Monday, February 6, 2012

The Fishy Feeling of An Ambitious Gamble

If I am to put the Sara1M scheme, the Public Low House Scheme and the 1Care system together through an element in column, I must say that it is a very high-risk gamble with the results can be suicidal. One thing I was certainly weary of the Sara1M is that the returns, which PNB claims to give a returns up to 32% of the investment, sounds familiar. It's not as the same as your often heard "get-rich-quick" scheme, but in impression, it is more of a ponzi scheme because of its high-yield investment programs. Another thing is that there was understood expectation that the more money poured into it the longer the scheme can go.

The real potential danger of one scheme like this, though it sounds very appealing in nature is that in the period where the investment slows down and should such problem happens unexpectedly / unanticipated - e.g market catastrophe in Europe / America, the target of returns in the space of 5 years as what PNB claims to be would not be met. Thus, in reaction, people who may have invested in it might ask where are the returns asked? Have we not remembered what happen to the Madoff ponzi scheme scandal?

The 1Care system has met with many brickbats from many people including those from the medical sector. A simple logic will allow us to distinguish the difference of using a insurance medical card vs paying to the 1Care. The problem is that if you are healthy, you are penalized by paying 10% of your monthly gross salary. This already counts alongside paying your 11% EPF, SOSCO and even paying a PCB to the Inland Revenue Board.

The annual premium of a young working professional from the age of 21-40 is usually within the range of RM600 to RM800 annually which compared to paying 10% every month is basically paying 1/6th of the monthly pay. Many insurance companies, aware of the people's need to have proper healthcare have offered a medical card with the reasonable premium,  when divided by a monthly basis seem to make decent sales out of it and from the customer's point of view, much better than paying 10% and get nothing out of it.

And here we are, the government wants to use the people's retirement fund to fund the housing loan scheme whereas it is supposedly using their own side of the money, not people's money to do it. What Tony Pua and Nurul Izzah said of masking the real debts from people is true and of course this breaks the statement from Najib "Haji Express" saying that days of "gomen know best" is already over. And the mainstream media still remains willing to be prostituted over the fear of reprimanding by the Home Ministry although the facts have been wrong and economic data to skewed to please, a.la. Enron style.

All these three things point to one thing in common: there is a hidden acknowledgement that the government is already out of money and to keep it alive they had to loan (in confidentiality) money from lenders like IMF / World Bank and other countries with mass reserves. 

If any of us have watched some Hong Kong serial dramas or movies, you have seen a man in bad finances would desperately try to repay the loan sharks by undertaking more loans and do a desperate gamble hoping to win back money plus surplus to save himself. That is what BN is doing now. Obviously they won't dare to do it because truth can scare and cause panic across the country. As of 2011, the debt stands at RM456 billion, which if you are to recuperate back the money, how would you do it?
Simple: bond selling. my intuition is that Sara1M is like selling bonds, hoping if things get better they pay back the invested money plus interest. 1Care includes those who do not pay income taxes as if their monthly pay is below RM2500, but still paying 21 percent of contribution not counting SOSCO and PCB can still be considered burdening since the annual inflation rate stands at 6.8 per year. And it is considered a wild gamble to stake the monies like EPF funds into a foreign fund hoping if the fund hits high, another high return of investment from the base money would return.

There have been warnings that the world economy is not going to be like in the last 20 years or so but it could prolonged until early next decade. Sad to say I am not verse in economics to predict that but it clearly implies it will be a very disastrous move to gamble people's money and ending up bankrupt by 2019, if what Idris Jala says is true all the round.

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