Fears of a Black Swan in Singapore General Election 2011

Singapore general election will be held on 7 May 2011. Investors' expectations are over-optimistic.

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"So I think a lot of investors have plugged in very lofty expectations because over the last three GEs the PAP has only lost two seats so far, and given these are lofty expectations, should the opposition win more than that I think the markets will get slightly hit, but that will only be for a short while."

Given such high expectations, the market may suffer a backlash if the PAP loses 1 or 2 GRCs. I am not so worried about PAP losing one or two GRCs and losing plenty of money when the market opens. I think this may even be a good thing as it may make PAP listen harder to the people. My primary worry is the PAP losing power. That is the black swan event (unexpected with extremely damaging consequences) which will immediately devastate investors' portfolio and risk the long-term prospects of Singapore.

I strive to be pro-Singapore, neither pro-PAP nor pro-Opposition. The reason why I think it will be a disaster for Singapore if PAP loses power is that the opposition is still not ready to form a viable government at this point in time. Using a business analogy, if a customer (Singaporean citizens) is trying to switch supplier because there is great dissatisfaction with the incumbent supplier(PAP), it does not switch immediately to the alternate supplier (Opposition). It has to give time to cultivate the alternative supplier to achieve a reasonable quality before making the switch. In the mean time, if the incumbent supplier regains its edge because of competition from the alternate supplier, the business prospers. The customer may even stick with the incumbent supplier if he makes good improvements.

No business(citizens) with proper supply chain management will depend on only on one supply source (PAP). It is too risky. What if the sole supplier fails? Besides, without competition, the sole supplier will grow complacent and decline. The worst part of it is that the cost of the decline will be solely borne by the customer. The sole supplier(PAP) will simply squeeze the customer(Singaporean citizens) by raising prices (raise GST, ERP, government fees etc). The customer can cry foul and bang his fists on the table but can you really sympathize with the customer? We should blame the customer (citizens) for not cultivating an alternative supplier (opposition) to compete against the sole supplier (PAP). Meanwhile, we cannot blame the sole supplier (PAP) to make an all-out effort to destroy his competition (opposition). Do you want to be a shareholder of a company that does nothing about competition and destroy the competition?

In the coming election, the opposition has been able to attract high-calibre candidates like Chen Show Mao. A credible "alternative supplier" has emerged. Do cultivate them as a check on the incumbent one. However, this is not a time to switch supplier completely because the the "alternative supplier" is simply not ready to take over. In my humble opinion, give the "alternative supplier" (opposition) some time to prove itself and another chance for the "incumbent supplier" to recover its footing, for the sake of the country.

An investment operation functions best when the investor thinks like a business owner. Similarly, a democracy functions best when each voter thinks like a stakeholder. Rational voters who think like stakeholders do not treat political elections like a beauty contest (PAP Tin Pei Ling against NSP Nicole Seah).

On one extreme, I have read vitriol comments on the internet like "I will vote out PAP even if a cockroach contests as an opposition candidate". On another extreme, there is a climate of fear "I will vote PAP because there will be consequences if PAP finds out." Both are irrational. A more desirable approach is to simply think like a stakeholder. Assume that you and your children are going to live in this country for a long time to come to face the consequences of the polling results.

If you think the PAP candidate will bring a better future to you and your children, give him your vote.
Likewise, if you think the opposition candidate can do a better job, vote for him.

Different people will reach different conclusions despite having the same objectives. This is fine as long as the decision process is taken rationally like a stakeholder.

It is in fact more important for the middle to lower income groups to think like stakeholders than the upper-income. The rich will be able to migrate to greener pastures when the country crumbles while the middle-income and below will be stuck here to face the consequences. In a globalized economy, it is ironic that the asset-rich actually has less stake in the country than the asset-poor.

I am a middle-class person with 1 HDB property, middle-class salary and always worried about job security. I will be stuck here to face the consequences. I will certainly think very carefully on this issue from today onwards till 7 May 2011.