Structured Deposit vs Fixed Deposit

Although the names "Structured Deposit" and "Fixed Deposit" differ by just a word, the two are slightly different deposit instruments.

Assessment	Structured Deposit	Fixed Deposit
Protected by Deposit Insurance Scheme up to S$50k, aggregate of all accounts for each person with the bank, if bank becomes bankrupt (insolvent)	No	Yes
Capital Guaranteed (provided capital held till maturity and bank does not become bankrupt)	Yes	Yes
Early Withdrawal	No pro-rated/market interest, fees may apply	Market interest, e.g. 0.05% for savings rate
Interest Income	Guaranteed for the tenure	Guaranteed for the tenure
Tenure	5 years	renewable every 1 or 2 years
Reasonable Interest Rate per annum (as at 9 Feb 2015)	2%	1.3%

The fundamental difference is that structured deposits are not protected by the the Deposit Insurance Scheme if the bank becomes bankrupt, which puts it in the same category as Investment products. While we can have "faith" in the bank, the difference in returns of 0.7% may not warrant taking the risk, especially if you are not filthy rich. By filthy rich, I mean, you have money in different banks and have fully utilised your deposit insurance quota in different banks, and you are fine with taking the risk.

The Deposit Insurance Scheme protects the end consumer by requiring banks to pay the central insurer a sum based on the amount of deposits they hold, such that if the bank becomes bankrupt, the insurer would pay each depositor with the bank, the amount of savings held in the bank, up to S$50,000. Only savings deposits and fixed deposits are protected by this Scheme. The purpose is to avoid a rush of withdrawals if the bank enters a cashflow crisis, which would further worsen the problem. Read more about it from the Singapore Deposit Insurance website.

Personally, being risk-adverse, I prefer to open a few bank accounts and save up to $50k in each bank. At least, when I need some cash to apply for an Initial Public Offering (IPO) or buy some shares on the stock market (when the price is favourable), I will have some cash on hand. As I also like liquidity and flexibility, I dislike deposit tenures that have lock-in periods more than 12 months.

If you expect interest rates to rise year on year, all the more you will like the flexibility to renew Fixed Deposits every year.

Weighing the 3 local banks -- DBS, OCBC and UOB

With the three local banks about to release their full year financial results next week, I decided to read through the 9M14 report to re-look their positions with the new developments in US, mainly in order of priority:

1. Obama's proposed budget to increase corporate tax rates and foreign income tax rates, to reduce debt;
2. Ceasure of Quantitative Easing (QE); and
3. Fed's committment to increase interest rates "realistically", which many people believe to be in the second half of 2015.

I would not have been interested to look through the reports had it not been for Obama's announcement this week, so my focus is on the US currency and loan interest income, which I believe the three local banks share price will react to. Of course, US corporate tax rates hikes may not get the support from the Republicans but generally, I believe the businessmen are smarter than politicians to know who to support and what to believe in. The convergence of the three events will likely guide the USD to appreciate against the SGD.

Data had been extracted from individual bank's 9M14 financial reports. 

The focus is to ascertain the exposure to USD loans and reliance on loans as income, so that we can better infer whether income will increase or decrease when any of the two events occur:

• USD appreciates against the SGD (globally)
• SIBOR interbank lending rates increase (locally)

First, I look for Interest Income, which in lay man terms mean, how much I earn from my customers by lending money to them. This is determined by the interest rates the bank charges its customers for the loan.

DBS has the largest proportion of Interest Income at 82.63%. OCBC and UOB have a much smaller absolute and percentage amount compared with DBS. This potentially could give DBS a windfall if interest rates were to increase. On the whole, DBS' interest rates for income-bearing assets (not shown in this diagram but available in the financial report) were the lowest (2.38%) among the three (2.69% for OCBC and UOB), which gives DBS more leeway to increase rates without hurting their competitive edge. Income-bearing assets include what we understand in lay man terms as loans.

Second, I look for Customer loans by currency, which is the apportionment of loans based on the currency the loan had been given. This is important if we want to infer the income generation ability when one currency appreciates significantly over another.

DBS has the largest proportion and absolute amount of USD loans. UOB has the least exposure, hence will least likely be positively/negatively affected by USD exchange rates. Based on the distribution, OCBC's spread of currency looks more diversified, which implies less interest income fluctuations due to currency. DBS' distribution of a near 50-50 distribution of USD and SGD loans suggests a strategy of hugging both currencies tightly so that the appreciation of one and depreciation of the other will cancel the effects of each other. On the whole, no one bank is superior over another in this aspect mainly because all three banks report their earnings in SGD. For Singapore companies that report their earnings in USD, this could play a bigger role.

