Is Deutsche Bank Heading The Path Of Lehman?

With the recent Deutsche Bank upheaval which could be a reminiscent of the Lehman crisis. Have decided to read up more and here are some of my findings.

Let’s take a look at some statistics first:

Price- 13.5 USD

DB market Cap- 18.5 billion USD

Potential Fine from DOJ- 14 billion (Fine for their part in selling toxic mortgage backed securities during Lehman’s time)

Derivatives Exposure: 42 trillion

Price to Book: 0.25

Latest Year End Loss: 6.8 billion Euros

Debt to Equity: 2.8

The current worries of the market are mainly due to the fine and also huge derivatives exposure as it beats the exposure Lehman (85 billion) had heads down. There have been talk that the fine could be negotiated down and a rumored amount of 5.4 billion was spreading through the grapevine and this caused a positive surge for DB shares.

Let's first look at the DOJ fine, which I believe could be negotiated to the extent; whereby progressive payment is doable. It would also not be DOJ's best interests to force DB to insolvency,

As for the derivatives exposures, though it looks huge and simply mind blowing. However, these may be hedged positions (a buy position will have a sell leg and this is to allow trading of the spread differentials of a nearer month to a further month). Their interest rate derivatives took up 70 percent of their exposure. My guess will be they could be executing trading strategies that are similar to Long Term Capital Management Fund ("LTCM"). LTCM was really successful at the start but things began to go hey-wire when they try to go into areas that are not their forte to drive positive returns.

Looking at the net exposure which they will take the long positions and minus the short positions and after further netting the positive and negative figures; we actually have a positive net market value of around 18 billion. In other words, if I interpret correctly, their derivatives exposure are actually netting a gain as of Dec 31 2015 annual report. However as most are OTC contracts, therefore we have to take the valuation with caution too. 

https://annualreport.deutsche-bank.com/2015/ar/risk-report/risk-and-capital-performance/credit-risk-exposure/credit-exposure-from-derivatives.html

My personal opinion - The real issue with Deutsche Bank is actually profitability whereby they lost a whopping 6.8 billion Euros in 2015 due to impairments, increase in administration charges and litigation charges.

Given the current situation whereby hedge funds are withdrawing funds and even their asset management business is likely to see an outflow of funds; along with the current stagnant economic conditions, their investment banking business should not be the black knight to the rescue. The odds of a quick rebound could be unlikely.

For the path of recovery, confidence is paramount to the banking business. They may need some form of assurance from the German government to the investment community of their commitment to aid the bank if need be in order to stabilize the ship (Something like MAS's stance during the Global Financial Crisis). If not a bank run could be on the cards as they have close to 500 billion worth of deposits. There may also likely to be another round of fund raising to beef up their capital requirements.

In summary, a collapse of Deutsche Bank in the footsteps of Lehman is a low probability event. Given that Lehman's books are toxic derivatives backed by junk mortgages, the derivatives exposure of Deustche Bank should be much safer (If the valuation of their OTC contracts can be trusted) especially after we look at their net positions. However, the road to recovery is still some way ahead and it could still be the lingering negative catalyst in the near future for the global markets given the scale and reach of the largest European Bank in the world.

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Dollar and Cents- Buying a Piano

Just a couple of months back, we got an upright piano for my daughter who is enjoying her piano lessons. Therefore, we would like to share our experience in shopping around for the best value that we could find in the Singapore Piano Market.

For a start, there are many brands available such as Yamaha, Kawai, Hailun, Steinberg & Song and etc. Our main criteria are that it must have good resale value and would be able to last till Grade 8. We do not want to have the hassle of changing to a new piano and at the same time not able to sell it should my daughter lost interest in playing the piano.

We finally decided to get a Yamaha U1 which will cost around 10k Sgd if we get it brand new. With such a hefty price tag, we opted to get it from the resale market. We search all the classified websites (Locanto, Craiglist and Carousell) and Google on second hand piano shops. To cut the story short, these two second hand piano shops were shortlisted by us, Asia Piano and Piano Gallery.

At the end of the day, we got a Yamaha U3 which cost around $4900 Sgd as it is of a higher calibre and it would have cost 11k-12k for a brand new one. The Yamaha U1 was going for around $4500-$4600 and the Yamaha U1 tends to have a higher pitch sound while the Yamaha U3 has a more mellow sound. Each U3 tends to have a sound of their own but the U1 have a more universal sound. The age of our piano is around 26 years old and it is imported from Japan (domestic use). To know the age of the Yamaha piano, you can just look at the serial number and you can go to this link to have a gauge of how old your piano is:

http://www.markgoodwinpianos.co.uk/info/yamaha-piano-serial-numbers

As part of the package, we have two free tunings and several freebies thrown in. We got our piano from Asia Piano.

