Net Worth Update (April 2013)

Assets	Mar-13	Apr-13	Change	% change
Savings Account 1	$3,539.13	$3,029.26	($509.87)	-14.41
Savings Account 2	$1,525.66	$1,525.66	$0.00	0.00
Savings Account 3	$17,055.99	$18,567.34	$1,511.35	8.86
Investment Linked Fund	$8,550.42	$8,710.40	$159.98	1.87
Schroders Commodity Fund	$9,992.27	$9,510.86	($481.41)	-4.82
Stock Holdings	$10,140.00	$10,050.00	($90.00)	-0.89
Phillip Money Market Fund	$15,013.63	$15,020.14	$6.51	0.04
Physical cash	$1,000.00	$1,000.00	$0.00	0.00
Market Value Of BTO Flat (to be built in 2016/2017)	$750,000.00	$750,000.00	$0.00
Total Assets	$816,817.10	$817,413.66	$596.56	0.07
Liabilities
Home Loan	$617,500	$617,500	$0.00	0.00
Net Worth (including flat to be built in 2016/2017)	$199,317.10	$199,913.66	$596.56	0.30
Investible Net Worth	$66,817.10	$67,413.66	$596.56	0.89

Highlights

• Drop in commodity fund offset the increase in cash, resulting in a slight overall increase of $595.56 in investible net worth
• As I will be starting work full time this month, increase in cash savings from May 2013 onward should be at least $2,000 every month
• I have dropped all my tuition classes as I no longer have the time to give tuition during weekdays due to my full time job. I might consider taking up 1 or 2 weekend tuition assignments after I have settled down in my new job.
• Target of $70,000 by Dec 2013 will be achieved by June 2013.

This Is As Good As It Gets

The GDP announcement this morning for the first quarter of 2013 was 2.5 percent, well below the 3 plus estimates that economists were expecting.    This will not be the first disappointment.  Folks like Jim Cramer on CNBC can't understand why businessmen are reluctant to expand capital equipment and hire employees.  That's because Cramer is a media celebrity not a businessman.

If Cramer were even remotely aware of the actual business climate that ordinary folks have to contend with, he would know what the problem is -- over regulation, absurd tax levels, Obamacare, EPA regulations, Dodd-Frank.  It is almost as if the Obama Administration has declared war on the US economy.  Anything that smacks of business success is viewed suspiciously by the Administration (and by Jim Cramer, I might note).

The talking heads can't figure it out, but the economics are simple.  If hiring an employee at a $ 35,000 salary means it costs you $ 75,000 per year, you are not going to make that hire.  End of subject.

Why the simple economics of hiring and firing eludes people like Jim Cramer is amazing.

There is no reason that health care costs should be borne by employers.  None....no reason at all.  But one thing is certain, if employer bears the cost of health care, they are going to be reluctant to make new hires and anxious to reduce their existing work force.  Why is that hard for the Obama fans like Jim Cramer to figure out?

Citizens should finance their own health care.  That would keep costs down and make the market efficient, as in the provision of anything else in a market economy.  The only way to get health care costs to spiral out of control is to get the government involved. 

There is so much double talk in an attempt to circumvent the obvious facts on the ground.  The economy is grinding to a halt in Europe and in the US.  The West is in deep, deep trouble.  They have drunk the nectar of socialism and wealth redistribution.  All of that feels good for a while until the economy begins to fall apart.  We are now witnessing the collapse of the West.

This is not going to get better.  It is going to get worse.  Economic policies in Europe and in the US are not designed to make economies grow.  They are designed to make economies fair, according to the fairness whims of the political elite.  That kills economic growth.

So, get used to it.  This is as good as it gets.

Ignorance and the NY Times

Eduardo Porter, an "economics" columnist with the NY Times, has penned an article this morning in the NY Times that purports to address the lack of solutions to today's economic stagnation.  Porter reports on a recent IMF sponsored conference of economists that was supposed to address problems posed by the "financial crisis of 2008."

