Thursday, March 12, 2009

Second Thrust

The second thrust is meant to augment aspects of the social safety net. It doesn't quite achieve the effect, though.

The First Minister of Finance has said that, The Government provides various subsidies, incentives and assistance for fuel consumption, food security, scholarships and educational assistance as well as social welfare programmes. The allocation for subsidies and other assistance in 2008 totalled RM34.1 billion or 22% of total operating expenditure. Of this, RM18.1 billion was for fuel subsidies, RM6 billion as assistance for students, disabled and poor families as well as RM3 billion for food assistance, while RM7 billion was for other forms of assistance.

The second thrust involves RM674 million in consumption subsidies for things such as sugar, bread and wheat flour.

I've always been leery of broadbased consumption subsidies since it is a drag of Malaysia's competitive spirit. Such subsidies can be targeted to lower-income groups. It should not be across-the-board from the super-rich to the super-poor. Maybe it's time we considered food stamps for the truly needy, instead. Really, these consumption subsidies are paid directly by the government to the sugar tycoons, bread barons and flour kings. What gives?

Home ownership
The plan is to give house buyers tax relief on interests paid on housing loans capped at RM10,000 per annum for 3 years. This plan is neither here nor there. I don't think anyone will go and buy a house just to get 3 years of tax deduction on loan interest especially if the loan is for 15 years. After 3 years, how?

Improving public infrastructure
The plan is to, enhance public infrastructure for the benefit and welfare of the rakyat. Apart from building capacity for the future, these efforts will also promote greater activities in the construction sector and stimulate domestic demand. Towards this, the following measures will be taken:

First: Accelerate implementation of projects under the Ninth Malaysia Plan, which have high local content and multiplier effect, people-centric and can be implemented immediately. These projects amount to RM8.4 billion. In addition, RM1.6 billion is allocated for funds to promote investments (Very short on details. More information should be given just so we understand what specifics there are. There's a lot of money here. What local content? What multiplier effect? Where's the people-centric features?);

Second: Provide additional allocation of RM200 million to repair and maintain drains and roads. In addition, the surroundings of public flats will be improved to ensure more comfortable living conditions. This includes painting, repairing of lifts and improving waste disposal facilities (Sounds like something local councils should be doing...including the Pakatan Rakyat states. There should be no discrimination on the basis of politics. Everyone is a Malaysian.); and

Third: Undertake renovation, maintenance and repairs of welfare homes, fire and rescue stations and quarters, as well as public toilets in mosques, surau and tourist spots. For this, a sum of RM150 million will be provided.

Government savings bond
Like etheorist has observed, the plan for RM5 billion worth of savings bonds is anomalous in a stimulus package since this issue is about fund-raising. But, at 5% per annum yields payable quarterly, it's good for Malaysian savers. I'll take it.

Improving school facilities
RM1.95 billion to build and improve facilities for 752 schools. For goodness sake, don't just bloody buy computers and build all sorts of nonsense. Resources should be allocated to training the teachers. The quality of the delivery system is questionable.

And, there must be stringent and highly transparent tender processes for any construction work. The bloody sub-sub-sub-contractors are prone to curi makan on sand, cement and steel frames. Why do you think school buildings are cracking and sinking?

About RM1.8 billion are allocated. That is good. This blog has advocated microcredit/microfinance for a long, long time.

Helping the less fortunate
Another RM20 million to augment the RM830 million already allocated in Budget 2009. The ordinary Malaysians are not feeling the effect of this one. This plan is regarded as a social safety net. It is a flimsy net.

Retrenched workers
They are retrenched but they get a tax exemption on RM10,000 of the retrenchment benefits. I don't think this one will go down well with the retrenched workers.

Incentivising banks to defer loan repayments
No outlay here. Just get the banks to agree to defer loan repayments for 1 year. What happens after that?

I don't think kudos can be given for the second thrust. No oomph. No real social safety nets.


Navi said...

