tag:blogger.com,1999:blog-4405345292513335071.post5812598298189935353..comments2024-03-19T18:44:15.041+08:00Comments on Little Stories: Perils for the Retail InvestorGilbert Koh aka Mr Wanghttp://www.blogger.com/profile/01027678080233274309noreply@blogger.comBlogger50125tag:blogger.com,1999:blog-4405345292513335071.post-1437655993758425062008-10-09T17:24:00.000+08:002008-10-09T17:24:00.000+08:00If you can't convince, confuseThat's what all thes...If you can't convince, confuse<BR/><BR/>That's what all these prospectuses do anyway...<BR/><BR/>Even for someone in the financial industry, I feel it a challenge to really understand how these structures work without combing through the prospectuses, let alone the man on the street!Xtrocioushttps://www.blogger.com/profile/08846520633929127414noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-71833718260342649502008-09-30T12:36:00.000+08:002008-09-30T12:36:00.000+08:00These investors have tons of money in FD before th...These investors have tons of money in FD before they got conned, didn't they? Shows that they have faith in their banks.nhyonehttps://www.blogger.com/profile/07856759147801825744noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-14786980458948276092008-09-30T01:20:00.000+08:002008-09-30T01:20:00.000+08:00to nhyone:the Deposit Insurance (DI) only pays out...to nhyone:<BR/><BR/>the Deposit Insurance (DI) only pays out on bank failure i.e. post bank run and upon winding up. So being unable to pay the bulk of the large depositors' cash deposits (20% of the population) isnt going to have much marginal impact after something earthshaking like a bank closure - the bank is gone, confidence is gone - the rest is collateral damage on the top 20% of society. Guess they can't finance their third houses. I can hear the heartlanders shedding a tear already. <BR/><BR/>I should also add that the DI covers net liabilities. This means that if you have taken a mortgage from the bank in excess of 20k, the bank doesnt owe you anything on your 20k deposit. Unfortunately the converse may not be true depending on the the govt agent appointed to oversee the winding up i.e. you may still have to make good on your debts. So if youre totally paranoid, make sure ur large loans are from banks that you don't have deposits with, and put all your deposits in banks you dont take loans from. Otherwise, u might find all your liquid assets being netted off from your mortgage obligations.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-45180810977383124512008-09-30T00:17:00.000+08:002008-09-30T00:17:00.000+08:00i think to save everyone grief, MAS should come up...i think to save everyone grief, MAS should come up with simple-to-understand, must-include summaries like:<BR/><BR/>1. Risk: High/medium/low (rated by MAS - which is a regulatory authority anyway)<BR/><BR/>2. Capital protected? guaranteed?<BR/>Will u get back 100% of your capital without premature withdrawal?<BR/><BR/>3. etc...<BR/><BR/>Something which the layman can actually appreciate. If they have to be frightened into understanding the risks, so be it. <BR/><BR/>If we can do it for cigarettes, hell we can do it with investment products. Show a picture of a burning pile of $100 notes as a warning on all prospectuses. ;)<BR/><BR/>3.Lalalalalahttps://www.blogger.com/profile/01132275990220618963noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-22825658738745779522008-09-29T19:21:00.000+08:002008-09-29T19:21:00.000+08:00The SDIC protects the first $20k. What I'm saying ...The SDIC protects the first $20k. What I'm saying is that MAS has to guarantee the rest, otherwise a bank run -- for the amounts beyond $20k -- would be unimaginable.<BR/><BR/>Covering 80% of the depositors sounds impressive, but if the top 20% holds 80% of the cash (say), then a bank run would be very damaging.<BR/><BR/>Of course, the bank may just merge with another to save itself.nhyonehttps://www.blogger.com/profile/07856759147801825744noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-35174477249665309672008-09-29T00:14:00.000+08:002008-09-29T00:14:00.000+08:00To the folks who commented on deposit insurance: M...To the folks who commented on deposit insurance: <BR/><BR/>MAS isnt going to step in to cover deposits above 20k. In fact, MAS doesnt pay anything to cover the deposits - the banks do, and the premiums are based on the size of their deposit bases. Since the Deposit Insurance Corporation was only established some 3 years ago, it will likely take quite a while before sufficient premiums can be gathered to cover even a run on a smallish bank. Should deposits above 20k be covered? It's arguable, but gotta bear