All posts by Wan Kong Yew

Inheritance taxes

This is something that I’ve touched on before, but I recently got involved in an extended discussion on the subject on the LYN, so I’ll post a summary here. To me, the argument in favor of inheritance taxes is painfully obvious. Unless you’re a tax-hating anarcho-capitalist, in which case I invite you to move to Somalia, everyone agrees that every country needs to raise taxes somehow to function. And for the sake of fairness, it is a given that taxes should be progressive. This not only means that folks who are better off needs to pay more taxes as an absolute figure, but that they need to pay more as a proportion of their total income and wealth.

This means that inheritance taxes need to be a part of any reasonable tax system as they’re probably the most progressive form of tax possible. True, you can make income taxes highly progressive by vastly increasing the marginal tax rates for the highest income tiers, but economists generally agree that this is inadvisable that extremely high income tax rates create a disincentive to work. Inheritance taxes have similar effects, but to a much lesser degree than income taxes. Given all this, what are the objections to them. The following is directly from one my posts on LYN:

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Recent Interesting Science Articles (June ’10)

Four articles this month. Three of them are about humans the last one, about giraffes, is just something I threw in for fun. The three articles about people deal respectively with yet another mooted cause for schizophrenia, how our sense of touch affects our judgment and an unconventional, but very intuitive, way of determining whether or not someone is lying.

Schizophrenia

The first article is from The Economist and deliberately evokes a scenario that could have come right out of Invasion of the Body Snatchers. There have been many different causes mooted for schizophrenia over the years and some of the theories I’ve read even include pathogens. But this is the first time I’ve heard that it’s caused by one that explicitly causes behavioral changes in its host to ensure its own propagation.

Continue reading Recent Interesting Science Articles (June ’10)

More corruption in the Catholic church

If Pope Benedict XVI has been praying for a break from the endless criticisms against the Catholic church, it looks like he’s out of luck. Today’s news is about his statement condemning what he calls the deplorable actions of Belgian police who raided a cathedral in the country as part of their ongoing investigations on sexual abuse by Catholic priests. What’s especially shocking about this statement is his insistence that the Catholic church be allowed autonomy to investigate the sexual abuse allegations on their own.

So far, so bad but there’s nothing particularly new in all this. What’s more interesting is this extended expose published last week in Der Spiegel about a more conventional kind of corruption in the church’s organization in Germany. From the article:

The Catholic Church in Germany, already struggling to cope with the sex abuse scandal, has been hit by revelations of theft, opaque accounting and extravagance. While the grassroots faithful are being forced to make cutbacks, some bishops enjoy the trappings of the church’s considerable hidden wealth.

Shortly before Pentecost, Pastor S. received an unexpected early morning visit, not from the Holy Ghost, but from the police.

For the authorities, the words of the Gospel of Luke came true on that morning: He who seeks finds. More than €131,000 ($158,000) were hidden in various places in the rooms of the Catholic priest, tucked in between his laundry or attached to the bottom of drawers. The reverend was arrested on the spot. After several weeks in custody, Hans S., 76, is now back at the monastery, waiting for his trial.

And lo and behold, the proliferation of cash may have been even more miraculous than initially assumed. The public prosecutor’s office in the southern city of Würzburg now estimates that S. may have embezzled up to €1.5 million from collections and other church funds. The members of his flock in a wine-growing village in the northern Bavarian region of Franconia are stunned. They had blindly trusted their shepherd, who always seemed so humble and modest.

The Catholic Church is currently being shaken by a number of financial scandals, not only in Franconia but also in Augsburg, another Bavarian city, where Bishop Walter Mixa’s dip into funds from a foundation that runs children’s homes recently made headlines.

More than €40 million have gone missing in the Diocese of Magdeburg in eastern Germany, €5 million have disappeared in Limburg near Frankfurt, and it was recently discovered that a senior priest in the Diocese of Münster had 30 secret bank accounts. And while parishes throughout Germany are cutting jobs and funds for community work, many bishops are still living on the high horse. A brand-new residence? An ostentatious home for their retirement? Restoration of a Marian column to the tune of €120,000? None of these expenditures presents a problem to high-ranking church officials from Trier in the west to Passau in the southeastern corner of Bavaria, whose coffers are brimming with cash.

The behavior of the church is this regard is precisely the same as what one would expect to see from corrupt government officials: insistence that church accounts are secret and spending is totally at the discretion of church officials, refusal to open up the books to independent auditors, extravagant spending on residences for clerics while maintaining that all this is for the good of the church and even keeping large sums of money in cash instead of in a bank account. As the article notes, all this is made even more painful as the parishioners who actually use the church’s services face austerity cutbacks.

Extra chuckles at how the church continues to benefit from such frivolities as free firewood and altar wine due to centuries-old treaties between the church and the state that lawmakers in Germany never bothered to review and probably know nothing about.

