High price of rice

There are two letters in Today paper commenting on the high price of rice, its impact on the ordinary workers and the insensitive remarks by two politicians on this matter.

Here are my observations:

a) The increase in the price of rice, on its own, may appear to be bearable
b) But the prices of many other essentials have increased as well
c) Taxes and ERPs have also increased
d) The total impact of all the increases is large

It is not only the people on public assistance who cannot cope. Many workers or modest salary do not earn enough to meet their expenses. The recent increases is a big blow to their budget.

What is the solution? There are two possible approaches:

a) Price controls on essential products
b) Allowance for low income families

I agree with the approach adopted by the Government to provide assistance to low income families (rather than price controls). I believe that the assistance net should be widened to include more low income families who are affected by the hike in the cost of living.

Are Bernanke's Hands Tied?

"Are Bernanke's Hands Tied? 8 Reasons the US May Be in Worse Trouble Than You Think "

http://www.currencytrading.net/2008/are-bernankes-hands-tied-8-reasons-the-us-may-be-in-worse-trouble-than-you-think/

STI Exchange Traded Fund- Liquidity

Dear Mr. Tan,
I would like to seek your advice about the Street-Tracks STI ETF http://www.sgx.com/psv/securities/etf/documents/STI4Apr2008Lodgementversion.pdf)

It seems that small investors can only sell through the SGX Exchange. As the volume of trade is low, there is liquidity risk. What do you think?

I read your blog frequently; maybe it will be good to discuss with blog readers.

Minimum Subscription: Creation Requests for Units may only be made in a minimum of Creation Unit size of 500,000 Units. Investors who wish to subscribe for Units has to go through Participating Dealers.

Liquidity: Investors should note the listing of the Fund on SGX-ST does not guarantee a liquid market for the Units.

REPLY
I believe that State Street will try to create the liquidity for this ETF. The current liquidity should be sufficient for the retail investors. It is suitable for long term investors (who are willing to buy on the market price).

It is not suitable for short term trading, where liquidity is important.

Government bonds

Dear Mr. Tan,
I would like to find out what a bond is. Is there a risk factor involved? How do I go about finding about government bonds?

REPLY
Government bonds have very little, almost negligble risk. You can buy through a bank or stockbroker. They can tell you about the yield and risk.