in mind that you get exactly what you pay for. Banks will simply have to pay much higher premiums, and primarily to cover those folks who have more than 20k per deposit account (less than 20% of depositors if you trust the statistics). Those premiums will get passed on to you, dear customer, in the form of lower interest on your deposits. And all to help out the richer folks among us. I can think of an easier solution - just make sure you maintain no more than 20k with each FI in savings and deposits. Not too hard for average joe. <BR/><BR/>As for the structured pdts debacle:<BR/><BR/>I think that MAS communication on the matter hasnt been as slick and forthcoming as the HKMA. Having said that, just because HKMA talks tough about directly investigating banks that sold the pdts to retail customers, im more interested to find out what exactly can be done, all the tough regulatory posturing aside. The likely fact of the matter in both HK and Spore: Customers signed off on the prospectuses, which while very thick and technical, gave ample warnings of the risks involved in rather clear language (i read them so im familar). I also know that the prospectuses were inadequate in fully describing the risks in some areas, but they were so inadequate that they served as red flags in themselves. So this will ultimately reduce to the lowest common denominator of "he said she said" btw the RM and customer. Im personally not too hopeful of a legal outcome in favour of the retail customer, though I can emphathise with the pple who lost money through bad advice. <BR/><BR/>Actually, now that this has happened, retail customers as a whole will probably benefit from the educational experience. No point talking airy fairy about credit/legal risks - nothing like seeing your neighbour lose money and kao beh bao bu to give you a right good scare. It's no point pretending that all retail customers lost out bec of inadequate regulation - just those careless enough to think that everything that a 20 something RM says must be the gospel truth. Now that this has happened, retail customers will become more savvy about who they are banking with and what type of pdts they will buy. I've always doubted that this increase in customer awareness could come abt without a blowup of some kind and now that blowup has arrived.<BR/><BR/>Honestly, I struggle to blame MAS for this incident - But so much easier to blame the authorities than your own greed and carelessness.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-28585952244674596212008-09-28T16:46:00.000+08:002008-09-28T16:46:00.000+08:00when someone enters a bank to deposit his money, a...when someone enters a bank to deposit his money, and as requested to fullfill some forms is very common, it is our daily life, but later days the banker notice you your money is wiped out. then somebody feels confused. and frustrated, cheated ,the banker says he got the doc.you<BR/>signed, imagine how shocked you are, that is the story about DBS HIGH NOTES 5 event's story ,maybe you are the next victim ,a great banker should have high moral blood circulating within his body,have mercies on the layman's coffin's and hard-earned money. they are not capitalist, they just<BR/>want to have a living only.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-82170413297214161572008-09-28T12:04:00.000+08:002008-09-28T12:04:00.000+08:00LOL... hilarious. If the banks know lehman will fi...LOL... hilarious. If the banks know lehman will file chapter 11. The market won't come to a standstill on tuesday. The money markets for overnight dollar rates shot up to even 13%! If banks are psychic, lehman wouldn't fall.<BR/><BR/>Of course it takes two hands to clap when it comes to signing the contract. Ordinary investors who do not read the prospectus should not have signed it anyway. Warning signs for retail investors should be existent since the product is not marketed as capital protected anyway.<BR/><BR/>Who is going to pay the retail investors who lost money in the lehman deal? MAS? Isn't it unfair for tax payers who didn't sign up for the structured products??jiantehttps://www.blogger.com/profile/07768752144237522806noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-84010180408728958582008-09-27T19:59:00.000+08:002008-09-27T19:59:00.000+08:00i dun actually know the answers and appreciate you...i dun actually know the answers and appreciate your sharing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-45569175669209363232008-09-27T19:32:00.000+08:002008-09-27T19:32:00.000+08:00Do you actually know how many pages in a 60-page p...Do you actually know how many pages in a 60-page prospectus are devoted to "risk factors"?