Tan Kin Lian asks: Is it fair? Investors answer: NO!
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Tan Kin Lian asks: Is it fair? Investors answer: NO!
Written by Ng E-Jay
16 November 2008The fifth rally organized by Mr Tan Kin Lian for investors of Lehman-linked structured products and other credit linked notes that have fallen drastically in value drew a record crowd on Sat, 15 Nov, with investors vociferously expressing their anger and dissatisfaction at MAS and the financial institutions for pussyfooting and failing to provide prompt and fair redress for their heavy losses.
Mr Tan Kin Lian began his speech by drawing attention to a new group of investors — people who have invested in the Pinnacle Notes series created by Morgan Stanley. Many of these credit linked notes, which typically run for a term of around 5 years, have had their value nearly obliterated even though they are not linked to the failed US bank Lehman Brothers.
For example, Pinnacle Notes 1 has only 1.8% of its original value left; Pinnacle Notes 2 has only 3.8%; Pinnacle Notes 8 has around 69%, and Pinnacle Notes 12 has around 80% of its value remaining as of last week.
More seriously, Pinnacle Notes 9 and 10 have had their value completely wiped out because at least 5 of the underlying 100 financial assets have gone into default.
Why are the Pinnacle Notes affected even though they are not linked to Lehman Brothers?
The answer is that the Pinnacle Notes are very similar in structure to the other structured products like the Lehman Minibonds and the DBS High Notes. Each of the Pinnacle Notes have several reference entities. If one of the reference entities goes bankrupt, the entire Note will go into default. In addition, each Pinnacle Note also invests in the credit instruments of around 100 underlying financial entities. If a certain number, say 5 to 10, of these underlying financial assets goes bust, the entire Note will also be obliterated. The latter event is precisely what happened to Pinnacle Notes 9 and 10.
Another question arises: What if there is a new swap counterparty for Lehman Brothers? Will investors be able to recoup their full principal sum at the maturity of the Lehman Minibonds?
Mr Tan Kin Lian’s reply was that he was not sure, as the value of the Minibonds will also depend on the performance of the underlying financial assets. If the underlying assets go into default, the Minibonds will be similarly affected even if all the other reference entities are still around.
Mr Tan recapitulated that he had already sent 3 petitions to MAS.
The first petition, dated 9 Oct and signed by 983 people, asked MAS to carry out an independent investigation into whether the financial institutions had breached the Securities and Futures Act or the Financial Advisers Act. Mr Tan had also sent a personal letter urging the Government to take action in the form of bringing the errant financial institutions to Court or negotiating with them to compensate investors duly, if indeed the law had been broken.
However after one month, there had been no concrete action from MAS, which had refused to meet or discuss the matter with Mr Tan. MAS had only announced that they could not discuss the issue with individual investors, but gave no indication as to whether there would be a full fledged independent investigation.
Mr Tan asked the crowd: “Is that fair?”
To which the crowd replied loudly: “NO!”
The second petition, dated 17 Oct and signed by 277 people, asked MAS to check on how the financial institutions had trained relationship managers and sales representatives.
The third petition, dated 31 Oct and signed by 1017 people, asked MAS to set up an independent unit for investors to lodge complaints, so that investors need not approach the financial institutions directly if they feel uncomfortable doing so. The petition also urged MAS to push for a collective settlement for all affected investors, rather than allowing the financial institutions to go on a case-by-case basis which would inevitably prejudice certain investors.
Next, Mr Tan Kin Lian brought to attention the recent remarks made by MM Lee Kuan Yew. MM Lee had said that many educated and young investors went into the Lehman-linked structured products with “their eyes open“. He also said: “Higher returns means higher risks. So when somebody tells you, ‘you get 1.5 per cent at the bank, I give you 5 per cent’, read the small print carefully.” (ST Online, “Lehman investors ‘aware of risks’”, 11 Nov 2008)
A person using the initials S.B. had written to Mr Tan expressing his anger at MM Lee’s comments. The writer said that an annual return of 5% was not commensurate with the amount of risk that the investors were taking, and that investors had been lulled into assuming the products were all right because they were approved by the authorities for sale. The writer admitted that he should shoulder some responsibility for his investment decisions, but added that MM Lee’s words sounded as if the authorities were taking investors to task, and that the case was closed as far as the Minister Mentor was concerned. The writer said that this gave him the impression that the Government had already taken the side of the financial institutions even without any solid evidence, and that this was unacceptable action from a popularly elected Government.