According to Porter, the 2008 collapse discredited policies of lower taxes and de-regulation.  You have to wonder what world Porter lives in.  Was Sarbanes-Oxley an example of the deregulation?  Were the Congressionally-imposed strengthening and rule-making for Fannie and Freddie examples of de-regulation?  Exactly what is Porter referring to?  Or do facts matter anymore when you have a convenient agenda ready?

Here is an example of the absurd conclusions that Porter draws in his article: "One lesson from the crisis -- first learned in the 1930s and corroborated in several contemporary analyses -- is that when interest rates lose their power to stimulate the economy, additional government spending can help generate real growth."  Really?  Could have fooled me! 

Government spending in the US has exploded since 2008, as well as the national debt.  And what have we gotten for this explosion in government spending?  Economic stagnation -- the worst economic recovery since?  Guess what -- the 1930s.  Yes, the last time government spending was tried as a solution was the last time the economy failed, for a genertion, to recover from an economic downturn.

The way out of our current quagmire is easy and historically established. Go back to the early 1980s.  Drastic tight money, high interest rates, major tax cuts and de-regulation spurred the most dramatic economic recovery in world history.  All of this took place in the US under President Reagan in the bad old 1980s.  The Clinton years benefitted from these policies, but Clinton couldn't handle prosperity.  He and a Republican Congress raised taxes which began to produce economic contraction by mid-2000.  Further regulatory nightmares, led by Sarbanes-Oxley, the dramatic push by Congress to expand Fannie and Freddie set the stage for the 2008 disaster.

What has been discredited is the idea that expansive monetary and fiscal policy can substitute for free market capitalism.  The facts have turned naive Keynesiasm on its head.  Free markets produce economic growth.  Governments produce economic stagnation.  The IMF wasted its time holding their conference last week.  They would have been better served reading some economic history and learning the facts.

How to get your PRS Tax Relief statement from PPA ? (April 2013)

In conjunction with the NEW tax relief available from YA2012, many Private Retirement Scheme (PRS) contributors are wondering how can they get the tax statement for income tax filling. To address your concern, here you go... (If you don't know what are we talking about, please find out "What is Private Retirement Scheme?")

To recap, contributions into a PRS scheme can enjoy a tax relief of up to RM3,000 from YA2012 - YA2021. If you did contribute some money into a PRS scheme in 2012, congratulations, you're entitled for PRS tax relief for YA2012. If you haven't, no worry, you still got time to start contributing before end of this year.

Back to the topic, please follow these few easy steps to get it:

Please surf www.ppa.my and click log in. I believe you already get your PIN from PPA when you made your first contribution. If not, please contact PPA and request again.

After log in, you will arrive at the following page. Supposedly, you can download the tax relief statement by clicking "Tax Relief".

However, you will be notified by this message.

Oppsss... What if I didn't keep the receipt or letter given by providers? No worry. Alternatively, you can download the "Consolidated Statement" as a proof and for income tax filling purpose. Hope this could clear your doubts. Happy income tax filing. Thanks.

Finance Malaysia would like to thank Alex Yeoh for his input in this article. Alex is a Licensed Financial Planner with VKA Wealth Planners, whom can advise and distribute multiple PRS products. You may contact him via email alexyeoh@vka.com.my

Personal Income Tax for YA2012

Finance Malaysia hopes this article doesn't come late to give you some info on Personal Income Tax filling for year of assessment 2012. Maybe due to the general election, which had diverts our attention lately. Lol. Anyway, do remember to file your income tax before 30th April oh!!!

Well, here is the list of Personal Tax Relief for YA2012. And, I would like to highlight to you, in RED color words, some changes/differences from previous year.

Personal Tax Relief for YA2012

• Item No.11:
  This would replace Item 10 from YA2012-YA2017 with higher amount of RM6,000
• Item No.23:
  Private Retirement Scheme (PRS) is the NEW item which can help you reduce tax further with additional RM3,000 tax relief from YA2012-YA2021. As such, Item No.22 would be replaced until after YA2021.

