Hi Mr. Tan,
Last year due to some unfortunate series of events, my parents and I decided to invest in the minibonds, which is already gone as Lehman Brother is undergoing liquidation. It is very sad, but we have to accept the loss.
REPLY
It is unfortunate that Lehman Brothers went into bankrupcy, triggering a credit event. If they had been rescued like AIG, the credit event could have been avoided.
You should write to ask MAS to investigate what happen to the mini-bonds. Although a credit event has been triggered, you should ask what really happened to the money. Who took the money when a credit event is triggered?
It seems that many investors lost their money, and someone must have made a big gain. I undersand that the money raised from the mini-bonds are actually invested in other assets and are not invested in Lehman Brothers. So, somebody must have made a big gain at the expense of the small investors.
Please ask MAS to investigate this structure on behalf of the small investors.
Friday, September 19, 2008
Pinnacle Notes
Hi Mr. Tan,
I invested in Pinnacle notes series 6. The arranger is Morgan Stanley and the 6 reference entity are Bank of America, Citigroup Inc, DBS, Singtel, OCBC and UOB.
Should I continue to hold on to the notes or cash out? If I cash out now, I will get only 34.07% of our total principal. I know that the health of Morgan Stanley is crucial to the survival of this Note. With so much uncertainty in the market, is it better to take a loss now?
REPLY
In my view, and it is just my guess, Morgan Stanley will not face the same fate as Lehman Brothers. The six reference entitles appear to be all right. The rescue package being arranged by the Fed and Treasury in USA is likely to prevent other big failures. It is not worth while to sell the Pinnacle Notes at a loss of 65% at this time.
I invested in Pinnacle notes series 6. The arranger is Morgan Stanley and the 6 reference entity are Bank of America, Citigroup Inc, DBS, Singtel, OCBC and UOB.
Should I continue to hold on to the notes or cash out? If I cash out now, I will get only 34.07% of our total principal. I know that the health of Morgan Stanley is crucial to the survival of this Note. With so much uncertainty in the market, is it better to take a loss now?
REPLY
In my view, and it is just my guess, Morgan Stanley will not face the same fate as Lehman Brothers. The six reference entitles appear to be all right. The rescue package being arranged by the Fed and Treasury in USA is likely to prevent other big failures. It is not worth while to sell the Pinnacle Notes at a loss of 65% at this time.
Foreign currency exchange rates
Do not trust your bank to give you a fair exchange rate. They don't. They like to increase their profits, and that is done by charging a high spread on their customers.
If you change from foreign currency X to foreign currency Y, the bank changes your money from X to SGD and from SGD to Y. At each change, they charge a spread of about 1%. You have to pay a spread of 2% for changing from X to Y. This is too high. If you do not ask, the bank does not tell you how it is done. It applies the two spread automatically and send a statement to you. When you realise it, it is too late.
In the past, I trust my bank. Now, I don't. I always ask my bank to quote the exchange rate or interest rate to me. With the quoted rate, I can compare with the rates charged by other banks. My bank automatically gives me a competitive rate, as they are afraid when I move my business to another bank. Later, they will lose me as a customer.
You should always your bank to quote the rate to you. The relationship manager will give you the "excuse" that the rate changes every minute. This is partly true. But the real reason is that, if you do not ask, they can charge you a large spread and you will not realise it.
I hope that the Consumer Association or Monetary Authority of Singapore get the bank to adopt a code of practice that is transparent and fair to consumers.
If you change from foreign currency X to foreign currency Y, the bank changes your money from X to SGD and from SGD to Y. At each change, they charge a spread of about 1%. You have to pay a spread of 2% for changing from X to Y. This is too high. If you do not ask, the bank does not tell you how it is done. It applies the two spread automatically and send a statement to you. When you realise it, it is too late.
In the past, I trust my bank. Now, I don't. I always ask my bank to quote the exchange rate or interest rate to me. With the quoted rate, I can compare with the rates charged by other banks. My bank automatically gives me a competitive rate, as they are afraid when I move my business to another bank. Later, they will lose me as a customer.
You should always your bank to quote the rate to you. The relationship manager will give you the "excuse" that the rate changes every minute. This is partly true. But the real reason is that, if you do not ask, they can charge you a large spread and you will not realise it.
I hope that the Consumer Association or Monetary Authority of Singapore get the bank to adopt a code of practice that is transparent and fair to consumers.
Thursday, September 18, 2008
DBS High Notes
Dear Mr Tan,
You were always very critical on structure products from Bank.
And you are right!
Thanks for the previous posts on such structure products.
Sep 18, 2008, The Straits Times
DBS High Notes investors at risk
Bank warns they may lose entire stake in Lehman-linked product
By Francis Chan
SOME local investors of a product linked to bankrupt investment giant Lehman Brothers have received late-night phone calls from DBS Bank warning them that their entire stake may be wiped out. The investors have their cash in a product called DBS High Notes 5 that the bank offered wealthier clients last year. It came with a promised annual return of about 5 per cent.