Mr Tan Kin Lian went on to mention that in his recent meeting with some primary school teachers, the teachers were of the opinion that the Government had done a good job by making sure older investors were compensated. Mr Tan was quick to give these teachers a reality check. He told them that the so-called “vulnerable investors” who were given prompt and full compensation only constituted less than 5% of the total number of affected investors. The teachers were shocked when they learned this. They realized that they had been mislead by the media into thinking many people had already been duly compensated.
Finally, Mr Tan asked why these highly defective credit linked Notes were only sold in Singapore, Hong Kong and Taiwan, and not in places like the US, Malaysia, or Australia?
The answer, sadly, was that if investment banks were to sell these defective products in places like America, they know they would be sued and forced to compensate investors the full principal amount, unlike places like Singapore where they have a chance of fooling investors and getting away with it. Places like Malaysia were also unlikely to approve these products for sale to retail investors or unsophisticated investors in the first place.
Mr Tan ended by saying that he hoped MAS would follow the example of the Hong Kong Legislative Council in carrying out a full fledged investigation and summoning banks to provide the necessary information about the sales process and the details of the transactions. Errant bankers should also be sent to jail if and when found guilty.
Mr Goh Meng Seng then gave a Chinese rendition of Mr Tan’s speech, as well as his own views on the matter.
He said: “This government only cares about the big corporations, what about its citizens?”
Mr Goh quoted the example of Hong Kong, where Minibond investors could pressure the Legislative Council (Legco) into launching a full probe into the banks because the Legco was not dominated by a single party. Here in Singapore, with only 2 opposition MPs in Parliament, the ruling party could do as it wished with flagrant disregard for the will of the people.
Mr Goh ended his speech by imploring the audience to “open their eyes” and “vote for the correct party” in the next election.
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I think the question of whether the Investor knew what the risks involved were before any established judgements can be made.
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if you don't benefit you, it is not fair.
high returns with no risk.... is that fair?
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About USD1 trillion dollar has been lost in structured CDO products around the world and the losses are mounting. Considering the world GDP to be 66 trillion and Singapore's GDP of about 140 billion. Assuming the CDO losses are distributed around the world, Singapore would assume 0.2% of these losses. This is probably around 2 billion. ( I would imagine the number to be smaller due to imperfect distribution of the CDO risk). There are many more CDO related funds out there that have been sold by insurers, i.e Great Eastern etc, that have lost 70-80% in the last one year. It is not viable to set a precedent to compensate these investors. Once we do, everybody would disregard due diligence to identify possible risks in purchasing these assets and expect to be "bailed out" when shit happens. Besides this situation happens only ONCE IN A HUNDRED YEARS.
Problem is people think that there is no risk in investing certain products. There are always risks even if you put your money in a DBS fixed deposit account or in government bonds. You are betting that the credit rating of DBS is strong, and that it won't go bust during the duration of your investment.
There is no way, the banks or any government can refund the investors all the money.If they do, it's unfair to the other 95% of the population. The DBS High Notes/Pinnacle notes is just the tip of the iceberg.
This is part and parcel of capitalism, the idea of a free market to make lots of money or lose lots of money. IF one doesn't like the idea of losing money in investing then stay out of the markets or embrace communism or ultra-socialism and vote out the PAP. Just be prepared to pay 40-50% income taxes, 20% capital gain taxes etc etc..
I sympathise with the people that lost money in this investment, but compensating everybody who bought CDOs is just unfeasible. I hope the people protesting at Speaker's Corners understand this and do something more constructive with their free time.
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Some of these people, when they invest and earn money, they boast and they know alot, but when their investment failed, they kao peh kao bu and claim they don't know anything. Funny hor?
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These people were given the assurance by the banks (not stock brokers) that it is safe, very safe. They pledge their reputation on it that it is safe, very safe. The banks must pay if it turns out that it is not safe.
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Originally posted by AndrewPKYap:
These people were given the assurance by the banks (not stock brokers) that it is safe, very safe. They pledge their reputation on it that it is safe, very safe. The banks must pay if it turns out that it is not safe.
Investors bought their sales talk, thats what they bought. And thats what they have to pay. They never get burned before, so they dunno what is fire.
Now they know, they can prevent such incidents from happening in the future, its a learning experience, although abit costly.
Then you keep saying not fair for investors, then the banks fair ah?