Third, I look for cost to income ratio, which is a way of telling the shareholder how much it costs the company to earn every $1. All three banks are close, but OCBC spent the least. At 39.5%, in lay man terms, OCBC spent 39.5 cents to earn $1.

The writer owns units of DBS shares at the time of writing.

References:

1. DBS 9M14
2. UOB 9M14
3. OCBC 9M14

Why I am not convinced of a market crash anytime soon

To the potentially 95% of the singapore population who are not well-versed with financial knowledge and economics theories, reality, what they hear from their friends and read from media will probably be source of truth.

I realised that there is a lack of really layman explanations behind the speculation of market crashes, beyond that notion of "there is a report predicting a crash". Therefore, I endevour to explain why I am not convinced of a market crash anytime soon. To balance the argument, I will summarise the crash advocate position first.

The crash advocate predicts a crash is coming on the following key observations:

1. Oil prices had fallen by 60% in the last 6 months.
2. US, EU, Japan debt had been rising faster than earnings.
3. China's development growth had been slowing.
4. Loan interest rates had been suppressed for more than 10 years and it must go up one day (and that day could trigger the crash)
5. Eloba, Syria, terrorists, etc.

Another perspective for the same observations is that

1. Consumers will enjoy cost savings directly from fuel and indirectly from fuel-dependent industries, such as freight/logistics (e.g. postal and courier services), transport (e.g. air tickets, train tickets, taxis), construction, power generation. The savings from every consumer when multiplied by the consumer equates to liquidity that could potential be fed into the retail market, assuming that people still have their jobs and are not afraid to spend.
2. Debt has risen to a point where I think they do not intend to repay the amount. The likely philosophy held by these decision makers is to keep printing money until nobody dares to take your money. If the banker, politicians, voters all are not too bored about their debt, then why should we be bothered by something beyond our control and reasoning? So what if they go bankrupt? The US government stopped functioning for a few weeks and nothing was impacted.
3. China sucked all the resources out of the earth over the past 30 years, and will continue to do that as long as there are mouths to feed. There are also developing regions in Asia, Middle East and Africa, except that hey are not big enough to make their growth look significant on a worldwide scale. So what if China's growth is slowing? Will that massive population still need to eat and live?
4. Loan interest rates had been kept low because of the incessant money printing by major central banks -- US, EU, China, Japan. Each round of printing by a major economy creates some psychological effect and perception that they would need to also print or risk their currency get inflated. In layman terms, every major economy is trying to suppress their currency exchange rates to make it "cheaper" for overseas customers to buy their products, to make their income look higher for the same unit of goods they are trying to sell. Broadly speaking, countries that do not print will have their currency appreciate against those that print. For example, for every 1 yen decrease against the USD, Japan Uniqlo's profits increase by 1 billion yen. Uniqlo sell sames the same units of goods, same number of retail, employees, etc. but see it's profits rise when their home currency drops. Another way to see this is that the Japan central banks is encouraging their Japanese businesses to expand overseas to benefit from the depressed currency. Unfortunately, global expansion does not work with that logic.
5. What can happen, may happen, but we should not speculate when specific events would happen.

Why I am not convinced of a market crash anytime soon

1. Singapore is very reliant on global markets for income, and has a higher risk than her neighbours that had substantial domestic markets. However, the Singapore government also has paid a group of highly paid ministers and intelligent economists and fund managers. The most we can do is to have faith in them and that the amount of taxpayers money invested in their education and career insures us with good governance and some insurance against crashes. At least, there has been a track record of fat yearly budget surplus that makes everyone drool with envy.
2. Bank deposit insurance will prevent a rush to withdraw cash and hasten a crash in the event of bad sentiment. Banks have to maintain a percentage of capital to operate to minimise the risks of over-leverage (i.e. borrowing beyond your income means).
3. Population is still growing, although at a slower rate, and is intentionally planned to grow to 7 million in 2030. Population growth is the fundamental driving force for any economy. More people -> More mouths to feed -> More housing needs. Ask yourself whether housing price will be lower in 2014 or 2030.
4. Historically, crashes will crash the stock market indices by 50% within a week. Anything around 5% is a just a correction and not a crash. After it drops by 5%, it rebounds by 5.5% to return to the same position it was at before the drop. In absolute terms, the amount could be the same, but when you take the percentage against a smaller base, the percentage is higher. Simple arithmetic. Just take statistics with a pinch of salt. Same goes to all the reports about housing resale indices seeing a large drop in growth percentage. For example, you grow at 2% in 2013, then you grow at 1% in 2014, so the sensationalised report says 50% drop in growth in 2014.
5. Historically, crashes happen after really steep increases. Hence, seeing a few drops here and there just means a crash will not happen so soon.

