS will be very profitable in 3 to 5 year period..” Jon, what makes you so sure about this? You’re just like Jinx. Playing a game by mere hopes and lucks!!
Correct me if I’m wrong, stock price reflects the future earning of a company. Even if UBS wil be ‘profitable in 3 to 5 years’, how much can it’s price go up to justify its downside risk? Don’t carry too much your master’s boss and say it’s for long term?
Do you honestly think that UBS can appreciate 423%(say entry price was $55 from the above author’s chart) from today’s $13. How long it gonna take? 5 years? few decades?, one generation?What about the downside risk for carrying long term?
I somewhat agree that UBS is too big to fail. What if there’s(re) another bailout(s), like AIG by Fed, share price will be diluted again and again.
Last but not least, I’m not sure Jinx is he or she or it , dont pick on that pls.
Just a gentle reminder…and those already in the know…
The monies invested are not their own money…it is the peoples of singapore monies via direct/indirect taxes/CPF/and what have you…
They never even bother to ask the people of singapore permission to use these monies accumulated over the years thru the hard work and sacrifices of our forefathers…they just use it…when monies are made…hw much actually tickle down to the peoples of singapore, peanuts is it ONLY!….and for them how much tickle to them, multiple peanuts is it!…as SM wife mentioned that S$600k per annum salary plus bonus is just a peanut!…now where are these so called high up or uppity class get the idea they are better people…where? Because they think they are really ELITE ? or Elshits!!
http://www.peterparkinsonsprinciples.blogspot.com/
Over-qualified for such outstanding critical positions.
Sick.
Parasite.
Farktards.
Bloody fools…not once or twice but thrice being fool into such simple obvious con-jobs…it is really beyond stupidity and now borders beyond the idiotic stage…and they still think they are truely intelligent/wise…starting to doubt all these so called elite intelligent “people” in charge.
Educated Ah Seng
Ho JINX lost $300m of Singapore Technologies Group’s money (our money) through her stupid decision to take over Acropolis and tikum tikum operated it for 2.5 years. After that loss she stepped down from ST. Everybody shouted hurray ! But that was only a temporary celebration….
Within a year she was appointed to board of Temasek as incumbent CEO ! The hurray from the public turned to ..what the? The PAP leadership never learn from mistakes. She lost $300m of our money the first time. Now she lost more $3bn of our money. What is really going on in the heads of the PAP brains? She definitely has got no investment touch nor forecasting ability.
Actually she has…. she learned it from her father-in-law whose forecasting is known to be first class…day one forecast amended in day two and day two forecast amended in day three….
To Ho JINX and her father-in-law and to her hen pecked hubbie I say to them, “YOU’RE FIRED !”
you’re fired!,
Good points and well said, talking about the jinx and the episode that she/he supposed to be replaced by that oz guy. coffee shops’ rumors are that after the temasek massive losses, jinx’s inlaw was so mad that he ask jinx to retired, but she managed to convene
her hubby she can’t survive without the title of ‘one of the most powerful women in Asia/the world’, so they fire oz guy instead, giving all the crapy reasons published in the shitty times. Some naive reporters from this shitty times were still speculating who’s the most likely candidate to replace her.
Daft ST journalist! Jinx is gonna be there forever!
Wonder when Temasek will be doomed.
Those DAMN STUPID ministers should have their 50% pay cut for all the mis-management and losses incurred.
“UBS will be very profitable in 3 to 5 year period. 4th quarter of fiscal 2009 was profitable and within the next year client flows will be positive.”, John
This is purely a speculation. It comes down to this. The government of a country is not a business organization. Its job is the defend the country, keep peace and order and not sell its citizen short.
“There was so much liquidity sloshing around at the end of ‘07 people were just looking for places to stash it.”, John.
That’s the point , why does the PAP govt. take so much money from taxes, etc, then speculate and lose them. They should invest it in Singapore and Singaporeans.
The PAP has FAILED in its duty as a government.
@qussl3
I initially responded to the author’s blatant suppression facts and distortions to further his aim of skewering GIC. I didn’t see any even-handed analysis based any sources other then online newspapers and magazines – not the stuff of careful, thoughtful analysis.
I am not writing as an apologist for the GIC. I am writing from the personal belief that the UBS investment will be very profitable in the fullness of time and it is a little premature to call it a “disaster”.
I very much agree with your statement that the GIC role as stewards for the wealth of the people of Singapore “doesn’t give it the right to treat it [the surplus] as private money. For some perspective, the demands of disclosure on a public company are more comprehensive when compared – such a dichotomy just feels … wrong”. However disclosure could lead to a more short-term focus which could be even more harmful than the current approach. Perhaps some sort of middle ground?
However I disagree with your assertion that Eveline Widmer-Schlumpf’s comments were an attempt to “shake down” investors for more cash. Whether you use BIS Tier I or FIMNA’s leverage ratio, UBS is one of the better capitalized large-cap banks in Europe. Her comments were an attempt at brinksmanship and were not only directed at the IRS but also the Germans.
@Educated Ah Seng
Bottom line is this. With respect to UBS, GIC could cut and run and realize a loss of cir. S$10Billion. The money will still need to be invested. At this point it is far better to let the investment ride since there is now much more upside for UBS than a year ago. The big GIC mistake with UBS was timing. It would have been a brilliant move if they acted now.
I don’t disagree that GIC has made some terrible investments, but I think that attention should be directed to Citi (who is still in a very precarious situation) and those that could very well prove to be disasters i.e. the impending Travelport investment.