Because of their sales rep they take the blame? You should find the sales person who sold you the products, not the bank.
Its like another sim lim square. -
Originally posted by uaremyfayth:
Investors bought their sales talk, thats what they bought. And thats what they have to pay. They never get burned before, so they dunno what is fire.
Now they know, they can prevent such incidents from happening in the future, its a learning experience, although abit costly.
Then you keep saying not fair for investors, then the banks fair ah?
Because of their sales rep they take the blame? You should find the sales person who sold you the products, not the bank.
Its like another sim lim square.Of course it is only fair that the banks pay. They behave like sim lim square shops, they pay.
Education can take many forms. The banks can educate their customers instead of behaving like sim lim square shops ah bengs.
Now we know, banks in Singapore are no better than Sim Lim Square shops ah bengs, still trust your bank?
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Originally posted by AndrewPKYap:
These people were given the assurance by the banks (not stock brokers) that it is safe, very safe. They pledge their reputation on it that it is safe, very safe. The banks must pay if it turns out that it is not safe.
Uncle, when i buy my triumph bra, the salegal from takashimaya also said "mei mei, this one expensive but very good, very comfortable, very durable"...but after one years, the strap broke,,..how?? go back and blame the salegal, blame taka, blame triumph??? no mah.The most i learned is that i dun wear triumph bra anymore lor, either wear double swans brand from China or dun wear
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Originally posted by skythewood:
if you don't benefit you, it is not fair.
high returns with no risk.... is that fair?
That is why personally I don't feel sympathic to these 'victims' at all. It takes 2 hands to clap. One driven by greed to push the sales; the other driven by greed in hope to earn 'high returns with no risk'. -
Originally posted by angel7030:
Uncle, when i buy my triumph bra, the salegal from takashimaya also said "mei mei, this one expensive but very good, very comfortable, very durable"...but after one years, the strap broke,,..how?? go back and blame the salegal, blame taka, blame triumph??? no mah.The most i learned is that i dun wear triumph bra anymore lor, either wear double swans brand from China or dun wear
too heavy that's why strap broke is it?
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Originally posted by AndrewPKYap:
Of course it is only fair that the banks pay. They behave like sim lim square shops, they pay.
Education can take many forms. The banks can educate their customers instead of behaving like sim lim square shops ah bengs.
Now we know, banks in Singapore are no better than Sim Lim Square shops ah bengs, still trust your bank?
Do u know that DBS and other financial insitute decided to compensate some of the lehman mini bonds investors was mainly due to sympathetic and understanding,...by laws, they dun even need to foot a single cents. But reputation is at stake, and as for DBS, voting is also at stake...understand!!! knock yr head. -
Originally posted by yamizi:
too heavy that's why strap broke is it?
huh?? howcome u know leh?? -
Originally posted by angel7030:
Uncle, when i buy my triumph bra, the salegal from takashimaya also said "mei mei, this one expensive but very good, very comfortable, very durable"...but after one years, the strap broke,,..how?? go back and blame the salegal, blame taka, blame triumph??? no mah.The most i learned is that i dun wear triumph bra anymore lor, either wear double swans brand from China or dun wear
"Bra" can compare with "Bonds"? They are the same to you because the two words start with the letter "B"?
Sesame Street: The Beetles - Letter B
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Originally posted by AndrewPKYap:
"Bra" can compare with "Bonds"? They are the same to you because the two words start with the letter "B"?
Sesame Street: The Beetles - Letter B
that is why, u need the niche to seek attention and spread your idea across, hope the letter B is imprint in tiny little brainy ya. Drink kopi, ai mai?? -
I would imagine the number to be smaller due to imperfect distribution of the CDO risk
Why wouldn't you imagine the number to be larger?
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The bottomline is don't invest in structured deposits.
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Don't lose a rationale mind and your common sense when you're loaded with monie.
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Originally posted by Uncertain:
The bottomline is don't invest in structured deposits.
depend, if u gain, u will said, invest in it...there nothing wrong with structured deposits, just the wrong investment...so u are telling me to invest in unstructured deposits??Frankly speaking, in states and other countries, many investors also lost lots, but they knew that investment is a risk, and as an investor, u should take risk. Here, our investors are just too naive, mainly due to over the years of gains and never before think that their investment will come to zero. But that is wrong.
