Who is vulnerable?

part of Shenton Way's history

We are hearing that the banks and other financial institutions are doing the right thing by compensating the vulnerable group ie. defined as illiterate, elderly people.

A bank said they are prepared to do that as their investigation has shown that their sales staff have failed to live up to their "high" standard of selling and marketing financial products. Such well crafted marketing communication punch line indeed AS it suggests that the sellers have "high" standards but some may have failed to deliver according to standards.

When a plane crashed, the investigators would look at how the pilots were trained and pre-qualified for the job.

Couple of questions in my mind:-

1. How do the banks/FIs approve a product before being "sold" to their respective custoner base? I notice some FIs are deeplyly involved with these ill-fated products but other FIs are not involved at all.
2. What are the profiles of their sales staff? How are they remunerated? Are they qualified to advise?
   
3. Are these sales staff personally liable?
4. Do the FIs really think the elderly and illiterates are the vulnerable groups and thus the compensation? Or the FIs are most vulnerable to additional liability given their "miselling" to these "vulnerable" groups?

So who is actually vulnerable here?

Old Wheelock admits mistake...

Wheelock Properties CEO Mr David Lawrence apologised to his shareholders at AGM for having bought a 10% stake in SC Global in June 2007 at $6 per share.

SC Global has since done a two-for-one stock split and the counter closed at 39cts yesterday. Based on my back-of-envelope calculation, this represents a 87% decline in total investment value of $112mio.

This admission of judgement error affirms my view back in 2007 that it was a wrong move by Old Wheelock to have invested. But it was certaintly an excellent piece of business done by Young Simon Cheong to have cashed out at that time.

http://investingwithedgar.blogspot.com/2007/10/merrill-lynch-recommends-sc-global.html

While Old Wheelock said he had made mistake in the past cycle, let us see how he can recover from this one.

A saving grace for Mr Lawrence is that he has done more good than bad for Wheelock. He should be commended for having the guts to admit error.

To bet on S-Reits now?

looking for value

REIT - Real Estate Investment Trust has been one of the best business models I have seen in recent time. Use other people's monies to buy your assets (acquired at lower prices) and then subsequently put yourself as managers of the REIT. Thus ensuring long term income streams for yourself in addition to capital gains and unlocking liquidity in non current assets.

Uma Shankari, in this weekend Business Times, said Singapore Reits (S-Reits) are gaining favour as prices fall and yields climb on the following grounds:-

1. the share prices have dropped significantly (Edgar says - but so have other blue blue chips)
2. a source of stable, visible and recurrent income (Edgar says - We need to check rental collection and rental rates would hold at current level. The fundamental determinants to dividend payouts. I am of the opinion that current rental levels are not sustainable.)
3. tolerating cost of debts to be between 4% to 4.5% (Edgar says - assuming the liquidity is available in the first place. I am more comfortable with this.)

Bottomline - Wait for rental rates to adjust first.

My notes - Singapore Reits' distribution yield has ranged between 4-9plus%. Average - 6.03%. Price/NAV has ranged from 0.6 to 1.2plus times. Average - 0.97x.