@John on Tue, 9th Feb 2010 6:53 pm
I agree with your position that UBS is likely to be profitable going forward (as today’s earnings has shown) but their inability to stem the loss of clients is a worrying trend (though ultimately likely temporary).
My belief is that GIC/Singapore’s investment in UBS and the banking sector in general is strategically motivated rather than value driven, and more a long term play to position Singapore as a viable alternative to the traditional European banking blocs. The Merrill bet though, was a major miscalculation.
Yes, more comprehensive disclosure would certainly be tricky, even detrimental. However, our government is losing the political capital to continue to expect to operate in the same manner going forward.
In the past boo boos like Merrill could be swept under the carpet and in time fade from public consciousness, but in the internet age such incidents have the potential to take a life of their own online and become the clarion call for the electorate to take a stand on bureaucratic accountability.
In retrospect I believe that it is more a lack for accountability rather than lack of disclosure per se that is responsible for sense the disquiet I feel.
One has to agree the entire Goodyear fiasco leaves much to be desired and was poorly a managed transition to say the least.
In an environment where even the “masters of the universe” are taking reduced and scaled compensation, it is galling to watch our technocratic elite continue to attempt to justify their outsized pay packets rather than take the opportunity to display the humility exhibited by all great leaders.
BTW the “shake down” comment was meant to be facetious
http://www.youtube.com/watch?v=q_lzrGUGAWM&feature=related
John
With regard to your reasoning in your reply to “Educated Ah Seng” I agree with your sanguine points regard realisation of UBS and the timing of entry into this institution.
However, I am rather put off with the leadership’s ability to pick horses. There was Goldman Sachs, there was Merrill Lynch and then there was UBS. One out of these 3 is a winner (Goldman) and it was picked by Warren Buffet and the other two were laggards, and they were both picked by our Temasek/GIC people. Was it brains? These scholars sitting on the 2 funds all have their degrees and super degrees and went to super colleges. Warren Buffet only got his degree and post-grad degrees from normal mainstream institutions. But he turned out being the master of his trade.
The moral of the story : You need to have the necessary experience in picking horses.
And that is why the hairy one now says that degree is not important.
John,
Here you go again.
“GIC could cut and run and realize a loss of cir. S$10Billion. The money will still need to be invested. At this point it is far better to let the investment ride since there is now much more upside for UBS than a year ago”
So you’re just like those dafts who’s hopeful or who has guts feeling that UBS will go up 400+ % for GIC to break even. Stock investment is not a probablity game like gambling!! You can never pick bottom/or top. You may think that it’s very likely that the next outcome of baccaret game should be banker after 15 consecutive players. It could happen 25 times in a row !
Let me remind you that it was exactly this gambler attitude that temasek lost US$4.6b in Merrill(bank of america). Temasek was one of the institutional investors that Merrill Lynch invited to invest in its reissued stock at the start of financial crisis in Aug/Sept 2008, when Merrill faced with mountain of debts and troubled assets that need to raise billions of $. The daftest in temasek scooped up most of the reissued share(and became the biggest Merrill sh holder), thinking that it was a god damn good deal for the offered prices of $48 and $38, as compared to over $100, when they first bought Merrill share in Dec 2007. Merrill was later bailed out by BoA(arranged and guaranteed by US Gov) and finally its shares were converted(close to par) to BOA share at $14.81 in Jan 2009. Temasek sold(cut lost) all BoA shares during 1Q of 2009 at an average price of $7, total loss: US$4,6b !!!
Johnny boy, do you think the same episode or swiss version of bailout would not happen to UBS? Think again!!
Don’t be a pathetic MIW ‘yes man’ – always smell good to you when MIWs fart ????
Why does GIC whose capital initially originated from taxes and government sales revenue invest in UBS, a bank complicit in tax evasion? Singapore Government abhors and punishes tax cheats; yet, invest in a bank aiding tax evasion. I invest mainly through Sharia banking to comply with my faith.
Why GIC (top shareholder) put out so much money but has no board representation in UBS? Capitalism teaches me that if I put up much capital investment, I should have a lot of say. If I cannot or don’t want to say so much, I just give a little only like investing in Singapore shares, one lot here and one lot there.
Pardon me I am a Malay-Singaporean still learning mysteries of finance.
Hi, please see this article on UBS finally goes back into the black.
http://www.todayonline.com/Business/EDC100210-0000100/Back-in-the-black
The failures of so-called investments by GIC/Temasek cos it lacks transparency,NO ombudsmen,accountability and lastly cos of the one-party system that all that has been lost or is being lost is happening lar.
Suggestion – change the political landscape with a two/multi party system. If not, all these tax-payers’$$$$$$ is going to be simply squandered again.
PS: Death is a great equalizer and no one can escape the Grim Reaper. LKY for all that he has acquired will go empty-handed.
Yup…yaaaaaaahhhhh…UBS in the black…but…please look at this…
http://atans1.wordpress.com/2010/02/10/ubs-that-dog-with-fleas/
then ask and really ask how now liao!!
…and Vietnam has potential to turn into another Greece…and DBS is going in…are they really thinking or just blindly thinking…
Haiz.
To john,
Norway sovereign fund is transparent and accountable for its actions, it isn’t affected by it,it still has a long-term focus.instead ppl will trust it more.
what makes you believe that GIC/Temasek by adopting transparency and accountability will be affected? obviously, you are not trusting ppl’s intelligence in distinguishing a temporary loss from a permanent loss.