Goh Meng Seng: PAP Teo Ho Pin appears to say Lehman MiniBonds considered SAFE

[Porfirio Rubirosa]

So how does this affect the aggrevied retail investors of the failed products?

We take a longer-term view of Town Council sinking funds, in line with the funds’ long-term objectives.
.
We recognise that the amount invested in Lehman Brothers’ related products is not a small sum in absolute terms ($16 million), even though it is only 0.8 per cent of the funds.
.
These losses arise from the unprecedented situation facing financial markets around the world, which saw the failure of an “A” rated bank and the near failure of other financial institutions that had received similarly good rating. Institutions and investments that were considered safe by most have failed and are now deemed high-risk on hindsight. .

PAP Dr Teo Ho Pin

 

[Goh Meng Seng]

LOL! Then apparently he and his group of "financially trained" individuals did not go in with their eyes fully open!

Well, it is really very interesting indeed. While DBS has admitted that their High Notes which are very similar to Lehman Minibonds and Pennacles notes, are HIGH RISK products, they are still maintaining that their investments are "LOW RISK"? LOL!

Apparently they still have little idea what they are investing by the way they are talking about their understanding of "low risk" investment! Goodness me! LOL! They should get themselves educated of these products by visiting my blog! Well, its FREE education after all!

One mistake is enough but yet, they are still exposing their TOTAL IGNORANCE about their failed investments! Are these people really "TALENTED" they claim to be?

I must admit that prior to this Minibonds saga, I too have little idea of what Minibonds is all about. BUT AT THE VERY LEAST, I bother to get myself educated by doing my own research and read up!

Sigh. Ignorance breeds Arrogance breeds Imprudence. When would they ever learn?

Goh Meng Seng

So how does this affect the aggrevied retail investors of the failed products?

We take a longer-term view of Town Council sinking funds, in line with the funds’ long-term objectives.
.
We recognise that the amount invested in Lehman Brothers’ related products is not a small sum in absolute terms ($16 million), even though it is only 0.8 per cent of the funds.
.
These losses arise from the unprecedented situation facing financial markets around the world, which saw the failure of an “A” rated bank and the near failure of other financial institutions that had received similarly good rating. Institutions and investments that were considered safe by most have failed and are now deemed high-risk on hindsight. .

PAP Dr Teo Ho Pin

 

[Porfirio Rubirosa]

Failed products: Why clients were misled

I REFER to Mr Chua Sheng Yang's letter last Saturday, 'What he meant'.
We take issue with Mr Chua's claim that there are many people seeking redress when there has been no injustice done in the first place.

We would like to ask Mr Chua how familiar he is with the issues of the collapse of the Lehman-related products such as Minibonds and DBS High Notes.

Recently, we carried out a data-gathering exercise among High Notes 5 investors. Preliminary findings show a consistent pattern of customers being told at the point of sale that High Notes 5 was low risk and safe, something that does not match DBS' recent public admission that the product had a risk rating of '8 to 9' on a scale of 1 to 10.

Now, Mr Chua could well say that investors may assert this only because High Notes 5 has collapsed. But would he also contend that a reasonable retail customer, if given all correct information, would still risk his entire investment on such a risky product in return for a mere 5 per cent in annual interest?

And would town councils also knowingly have invested public funds, especially given that they are not aggressive investors?

To us, there are systemic failures in the product, in the selling process and in the targeting of customers. Therefore it matters not if the investors were professionals, or business people, or in fact, organisations like town councils. All of them have been similarly misled about the nature of what they bought because the risks are not commensurate with the returns.

Jeannie Lim (Ms)
High Notes Investor Group Committee

 

[Porfirio Rubirosa]

Minibonds, Pinnacle Notes and such: What constitutes mis-selling?

ANYONE who represents the 'vulnerable' group of investors seeking redress from financial institutions and brokerage firms will know it is difficult to prove 'mis-selling'. These institutions lay the burden of proof on investors who are mainly senior citizens with little education to understand the meaning of difficult terms. At interviews, they are given a long questionnaire, with staff helping those who are illiterate to fill in the blanks, and to tick responses to leading questions, often resulting in the prognosis that there was no 'mis-selling'.
What constitutes 'mis-selling'? It is not just false representations at the point of sale. To me, it is also misleading representations in newspaper advertisements and circulars, cajoling the man in the street to buy.

Consider a few of these simplified one-liners :

- 'Mini-bond'

- 'Invest on the shoulders of giants'

- 'Total returns payable unless a credit event occurs' in any of these six or seven AA-rated giants

- 'Good low-risk alternative to term deposits' (appearing in circulars to clients)

Now, if you modestly wish to diversify from less than 1 per cent return on your bank deposits, would you not consider this supposedly low risk product? And what are these giants? AA-rated corporations, and in the case of one Pinnacle Notes series, even entities like 'People's Republic of China' and 'Republic of Korea', among others. In many of these notes, none of these entities has suffered a credit event, yet the notes are now worth next to nothing. Why?