All other items remained the same. Do reduce your tax payable by maximizing the tax relief amount. Remember to keep a record and file it properly. Happy tax filling. Thanks.

Blue color: Tax relief that we can adjust easily in our daily life

Green color: Tax relief for property not rented out with S&P signed between 10/03/09-31/12/10

Light red color: Tax relief related to child

Yellow color: Tax relief related to life insurance premium

Even the WSJournal Doesn't Get It

David Wessel has a lengthy article in this morning's Wall Street Journal about the future direction of the world's economies.  He begins with Europe and then walks the reader through the US, Japan, China, and the rest of the world.  In every case, Wessel's discussion is about government policy.

The overall theme is that economic recovery depends upon government policy, discretionary policy at that.  He discusses the twists and turns of policymakers as they, according to his story line, attempt to guide their economies to the promised land.

But, that is exactly the problem.  Once government policy becomes the determinant of the economy's future, the economy no longer has a future.  The proper role of government in a free market is to lay down the rules of the road and then to get out of the way.  Increasingly, a government of rules is not to be found.

Instead we watch daily as policy makers, who frequently have a very limited knowledge of economics, move this way and that in a vain attempt to get economic growth going.  Such things cannot work.  They never have worked and they never will.

Economic growth occurs when businesses make capital expenditures and hire workers to create product.  They aren't going to do that if they have to spend their time wondering what the next move is going to be by their government.  Government action is detrimental to an economy's future.  Government inaction and consistent application of the rules of the road is the ticket to prosperity, not frenetic political activity and polarizing rhetoric.

If Obama had played more golf and forgotten about the stimulus, Obamacare and Dodd-Frank, we would probably be looking at 4 - 5 percent unemployment today and economic growth rates of 3 1/2 to 4 percent.  Unfortunately, Obama thought he had something to contribute.  So, we stagnate.  that's the price of a responsive government.

Better To Be An Academically Uninclined Female In Singapore?

Jack and Jane were the best of friends in secondary school. Jack had always been the smarter guy who scored all As for his exams while Jane would be struggling to get just a B grade. Jack scored 8 points for O'Levels while Jane scored 20. As expected, Jack got into a top junior college while Jane enrolled at a polytechnic. Few years later, Jack achieved distinctions for his A'level exams and got accepted into a local university while Jane managed to earn her diploma and enrolled to a part-time private university programme. 

Fast forward a few years, Jack finally graduated from the local university and began looking for a job. He secured a job interview and when he arrived at the office in a tailored suit , he saw Jane. Jane was one of the interviewers. What happened?

It is proven time and time again that academic performance does not always guarantee career success. All things being equal, is the light at the end of the tunnel brighter for an academically uninclined female in Singapore? Females in Singapore have a 2 year advantage over guys who served NS. In addition to the shorter duration of a private university course compared to a local university's, private universities also offer part time degree courses, allowing students to take up a full time job in the day and gain valuable working experience while beefing up his/her resume. 

The timelines below show a clearer view of the opportunity costs of serving National Service and taking up a full time university programme :

	JC To Full-Time Local University Route
	Female	Male - Jack
Age 12	PSLE	PSLE
Age 16	O'Level	O'Level
Age 18	A'Level	A'Level
Age 19	Start of University Year 1 (June)	Army
Age 20	Start of University Year 2	Army
Age 21	Start of University Year 3	Start of University Year 1 (June)
Age 22	Start of University Year 4	Start of University Year 2
Age 23	End of University Year 4 (June)	Start of University Year 3
Age 24	First year of work @ $33600/year	Start of University Year 4
Age 25	2nd year of work @ $36000/year	End of University Year 4 (June)
Total Salary earned by age 25	$69,600.00	$0.00
Amt saved @ 20% savings rate	$13,920.00	$0.00