I would have thought that the Minister for Finance would have considered monthly allowances for the unemployed who register with the MOHR; a figure of perhap RM500 to RM600 to tide them for the tough times. Bonuses should hsve been considered for the low ranking government staff as well as pensioners.
The budget just ignores the man on the street.

Sans said...

The devil is in the details. Will see what happens.

Unfortunately can already expect a certain amount going to prop up listed construction companies either directly or indirectly through infrastructure spend.

flyer168 said...

de minimis,

Now that the Funds are available....

It will be another round of "Vultues" & their Scams, etc

"Preying" on the "Innocent, Naive & Needy" folks, the elders, students, etc....

As such I would like to share this with you & your readers...

Thursday, March 12, 2009 | 7:30 AM

The Worst Con Jobs Are Yet To Come

by Larry Edelson

A. The broad stock markets are now within an important timing window for a major low. The month of March should mark the low for stocks for the year.

I can't tell you exactly where the low will come in on the Dow, but I do know that it will bottom this month and then begin a multi-month powerful rally.

B. Oil has bottomed. It will likely hit $50 next, then the $75 to $80 level. What will drive oil higher?

The fundamental explanations from the media will come after the fact. Keep in mind oil, like gold, tends to lead the economy, not lag it.

C. Gold is consolidating and likely preparing for a move to new record highs. It must hold the $891 level to do so. As long as it does, gold should move to as high as $1,250 an ounce on its next leg up.

D. The dollar is firm on a short-term basis, but remains in a long-term bear market. I expect a top in the dollar this month, then the beginning of a protracted decline in the greenback as the Fed's flooding of the economy and monetization of debt begins to inflate asset prices and deflate the dollar.

E. Long-term bond markets are a disaster in the making. Especially long-term U.S. treasury bonds. Continue to steer clear of them. There is simply no way they are going to hold their value in the face of at least $2 TRILLION in debt auctions this year from the Treasury. Even if the Fed buys those bonds to try and support the market.

If you've been following my column, and especially my Real Wealth Report, you're positioned nicely for the markets and for what's going to unfold over the rest of this year.

Targets of Vulnerability

Now, let's take a look at something I find terribly troublesome ... that very few are talking about ... yet is critically important ...

Most people think the era of scams in the markets and investments is over. Kaput.

After all, from the tech bubble to Enron and WorldCom ... from the real estate and mortgage train wreck, to Madoff's $50 billion Ponzi scheme ... we've seen every kind of scam possible, right?

Wrong! Fact is, beneath the surface of every bear market lies new scams being hatched ... scores more dishonest operators and flimflam con artists ...

... and sadly, tens of millions of vulnerable investors ready willing and able to try and grab any opportunity to make back even just a fraction of what they've lost in the markets. Or keep their job. Or supplement their income.

Madoff may be the biggest scam revealed so far, but there are tens of thousands of smaller scams going on now that involve billions more.

"Hope" is a wonderfully positive emotion. But it can also be deadly to your finances, especially when you're vulnerable.

All told, I count at least 124 new scams lurking out there right now — along with many old scams with new twists — that you need to be acutely aware of.

Even the economic stimulus package, which was only signed last month, is already spawning numerous scams trying to entice people with promises of free government cash.

Chief amongst the victims ...

* Homeowners having trouble paying their mortgages or in default. This group is especially vulnerable to newly-hatched scams that promise to forestall foreclosures, help with mortgage payments, refinancing, and more.

* Investors who have suffered enormous losses, which is just about everyone today.

* The unemployed, desperate to find new jobs. Even those gainfully employed, but worried about their jobs, and those seeking second incomes from part-time jobs and even home-biz opportunities.

* Senior citizens, who are especially vulnerable to scams today because they largely rely on fixed incomes ... where interest rates are now effectively zero.

* Small and medium-sized businesses looking for short-term credit lines and financing needs.

* Students, many of whom are having a tougher time financing their educations and recent grads looking for jobs.