Langkawi Trip (June School Holidays)

It was the school holidays (A dated post as the trip was a year back) and we decided to bring our whole family for a trip to Langkawi. We have been to Bali, Phuket and Bintan frequently and have also been to Krabi and Hua Hin once. So we decided to give Langkawi a shot this time round. It is a regional beach destination that is not on our conquered list yet. We hope it will be a perfect destination for our family trip after a few misses due to either too expensive air ticket prices or it was simply just not on the top of our pecking order

We started doing our research over tripadvisor and on whatever related websites we could come across through google search. We finally decided to stay in the Berjaya Resorts which have a 4 star rating through the overall reviews. We booked a rainforest view room as the sea-facing seems great but we have small kids, so it is better be on the cautious side.

We booked a Silkair flight and off we go on the first week of June for a 4 days 3 nights trip. Upon arrival in Langkawi Airport which took us around 1.5 hours, we are all ready to explore the beautiful island of Langkawi.. 

Once you reach the baggage reclaim area after clearing the customs, there are lots of car rental companies that are soliciting  for your business. We rented a car from one of the counters and after some slight bargaining, I manage to get a Proton Wira for around 70 ringgit per day with a 50 ringgit deposit. It is highly advisable to rent a car to self drive in order to fully explore Langkawi based on our recent experience. The roads are not congested, so it makes driving a breeze.

Based on my own observation, there are 4 main areas in Langkawi to explore and they are A) Berjaya area (it is where my hotel is located), B) Cenang Area (it is where the hype is, just like Patong in Phuket), C) Kuah Town (this is the city center) and D) Eastern Northern Side of the Island (They have some interesting places to visit such as the black sand beach and a waterfall. I have attached a tourist map and highlighted the areas for you to have a better idea.

 

 

 

Here is a summary of things to look out for:

 

1) Berjaya Hotel  have a nice thai restaurant which you have to reserve through the concierge and there is also a natural walk conducted at 6-6.30pm around the hotel compounds which is kind of interesting. The beach at Berjaya Hotel is really nice and when the sunlight rays are strong, the water are almost blue just like in the Mediterranean sea.

 

2) Cenang area might be a better choice to stay for those who are not into nature and more into street food and shopping.

 

3) There is a shopping center at the middle of Cenang, you could get good tour tickets over there whereby our island hopping price was around 25 ringgit per pax versus the quoted 50 ringgit elsewhere. Also, they have the most decent toilet but it cost around 2 ringgit per entry if I recall correctly. Finally, it is a good place to chill as it is the location with good air conditioning.

 

4) There is a cable car attraction to a mountain whereby I find it is kind of overhyped as there is basically nothing much to do apart from 2 small cafes once you are up in the mountain. Nonetheless, you can soak in the great scenery.

 

5) In Kuah Town, the must see will be the huge eagle monument. There are lots of factory outlets but it is more the chocolates, tidbits and kitchen ware that are worth a look at.

 

6) For car parks, just have to be creative and there are actually lots of spots to do creative parking.

 

To sum up, it is ok but not compelling enough to warrant a second visit.

 

 

Lee

 

 

 

Dollar and Cents- Renovating a House (Choosing of House Furnishing and Accessories)

It had been a hectic time as I have just moved to my new residence. I have moved four times so far in my life and moving is really tiring and stressful while managing all the logistics. Hopefully this will be my final home where I can retire in, provided it does not get en-bloc.

As promised in my previous blog post, I will be sharing my experience of the renovation process and the purchasing of the different accessories and home furnishing. Sad to say, the renovation id that we got did not perform as expected. We have moved in for about 2 weeks but the carpentry works are still in progress. So we are basically still living on boxes as our consoles and wardrobes are still not up.

Lately, we have been busy sourcing out for the different home accessories. I would say we have more or less got what we wanted. Here are the list of vendors we purchased from and perhaps it could prove helpful to those who are in the midst or intending to do a renovation.

Aircon
Twin City Engineering Pte Ltd

We choose this company from the recommendation of our id and we did some price comparison with Gain City and Coolserve. Their prices are reasonable from the different quotes. We pay around $5000 for a system 4 Mitsubishi Electric whereby we change all the pipes and all pipes are concealed. We were deciding between Mitsubishi Electric and Mitsubishi Heavy Industries but choose Mitsubishi Electric after doing some on-line research.