But Lehman's collapse on Monday means the product will be unwound and investors may only get a portion of their investment back - or none at all.
REPLY
Thank you for sending this news article to me. I am now in Jakarta and was not aware about this event. It is so sad that many people have lost their money in this "credit event".
Perhaps the small investors who lost their savings should ask MAS to look into the structure of this product, and why should the "credit event" cause a lose of their entire savings? Where did the money go?
FAQ on Structured Investment Products
http://www.tankinlian.com/faq/sinvest.html
You were always very critical on structure products from Bank.
And you are right!
Thanks for the previous posts on such structure products.
Sep 18, 2008, The Straits Times
DBS High Notes investors at risk
Bank warns they may lose entire stake in Lehman-linked product
By Francis Chan
SOME local investors of a product linked to bankrupt investment giant Lehman Brothers have received late-night phone calls from DBS Bank warning them that their entire stake may be wiped out. The investors have their cash in a product called DBS High Notes 5 that the bank offered wealthier clients last year. It came with a promised annual return of about 5 per cent.
But Lehman's collapse on Monday means the product will be unwound and investors may only get a portion of their investment back - or none at all.
REPLY
Thank you for sending this news article to me. I am now in Jakarta and was not aware about this event. It is so sad that many people have lost their money in this "credit event".
Perhaps the small investors who lost their savings should ask MAS to look into the structure of this product, and why should the "credit event" cause a lose of their entire savings? Where did the money go?
FAQ on Structured Investment Products
http://www.tankinlian.com/faq/sinvest.html
True cost of life insurance
Does a life insurance policy provide good value for a person to plan for the future?
http://www.tankinlian.com/faq/true.html
http://www.tankinlian.com/faq/true.html
Fake Money
Hi, Mr. Tan,
I have been taking about fake money very often in your blog, but I suspect not many people understand me..
Below is a link to an instructive cartoon about the fractional reserve banking system
> how it creates money out of thin air
> how it skews the wealth distribution, making the bankers richer and richer over time
> why this system is a ponzi scheme and will eventually collapse
http://video.google.com/videoplay?docid=-9050474362583451279
After watching the video, people should realise nearly all money is actually fake, created out of debt.. and we will need more and more fake money to keep the economy going (exactly like a ponzi scheme)..
When the amount of debt gets too big and balks at creating more fake money, the system will collapse and cause a severe recession/depression.
I believe we are really close to this point of collapse now.... and we should welcome the collapse and take the chance to adopt a different banking system, one where is sustainable and money not controlled by bankers/central bankers.. one such system is a free banking system proposed by most Austrian economists.. but which government is willing to give up the power to create money?
ym
I have been taking about fake money very often in your blog, but I suspect not many people understand me..
Below is a link to an instructive cartoon about the fractional reserve banking system
> how it creates money out of thin air
> how it skews the wealth distribution, making the bankers richer and richer over time
> why this system is a ponzi scheme and will eventually collapse
http://video.google.com/videoplay?docid=-9050474362583451279
After watching the video, people should realise nearly all money is actually fake, created out of debt.. and we will need more and more fake money to keep the economy going (exactly like a ponzi scheme)..
When the amount of debt gets too big and balks at creating more fake money, the system will collapse and cause a severe recession/depression.
I believe we are really close to this point of collapse now.... and we should welcome the collapse and take the chance to adopt a different banking system, one where is sustainable and money not controlled by bankers/central bankers.. one such system is a free banking system proposed by most Austrian economists.. but which government is willing to give up the power to create money?
ym
Poor conversion rate for Foreign Currency
Dear Mr.Tan,
I gave instructions that on maturity of my FD to convert GBP to NZ$. I got a poor exchange rate. I checked the conversion on the Internet and, in my opinion, a fair value is 2.3% higher.
I made numerous calls to the bank to ask how their rate was derived. They have not replied to me. As guideline. I understand that direct conversion GBP to NZ$ will give a higher figure than converting GBP to SGD and then changing to NZD.
So I want to get redress from MAS. Who shall I address to?
REPLY
Read these pages:
http://tankinlian.blogspot.com/2008/09/monetary-authority-of-singapore.htmlhttp://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html
You probably have to take the following steps:
1. Write to CEO of the bank
2. File a complaint with FiDREC.
3. At last stage, approach MAS
I gave instructions that on maturity of my FD to convert GBP to NZ$. I got a poor exchange rate. I checked the conversion on the Internet and, in my opinion, a fair value is 2.3% higher.
I made numerous calls to the bank to ask how their rate was derived. They have not replied to me. As guideline. I understand that direct conversion GBP to NZ$ will give a higher figure than converting GBP to SGD and then changing to NZD.
So I want to get redress from MAS. Who shall I address to?
REPLY
Read these pages:
http://tankinlian.blogspot.com/2008/09/monetary-authority-of-singapore.htmlhttp://www.moneysense.gov.sg/contact_us/Consumer_Portal_Contact_Us.html
You probably have to take the following steps:
1. Write to CEO of the bank
2. File a complaint with FiDREC.
3. At last stage, approach MAS
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