The truth is, these products have been creatively and deceptively mis-packaged. These notes are not 'mini-bonds' (a misleading misnomer) nor tied to credit worthiness of six or seven underlying AA-rated reference entities. The products are instead credit insurance swaps against these entities, tied to a basket of 100 or more collateralised debt obligations, all leveraged with low buffer margin. You may lose your capital, even if the six or seven entities do not fail, or if the arranger goes bust.

The regulators have a moral responsibility to investigate such misleading and grossly simplified marketing materials aimed at retail investors. How could these products have been approved to be marketed this way in the first place? Even those with CFAs and degrees in finance cannot understand these products, much less the average investor.

The vulnerable group deserving of compensation should also include widows and the disadvantaged. They bought with their life savings, wrongly told they were 'investing on the shoulders of giants', a deceptively low-risk proposition. They have been grossly misinformed of the risk implications.

Lin Xiao Fen (Ms)

 

[Porfirio Rubirosa]

Dr Money
How they zapped you & I
FUNNY MONEY: Financial hit-and-run billionaires
Their weapons of mass destructions:
By Larry Haverkamp (Doc Money)
[email protected]

25 November 2008

Their weapons of mass destructions:

Structured products called 'credit and equity-linked notes'.

Their target:

Earthlings who are not smart enough and paid billions for such bombs.

The fallout: Collapse of structured products.

Jan 2007
FD (Big Cunning Boss): Our financial engineer has invented an even more potent structured product. What should we call it?

Secretary: How about Cutsey, Wootsy?

FD: Not now, Peachy Weechy. How about Sure Thing Bonds? What say you Mr Engineer?

FE:This will work fine. Investors pay us $100m for 'Sure Thing Bonds'. We use it to buy 150 risky bonds that pay a high interest rate, like 8%. We give investors 5% per year. We keep the balance 3%. Nice.

FD: But they're risky. What if the bonds go bust?

FE: Ahh, that's the beauty of it. The 5% we pay investors each year buys us 'risky bond insurance'. If 1 out of 6 companies OR 12 of the 150 bonds go bust, we get to keep their $100m. If none go broke, we still make a profit of 3% with NO RISK!

S: It's bad luck for investors and good luck for us.

Nov 24, 2008

S: Bad news. Twelve bonds have gone bust. The remainder are only worth $60m. Oh no! We owe $100m. We're finished!

FE: Don't worry, investors lose, we win.

FD: Yup, we took 'Risky Bond Insurance'. Let's file a claim and cash in!

S: I remember! When 12 bonds default, investors lose their $100m and we get to keep what is left from the 150 bonds. It comes to $60m. Hey, we made $60m! I could kiss you, Mr Financial Engineer!

FD: Hold that kiss! Are you sure, Mr Fancy Engineer? We've got a financial meltdown! There is chaos and destruction! How can it be good?

FE: It is only good for you, sir. You make $60m on your insurance contract. The investors who sold it lose $100m. The remaining $40m has gone up in smoke along with other market losses.

S: You're a genius. I will kiss you now!

FD: We got out of this mess alive AND get to keep all the investors' money. Gee, am I smart!

S: There is one little problem sir. Mr Tan Kin Lian is explaining all this to 1,000 investors at Speaker's Corner today. They'll wise up.

FD: Not to worry, we'll use the magic words: caveat emptor. Let the buyer beware. It's their fault for not spotting our game earlier!:p

 

[Leegimeremover]

So how does this affect the aggrevied retail investors of the failed products?

We take a longer-term view of Town Council sinking funds, in line with the funds’ long-term objectives.
.
We recognise that the amount invested in Lehman Brothers’ related products is not a small sum in absolute terms ($16 million), even though it is only 0.8 per cent of the funds.
.
These losses arise from the unprecedented situation facing financial markets around the world, which saw the failure of an “A” rated bank and the near failure of other financial institutions that had received similarly good rating. Institutions and investments that were considered safe by most have failed and are now deemed high-risk on hindsight. .

PAP Dr Teo Ho Pin

Talk cock eat shit. Even if the funds did not fail, Teo still mismanaged. Opposition made 6% returns on investments. So if 0.8% refers to the invested funds, their average returns even it was sucessful at 6% would still be less than 3.5% returns on the portfolio. Even if it is 0.8 percent of total funds, with 35% as the cap for allowable investments, that would only constitute 2.28% of total 35% invested funds and would still have been below par performance with a 6% returns on minibonds. Weighted average dictates so. Teo mismanaged and bo charped.