Curtains
MGL Curtains

We were deciding between D Zander which is the sponsor for Xiaxue home curtains and MGL. MGL won us over as they have the fabrics that we want. Jimmy Textile in Katong seems to offer reasonably priced curtains too but we were to lazy to go over to do some comparison. We get MGL to do a wall paper, one set of master bedroom day and night curtains and three window blinds for the bedrooms and living room, we spend around 1700 dollars.

Kids Beds and Table
Piccolo House

We search quite a while for the furniture of our children's rooms. Piccolo House was our final choice as we feel their finishing and pricing are better.

Kitchen and Toilet Accessories
Adamas and GR Link

We kind of regret hacking away the toilet bowls as it seems to be of the Toto brand. Ironically, we got back the same brand and Adamas in Jalan Besar offered around 30% discount off the list price whereby the main Toto distributor, W.Atelier, offered around 20% discount. It set us back around 1200 dollars for two wc plus a Toto rain-shower set at 700 plus. A more high end Baron or Aquino wc would cost around 300 to 350 each while a less branded rain-shower set could cost between 200-450 region.

GR Link generally offered reasonable price for toilet and kitchen accessories whereby we got some of our stuff there too. The shop beside GR Link is also worth a look at.

Kitchen Stove, Oven and Hob
Mayer and Lion City Trading

We got a package which comes to around 1000 dollars for stove, hob and oven from Ariston which had got good reviews as compared to similar priced brands such as EF.

We got our build in microwave oven from Lion City Trading which offers pretty good deals.

Lighting
BL Lighting

We settled on BL Lighting (Jalan Besar) 5 inch LED downlight at 39 dollars each with 2 years warranty. The lights quality are pretty good. The normal non LED downlight would have cost around 26 dollars.

Store Room Racks 
Yee Sin

We got our bomb shelter storage racks form Yee Sin and they do have it in all white racks. I guess it looks more pleasing to the eyes.

Hope this list will be helpful for your renovation process.

Lee

Dollar and Cents- Renovating a House (Choosing Interior Designers and Contractors)

It has been a long while since my last post as I was away to France for a free and easy tour with my family which I will try to do a posting on it. Also, I am currently doing my renovation for my new apartment.

I hope to share my experience for the renovation process so others could perhaps benefit from it and be able do a better budgeting with cost savings in mind.

Before the renovation and short-listing of interior designers and contractors for our home, I have been religiously buying the Home and Decor magazines and also browse the other interior design magazines in the petrol kiosk rack since the start of the year to get ideas for our home. We also google and research on the web whereby renotalk and hardwarezone forums were very useful. There are also individual blogs such as those of Xiaxue and there is one which is really good whereby he actually went to around 10 interior designing firms to get a quote (I can't recall off hand his blog address but will upload it if I managed to find it). Along the way, my wife and I started to short-list those designers that we kind of have a good feel  from their portfolio showcase in the magazines and reviews from the web.

We ended up with a final list of 3 Interior Designing firms (1 is from the magazine approach, 1 is introduced by a client and another is my wife's contact) and 1 contractor (Recommendation by a friend).

This is the short-list of things we wanted to do:

1) Hack 3 walls and erect 3 new walls
2) Overlay Kitchen floor tiles and walls tiles
3) New wardrobe for master bedroom and two other rooms.
4) 2.2m full height console
5) 2m full height console for master bedroom
6) Hack master bedroom toilet and total overhaul
7)Overlay floor tiles for common bathroom
8)False Ceiling for Master Bedroom and Son's Bedroom
9)Polish marble floor, parquet and common toilet marble walls.
10)Custom made shelving and study table for son's room.
11) Custom made study table with shelving in master bedroom.
12) Kitchen Cabinets and a standalone cabinet for built in microwave and built in oven.
13) Electrical Works
14)Painting
15)Vanity top and mirror cabinet for common bathroom with a new shower screen

There were some good ideas suggested by the Interior Designers that we have met especially the one that was introduced by my client whom is very experienced in the business. We got quotes from all of them whereby the contractor came in with the lowest quote and we were tempted to pass the project to him as my friend have rave reviews of his work. However, my friend just did his kitchen and not the whole house.

We decided to go with my wife's contact at the end cause we feel an interior designer might be able to execute our theme better. Moreover, his rates are reasonable and not way off the contractor quote. As for the other Interior Designers, their quotes could be around 30-50 percent more than the quote I got from the interior designer that we went with.

Partly, they are from a more reputable interior designing  firm which means they do charge 7% GST which my current interior designer and the contractor does not charge as he just started his own company for around 3 years. This could be quite a lot of cost savings which you can utilise to make another wardrobe or for your furniture budget.

That's all for now and I will carry on with further posts on my renovation process. We are in the midst of buying the appliances, furniture, curtains and etc.

Lee