REITs revisited

Since it’s been almost exactly a year since I made this post, I thought that an update would be in order. I did end up investing money in REITs and have been very impressed with the results. Perhaps too much so. My average returns are close to 20%, which is too frothy for my tastes. Of course, most of this is due to the economic recovery. Like everything else, REIT prices were somewhat down in 2008 and this is just a return to par value. Going forward, I don’t expect to see returns of more than around 7-8 percent a year.

Most of the investing public still don’t seem to have clued in on REITs yet, but clearly they’re getting hot. Sunway’s recent launch seems to be one of the most attention-grabbing IPOs so far this year and more are in the offing, such as the one from CapitaMalls Asia Ltd., apparently with a substantial stake in Sungei Wang Plaza. This makes now a good time for me to raise some of my concerns about them.

  1. Quite a few of the REITs currently listed in Malaysia are linked to larger companies. For example, Starhill, UOA and AmFirst have obvious links to the far larger groups they’re named after. The new Sunway REIT will be another example. This is bad for the minority investors in them. AmFirst’s properties for example are mainly rented out to AmBank, its parent company. This is a clear conflict of interest as it calls into question how fairly the rental rates for the properties are assessed. I believe that the market has taken these factors into account and this is why Axis is one of the most valued REITs in the country, because it has no clear parent company and its shares are widely dispersed amongst different owners, including KWSP.
  2. Many of the property acquisitions and disposals that the REITs have conducted are with their related party companies. It’s especially bad when the REITs have to raise new capital to acquire new properties from related companies but only offer the new shares, which are always at a discount to the current market price, to private parties instead of the open market. This of course dilutes the shares of the other shareholders. Independent valuers are supposed to ensure that the purchases are being done at fair market value, but who trusts this kind of stuff in Malaysia?
  3. Strangely enough, the new REITs being announced have predicted yields that are substantially lower than just about all of the REITs already on the market. Both Sunway and the expected REIT from CapitaMalls are supposed to have yields of only around 6.8%. Take a look at the current yields for the various REITs in the country. Axis is considered to be slightly overvalued now but its yield is still better than the proposed IPOs. I predict that the share prices for these IPOs will tank. Actually, REITs in Malaysia do have a history of trading below initial prices after being launched. Since the total valuations for the REITs are still quite low, this makes me curious about why their prices are being traded up and their yields consequently depressed. The only explanation I can offer is that as trading volumes for REITs are very low, you’d have to increase your bid prices very quickly if you were looking to accumulate a substantial stake in any one of them within a reasonable time frame.
  4. The only advantage that I think of that the new REITs have are their more diversified portfolios of property. Al-Aqar for example has only one tenant, the KPJ hospitals. Similarly Atrium has very few properties and consequently tenants. So even though REIT prices so far have been very stable, in theory, it doesn’t take much to cause them to wobble if one of their tenants have problems with rental payments. The newer REITs have lower yields but should in theory be less risky.

Anyway, sorry for the somewhat rambling nature of this post but perhaps there will be readers out there who might be interested in my thoughts on them. Be sure to check out the REITs discussion thread on LYN. It’s a fantastic resource on the subject.

The New Space Opera

My wife mocks me for taking the better part of a year to get around to finishing this book. In my defense, I offer the following excuses:

  1. I’ve been busy catching up on my backlog of The Economist issues.
  2. With 18 stories in all, it’s a pretty hefty collection.
  3. Many of the stories are good but not great science fiction, and most would barely fit under the space opera label at all.

I don’t want to get into a lengthy discussion of what space opera is, let alone what “new space opera” would be. Suffice to say that old or new, space opera evokes images of starships and space battles, rip roaring action adventure on a grand scale and larger than life heroes. Think Star Wars instead of Star Trek (the pre-retcon version anyway). Most of the stories in The New Space Opera don’t really fit this mould.

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Saudi Arabia: breastfeeding for adult men is encouraged

This news goes straight into the “you can’t make this shit up” category. It appears that Muslim clerics in Saudi Arabia have recently issued a fatwa advocating that women should breastfeed milk to their close male colleagues and acquaintances. The reasoning? Islamic law in the kingdom strictly forbids unrelated men and women from mingling. However, a rule states that once a man takes milk from the breast of a woman, he would then be considered a relative and they therefore are allowed to socialize with one another. She wouldn’t even need to be veiled in his presence as his status as a relative means that he is not a potential mate.

The clerics are apparently in disagreement over whether or not it is necessary to feed the man milk directly from the woman’s breast or if just collecting the milk in a glass will do. Understandably, women in the country are upset and advocates of greater rights for women in Saudi Arabia point to this as yet another piece of evidence of how out of touch the Muslim clerics (who are all of course, male) are with how women actually think and feel.