Beware of These Major Scams

Sadly, the above groups comprise just about everyone under the sun. So this issue, in my opinion, couldn't be timelier.

The scams unfolding today? Here are some of the most prevalent ones that I think you need to be aware of and some that are just getting started — all of which are rapidly on the rise ...

black arrow Foreclosure scams: Here are 3 most common:

Phony Counseling or "Phantom Help": The "counselor" tells the homeowner that he can negotiate a deal with their lender to save their home.

In exchange for an exorbitant fee, the scam artist claims he will handle all the details. But once the fee is paid, the phony counselor disappears with the homeowner's money as well as with their personal financial information.

The lease/buy back: Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back.

Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the "rescuer" walks off with most or all of the equity.

The bait-and-switch: Homeowners are duped into signing documents for what they think is a new loan to bring their mortgage current. But what they are really signing are forged documents ceding the title of their house to the scammer.

Homeowners usually don't know they've been scammed until they get an eviction notice.

Foreclosure scams are rampant in today's depressed housing market.

Also included, a new rash of home improvement scams, where operators try to prove to you that by spending a few bucks on improving your home, with convincing pitches that you'll be able to sell it more quickly and at a much higher price.

While in many cases home improvements do help, don't make any improvements unless A) you can afford it, B) you're not borrowing money to do it, and C) you thoroughly check out who you're dealing with.

Examples: I recently read of operators on the East coast preying on homeowners telling them if they don't change their outside cable and telephone lines to comply with the requirements of the upcoming change to digital TV, their homes will lose value and be more difficult to sell.

I've also read of HVAC trades people preying on homeowners to get them to replace their older air conditioning unit and compressors over to Puron, a more environmentally friendly refrigerant than Freon.

The pitch: The investment offers tax credits and also makes a home more marketable.

How to protect yourself: Do your homework. Check references. Be sure any company you work with is appropriately licensed (and insured) to do business. Check for complaints against the company.

black arrow Debt elimination/ reduction scams. These are all over the place now, and unfortunately, wrought with illegitimate operators who claim they can reduce or even eliminate credit card or other debt, but charge excessively high fees, fail to pay creditors as promised, or do other shady things that put you in a worse financial position.

If you need help with debt problems, take time to seek out a legitimate credit counseling organization.

Black arrow High-return investment and savings pitches:

Preying on investors' desire to earn back losses or get higher returns on savings.

The pitches can run the gamut from "risk-free" investments in the stock market ... to Certificates of Deposit yielding 6 percent ... 7 percent ... 9 percent or even more.

If you're offered, say, a savings interest rate that's more than 3 percent or 4 percent above market rates, it's probably a scam — or at best, a legitimate investment that carries some hidden large risk, either spelled out in very-hard-to-find-or-understand fine print.

Or by locking your money up much longer than you ever thought or are being told, and likely in a weak, vulnerable financial institution.

Your best defense: Use common sense — if an investment sounds too good to be true, it probably is.

Black arrow Job, unemployment, and income-related scams: Running the gamut now to include everything from offering "job insurance," which allegedly covers you if you're laid off ... to filing unemployment claims for you (by charging you unnecessary fees) ... to "guaranteeing" they'll find you a job ... to promises of riches from part-time home-biz opportunities.

Facts: Don't pay anyone a red cent to file unemployment claims on your behalf or to anyone promising you they'll find you a job. As for home biz-opportunities, many are terrific and legitimate.

Many are not. The best way to tell: If a home-biz opportunity requires you to pay significant money upfront to start the business, or to buy loads of inventory to keep in stock, chances are, it's not a legit business. Be sure to check out the company with your state's Attorney General's office or the local BBB.

black arrow Tax scams: On the rise, organizations promising you — for a fee — tax rebates ... access to bogus government programs ... past due tax settlements, and more. And not just on the Federal level, but also on the state and local levels. Beware.

black arrow New fangled insurance products and related annuity pitches: The insurance industry is in the dumps, but there's no shortage of new products coming out of this industry, ranging from job insurance to annuity products for your savings that promise high rates of return.