Happy worrying. 

Disclaimer: This is just my personal interpretation and is not to be taken too seriously. You may choose to believe the more qualified "analysts", "economists", etc. My objective to explain in more layman terms.

Osaka Rinku Town Premium Outlet Mall

The Premium Outlet Mall is popular with tourists who arrive in bus loads. The main access modes are train (nearby JR and Nankai Railways Rinku Town) or by 100 yen 30-min frequency shuttle bus from Kaisai Airport. The shuttle bus pick up point is at a rather distant end of the airport at the bus terminal. It can be quite difficult to locate if there is no queue in sight. The shuttle bus is a large coach that allows tourists to load their large suitcases in the trunk.

When travelling with a younger one, every destination needs to have a playground as a form of a bribe to reward good behaviour while the adults go shopping. In the premium outlet mall, we found a small play area within the Lego outlet that sells retail lego sets at 30% discount.

There is an outdoor playground near to starbucks, which is a little more difficult to locate. We would not have known where it was had it not been for the shuttle bus driving past it.

Satisfied look after playing

Read about my review on Seacle Pleasure Town, next to Premium Outlet Mall, which boasts a large indoor playground for more play time. 

Osaka Rinku Town Seacle Club Yu Kids

Just one train station away from Osaka Kansai Airport is Rinku Town (accessible by both JR and Nankai Railways as these two stops share the same train platform). It consists of mainly two shopping areas -- Seacle and Premium Outlet Mall -- for tourists and lots of residencial areas for locals.

Seacle is a small outfit with a popular discount supermarket and 100 yen shop on the first floor and a large indoor playground operated by Yu Kids on the second floor near the entrance which is nearest the train station. There is also another playground on the way to Seacle's entrance which looked like a huge amusement park but the entrance fees were expensive and did not look suitable for toddlers. There is also an economical food court in the main building and restaurants (Ootoya, Saizeriya and many others) in the annex building. Other shops include economical children and adult clothing, which are usually below 2000 yen per piece.

Opposite Seacle is the Premium Outlet Mall with many popular american brands, such as GAP, Tommy Hilfiger, etc. There are also other more global Japanese brands selling at rather "high end" prices.

The good thing about shopping in Japan is that there is usually somewhere to entertain children. I suspect this is partly because many housewives visit these shopping haunts with their children when their husbands are working.

Lots of sitting space for parents

All children love the ball pit

This slide is very popular with the rowdier children

This is our little girl's favourite. She started riding this when we first visited at 2 years old.

For more information on the shops available: Seacle Shop List

Read about my review on Premium Outlet Mall.

Children Anpanman JR Shikoku train

Anpanman is a very popular comic character among japanese children. Every imaginable product is available in Anpanman design. Biscuits, drinks, tooth brush, utensils, socks, shoes, bags, face masks, bibs, toys, etc. The creator Takashi Yanase passed away in Oct 2013 at the age of 94. His hometown was in Shikoku, Kochi prefecture.

For the tourists, Shikoku has four prefectures and is the smallest main land of Japan. The area is easily accessible via bullet trains and JR train lines with JR pass. The train stations instructions and sign boards are all in Japanese in the sparse-populated suburbs and train station masters speak with a slightly heavier Japanese accent. Nonetheless, it is worth an adventuous visit to the tourist populated towns to see an extremely quiet side of Japan if you are bored with the bustling cities.

Train interiors are decorated with Anpanman stickers and figurines for a partial section of a carriage next to the "green car" (a type of reserved section). There are fixed train timings to book if you would like to board one of these trains. The train we boarded was a 9 am train from Niihama (the quietest town we had every visited in Japan) to Okayama (the interchange to change to bullet train to head back to Osaka).

Rubber stamp machine for children to collect stamps in their Stamp Rally booklet
from different stations and trains across Shikoku.

How do you see the Arduino Serial.print() output?

I realised that when I was trying to learn how to use the Arduino IDE, I could not readily find the output console to "see" the output from "Serial.print()" or "Serial.println()".

The following is a newbie guide:

1. Open the IDE -> Tools -> Serial Monitor.
2. Change the "Baud rate" setting to the same number in the code. E.g. "Serial.begin(115200);" means the baud rate is 115200.
3. After you switch to the correct baud rate, which is like tuning in to a radio channel on radio, you should see the output of the print command.

Good luck figuring this out!