interesting views here, but in order to make sense of the news, you have to look at the entire economy as a whole and analyse it in the simplest, non-biased way possible. you do not do analysis by focusing only on the bits and pieces that are favourable to your case, while ignoring others that may change the outcome of your analysis. that is already exercising a bias.
anyway back to the topic, a question was asked and i find that it is something which is really significant, whether or not the current disaster will affect singaporeans. i will not comment on things which will affect the global economy and not singapore in particular, though it is worth noting that the dow is suffering the greatest single day losses since the great depression, which was a prelude to world war 2.
but maybe there are reasons to believe that there are factors that will affect singapore in particular. somehow everyone has forgotten that
temasek holdings has invested heavily in merrill lynch
August 27, 2008 10:25 AM EDT
Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, said it has ``great confidence'' in Merrill Lynch & Co. (NYSE:
MER) Chief Executive Officer John Thain and plans to eventually raise its stake.
Actually, Temasek just received U.S. antitrust approval yesterday to raise its stake to between 13% and 14% in Merrill Lynch.
Yesterday, Temasek's Michael Dee told Bloomberg Television Merrill is a "great franchise which has existed through many crises through a long period of time.''
Merrill Lynch shares have fallen 55% since Temasek's first investment on December 24. MER is currently trading around the $24 range.
Temasek said its decision to increase its stake in Merrill was based on Thain and his management team.
Merrill Lynch & Co., Inc. together with its subsidiaries, provide investment, financing, insurance, and related services to individuals and institutions on a global basis through its broker, dealer, banking, and other financial services subsidiaries.
http://www.streetinsider.com/Corporate+News/Temasek+Holdings+Has+Strong+Confidence+In+Merrill+Lynch+(MER)+CEO+John+Thain/3944990.html
this is not the first time temasek has made a major blunder, with the failed singapore-suzhou industrial park in distant memory.
but i find it frightening that the merrill lynch blunder can be traced to an individual's decision.
merrill lynch has been 'saved' by bank of america. but it does not change the fact that the company has failed and that millions lost will probably never be recovered.
for those who do not know, the Fed protects financial institutions in the USA through a number of ways. the failure of a bank, especially large ones, will cause a contagion effect of bank runs, which could potentially, and in the past successfully, cripple the US economy.
should a bank fail, the Fed will save their ass in the following order
1. it will get another institution to buy over the troubled bank, such as the case of bear sterns (where the shares were sold for a ridiculously low price) and merrill lynch.
2. it will itself buy over the bank.
3. if all else fails, it will liquidate all the assets of the bank, in a bid to pay back creditors the best they can. the bank will cease to exist in whatever form.
these measures are not meant to protect the bank itself, but to protect stakeholders. it is an assurance to investors that the market would not be heavily affected by such occurrences.
it was believed that the Fed would only protect big banks from failure, but with more and more banks considered 'big', the policy was becoming ineffective.
now i return to how this could affect singapore, pointing to temasek's investment strategies.
use your reasonable mind and think; it is not unusual for an investment company to make risky investments and fail. but i find it immoral for temasek to pour millions of taxpayer money into a sinking ship.
it was arrogant and disgusting that temasek thought that merrill lynch would somehow save themselves one day no matter what happened. i just find it such a big gamble, even at the time when the decisions were made