Many of these products are being offered by legitimate companies. Many are not.

My best advice here: Steer clear of all of them, including legitimate offers.

Primary reason: As I just noted, the insurance industry is in the dumps, and some of the biggest names in the industry, like AIG, are failing.

So other than homeowner's insurance and life insurance and medical coverage needs, I would just simply steer clear of all insurance offers and annuity policies offered by insurance companies.

Be wary of offers that promise relief for debt, investment, tax or insurance problems.

Black arrow Reverse mortgages: One of the most worrying of all to me, reverse mortgages, which allow older homeowners over 62 years of age to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a "reverse" mortgage, you receive tax-free money from the lender and generally don't have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence.

Reverse mortgages can be a great way for older homeowners who are house-rich but cash-poor to stay in their homes, but boost their financial liquidity.

The catches ...

A) Reverse mortgages have very high up-front fees, as much as 8 percent of the home's value, plus monthly service fees.

So if you're an older homeowner and you own your home outright, you might be better off taking out a home equity loan.

Even though you'll have to make monthly payments to repay a home equity loan, in many cases, it can turn out to be less expensive than a reverse mortgage.

B) With a reverse mortgage (and also a home equity loan), you're tapping the equity in your home and taking on debt.

So if you have any plans of leaving your home in your estate to your children or grandchildren, just keep in mind you might be jeopardizing that, or, leaving your heirs an encumbered property.

Many senior citizens are jumping at the opportunity to cash out some equity in their homes. For many, it's a big help. But for many others, it's nothing more than going deeply into debt and hocking your home.

So, think this decision through carefully before you entertain a reverse mortgage, comparing its costs to that of just getting a plain old home equity line instead.

Also be aware of ...

black arrow Mystery shopping scams. Classified ads or unsolicited emails where the scammer claims they are sending you a check but instructing you to make purchases and then, after deducting a "commission," to wire the remaining funds back.

The check is fake, but the victim has withdrawn real money and sent it to the scammer. Fake checks are now showing up in lottery scams, internet auction scams, and rental scams. These checks look real, but they are just a way to steal your money.

black arrow Prize and sweepstakes scams. Also on the rise now, the victim is told he or she has won something and just has to send a check to cover the taxes. Or the victim is sent a fake check for $5,000 and told to deposit the check and send back $2,000 to cover the taxes.

By the time the victim figures out the check is bogus it's too late.

In addition to the above, please be acutely aware that identity theft — already growing rapidly before this financial crisis hit — is exploding exponentially higher. In fact, it was the top consumer scam complaint in 2008.

One reason is plain, old-fashioned greed. But another reason is the confusion in the market place caused by the increase in bank and credit card mergers.

For instance, WaMu credit cards were just merged with Chase. I have a WaMu card and have received at least eight notices from WaMu urging me to go to a Chase website via a link provided in the email to verify my card. All of the notices I received were scams, so-called "phishing" attacks to try and get my credit card and other personal information.

Identity theft is soaring more than ever.

How could I tell? First, every single one of the emails I received contained either multiple spelling errors or multiple formatting errors, none of which a legitimate company would most likely ever make.

Second, legitimate institutions or companies will never ask for your personal information via email or request you click a link to provide such information.

Bottom line: Email and online scammers are now taking advantage of the huge uncertainty and rash of mergers in the banking and financial industries to prey on innocent victims.

Indeed, according to a recent study by fraud-tracking firm Javelin Research, identity theft soared 22 percent from 2007 to 2008 ... while spyware attacks from November 2008 through January 2009 soared 169 percent according to analysts at the internet security firm Lavasoft.

de minimis said...

Thanks for sharing the Edelson piece, flyer168

flyer168 said...

de minimis,

The pleasure is all mine Bro.

This is my daily prayer....

To help One Anak Bangsa Malaysia ....Enlightened, Empowered & Smiling everyday.


walla said...