	Diploma to Part-Time Private University Route
	Female - Jane	Male
Age 12	PSLE	PSLE
Age 16	O'Level	O'Level
Age 18	Polytechnic 2nd year	Polytechnic 2nd year
Age 19	Earned diploma	Earned diploma
Age 20	Part Time Degree + Full Time Work @ $26400/year	Army
Age 21	Part Time Degree + Full Time Work @ $27720/year	Army
Age 22	Part Time Degree + Full Time Work @ $29106/year	Part Time Degree + Full Time Work @ $26400/year
Age 23	Full time work @ $31200/year	Part Time Degree + Full Time Work @ $27720/year
Age 24	Full time work @ $32760/year	Part Time Degree + Full Time Work @ $29106/year
Age 25	Full Time work @ $34398/year	Full time work @ $31200/year
Total Salary earned by age 25	$181,584.00	$31,200.00
Amt saved @ 20% savings rate	$36,317.00	$6,240.00

Assumptions have to be made as there are too many variations. As such, I came up with the following non-exhaustive list of assumptions for the tables above :

• No part-time job and no money saved in the 2 years of army, 3 years of diploma and 4 years of  local university
• No year-end bonus
• Annual salary increment of 5%
• Salary of full time job after diploma = $2200/month or $26400/year
• Salary of full time job after part time private university = $2600/month or $31200/year
• Salary of full time job after full time local university = $2800/month or $33600/year
• Full time job is in private sector : Male with NS same pay as female of the same rank in the company 
• Private University : 3 year course
• Local University : 4 year course
• Total tuition fees for Private & Local University assumed to be the same

In addition to the salary earned and amount saved, Jane has already accumulated 6 years of full-time working experience at the time when Jack graduated from a local university. When will Jack be able catch up?

Taming the Beast

When an economy collapses, usually with the financial sector leading the way, everyone fears that it will not soon recover.  But, history tells us otherwise.  The numerous financial and economic collapses from the end of the civil war in the US up to the start of World War I took place during the fastest spurt of economic growth in US history.  The US economy had no central bank during this period and the government was so tiny that fiscal policy was largely non-existent.  Absent modern policy tools, what happened?

What happens, when government is not around to step in, is that economies recover on their own.  That's what the period from 1865 to 1914 teaches us.  It was during that period that the US overtook other economic power houses to become, by the end of the first World War, the most powerful economic engine in the world.  That is the outcome one can expect if the central bank is non-existent and if government fiscal policy is non-existent.

But what happens when government attempts to "tame the beast?" and "reform" the economy and the markets.  After the 2008 collapse, an unprecedented effort by central banks and governments took place throughout the Western economies.  Combined with aggressive "regulatory reform" to prevent future financial collapses, political actions by western economies have attempted to "tame the beast" of modern capitalism for the past 4 1/2 years.

And what is the outcome of all of this government action? -- economic stagnation and distress.  Economies that chugged along with 3 - 3 1/2 percent real GDP growth and 4 - 6 percent unemployment, now face zero real GDP growth and unemployment rates between 7 1/2 percent and 30 percent (Spain, Greece).

What next?  The beast has been tamed.  The furious fires of capitalism have been successfully tapped down by government policy.  Now, policy makers have abandoned any serious effort to get free markets going again and are focused on taxing rich folks.  That is the new agenda -- move more and more activities from the private to the public sector (think health care) and go after the wealth of anyone who played by the old rules.

We now have new rules.  Bond indentures (think GM, think Stockton) can be rewritten by the judiciary and by politicians.  Raiding government protected checking accounts are now policy tools for dealing with excessive sovereign debt (think IMF recommendations on Cyprus).  Nothing is safe from the wandering policy eyes of the Obama administrations and European politicans.  Even IRA accounts in the US have now become targets of the new political elite.

The beast has been tamed.  Look for the economies in Europe and the US to roll over.  In the US, the imposition of massive tax increases, major new hikes in employee costs (Obamacare), an onslaught of new EPA regulations, and blurring of the legal status of ordinary financial contracts (GM) is enough to snuff out the tepid recovery in the US.  Absurd policies designed to increase sovereign debt in heavily indebted Europe will put the nail in the coffin for Europe.  The future is not bright.