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Originally posted by angel7030:
depend, if u gain, u will said, invest in it...there nothing wrong with structured deposits, just the wrong investment...so u are telling me to invest in unstructured deposits??Frankly speaking, in states and other countries, many investors also lost lots, but they knew that investment is a risk, and as an investor, u should take risk. Here, our investors are just too naive, mainly due to over the years of gains and never before think that their investment will come to zero. But that is wrong.
actually investment is like buying Toto or 4Du win or lose in life
so invest liao lose money is common
When Q up for Toto or 4D
unker and auntie lose also never Kbkb
if bo tio
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Originally posted by noahnoah:
actually investment is like buying Toto or 4Du win or lose in life
so invest liao lose money is common
When Q up for Toto or 4D
unker and auntie lose also never Kbkb
if bo tio
yalor, they can even laugh and talk about their losses over a cup of kopi. I think hor if this type of trend is to go on, more n more loser in investment will seek so call, "unfair investment"..then Govt will stop it once and for all. -
Originally posted by noahnoah:
actually investment is like buying Toto or 4Du win or lose in life
so invest liao lose money is common
When Q up for Toto or 4D
unker and auntie lose also never Kbkb
if bo tio
The people that buy bonds cannot be classified as investors. Bonds are like fixed deposit certificates. You put in the money and you get certain amounts of interests according to the interest rates.
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Originally posted by AndrewPKYap:
The people that buy bonds cannot be classified as investors. Bonds are like fixed deposit certificates. You put in the money and you get certain amounts of interests according to the interest rates.
My good lords, Bonds not consider investment...OMG!!, Uncle, u must be a Con sultant hor..anything that can make a lost or gain is an investment, i can also invest in property, buy a property, get the certicate of deed, then when time is good, sell to earn the profit, but if time is bad, sell at a lost or nothing. Bonds is not fixed deposit, if fluatate same as stocks and commodities, just that it has less risk, but still a risk. And you get dividends. -
Originally posted by noahnoah:
actually investment is like buying Toto or 4Du win or lose in life
so invest liao lose money is common
When Q up for Toto or 4D
unker and auntie lose also never Kbkb
if bo tio
erm
I think you should not touch investments or stocks or etc...
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This is an article.
Do give some comments... thanks
What is investment?
According to Wikipedia, investment is a term with several closely-related meanings in business management, finance and economics, related to saving or deferring consumption. Wiki went on to say that investment is the choice by the individual to risk his savings with the hope of gain.
According to dictionary.com, investment is
1. the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
2. a particular instance or mode of investing.
3. a thing invested in, as a business, a quantity of shares of stock, etc.
4. something that is invested; sum invested.
5. the act or fact of investing or state of being invested, as with a garment.
6. a devoting, using, or giving of time, talent, emotional energy, etc., as for a purpose or to achieve something: His investment in the project included more time than he cared to remember.
7. Biology. any covering, coating, outer layer, or integument, as of an animal or vegetable.
8. the act of investing with a quality, attribute, etc.
9. investiture with an office, dignity, or right.
10. a siege or blockade; the surrounding of a place with military forces or works, as in besieging.
11. Also called investment compound. Metallurgy. a refractory material applied in a plastic state to a pattern to make a mold.
12. Archaic. a garment or vestment.
Clearly, there are many definitions of investment. So what exactly is investment. To some people, investments might be putting money into the stock market. To some others, the unit trusts, bonds, etc. To another person, an education is also an investment. Raising a kid might be an investment to some as well.
To me, investing is the act of sacrificing something in order to gain something else more worthwhile. It does not necessarily need to include money. Example: spending time to read self-improvement books for free from the library is a form of investment; I gain in getting more insights. Spending the effort to build such a blog/website is also investing; I gain in being able to gather, clarify and put together my thoughts.
Indeed, investment is important. To me, the bulk of investments should be on oneself; the returns are far greater than investing in any stocks, bonds, etc. Education, reading, learning on the job, etc, build upon life skills that may likely be used again and again in the future. This is sort of like a form of compounding; the database in you may grow in a constant rate, but if each piece of data gives you some form of returns at a constant rate as well, the total returns increases in an exponential rate. This is because the data that you possess continue to give you some sort of returns as you build up your personal database. Every piece of new data starts to give you rewards the moment you put it in, together with previous data that continue to provide the rewards.
Not sure if I explained the idea properly, but in short, invest in yourself, invest in building up a personal database. This will be on top of investing time on trading on the stock market (stock market plays are not called investing, but trading).