<BR/><BR/>And how may pages are there jut to provide all the information and answers that the investor might want?Gilbert Koh aka Mr Wanghttps://www.blogger.com/profile/01027678080233274309noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-48397585900974032742008-09-27T19:00:00.000+08:002008-09-27T19:00:00.000+08:00about the china milk scandal.imagine if San lu gro...about the china milk scandal.<BR/><BR/>imagine if San lu group also applies what is common practice by the banks - to provide a 60-70 pages of a risk disclosures to consumers in a prospectus hardcopy/softcopy in their website. milk-drinkers once purchase their toxic milks are deemed to be read & understood all risks and San Lu is not liable for any damages or losses suffered by the drinkers.<BR/><BR/>likewise is this going to be fair for the aggrieved investors just because they signed on an iron-cladded toxic contract for the credit derivativesAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-45740575297107073202008-09-27T18:09:00.000+08:002008-09-27T18:09:00.000+08:00(My post didn't show up, let me try again.)I belie...(My post didn't show up, let me try again.)<BR/><BR/>I believe MAS will be forced to guarantee all bank deposits. Otherwise, the bank runs will be unimaginable.<BR/><BR/>(This is my opinion, not an advice. :-))<BR/><BR/>$20K covers 80% of the depositors, but it could just be 20% of the deposits.nhyonehttps://www.blogger.com/profile/07856759147801825744noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-25763090147853413522008-09-27T05:20:00.000+08:002008-09-27T05:20:00.000+08:00I was actually looking to invest some fund. Walkin...I was actually looking to invest some fund. Walking by the SC bank branch office in suntech.<BR/><BR/>I went in, and enquired about investment options for foreign exchange deposits.<BR/><BR/>Straight away, i was introduced to a structured deposit.<BR/>To quote " You can bet on how the AUD moves against the SGD"<BR/><BR/>That really put me off.<BR/><BR/>Then i tried to find out more information on structed deposits, high notes etc.<BR/><BR/>Well, after i read a couple of pages, i realised that it was so complicated...<BR/><BR/>That i just stayed away from it.<BR/><BR/>Shrug, if you cannot understand, its better not to buy.<BR/><BR/>No matter what the people gives in verbal assurances by the sales folks at the front lines...<BR/><BR/>saynAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-19938941983474555852008-09-27T00:01:00.000+08:002008-09-27T00:01:00.000+08:00/// Will there be a day when the accountant of a c.../// Will there be a day when the accountant of a commercial house saying he/she does not know his companys' account. ///<BR/><BR/>Enron & Authur Anderson.<BR/><BR/>AIG, Lehman, Freddie Mac and Fannie Mae are currently being investigated for their creative accounting.Thehttps://www.blogger.com/profile/02941744057903049051noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-76971289056458099572008-09-26T23:23:00.000+08:002008-09-26T23:23:00.000+08:00Hi Mr Wang,You're a lawyer. I'm a doctor. Your pos...Hi Mr Wang,<BR/><BR/>You're a lawyer. I'm a doctor. Your post made me remember what I always felt we doctors/surgeons should do with regards to taking consent/disclosure of risks of surgery/procedures etc....<BR/><BR/>Go the legal way. Fill pages and pages FULL DISCLOSURE of all the possible things that can go wrong with the surgery in super small fonts filled with all kinds of medical jargon.<BR/><BR/>I mean hey if the banks and insurance companies do it, why not surgeons and doctors right?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-55221189542452342492008-09-26T19:13:00.000+08:002008-09-26T19:13:00.000+08:00Why are there Financial Expert, Specialist, Consul...Why are there Financial Expert, Specialist, Consultants, Analyst, planners and what not if these people are incapable of reading the markets? Will there be a day when the accountant of a commercial house saying he/she does not know his companys' account. <BR/><BR/>Financial meltdowns are not like earthquakes or whirlwinds that give no sign before wreaking havocs. <BR/><BR/>There are professionals I mentioned above in Cyberspace that seem to think that the People in GIC and Temasek do not or are unable to read the markets. Many appear to think that there were plenty of signs indicating problems in those Financial Houses and yet GIC/Temasek dived in with fervour. Does this implies that the People in GIC/Temasek incompetent?<BR/><BR/>Please pardon me for my curiosity.<BR/><BR/>patriotAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-77296381418281685452008-09-26T12:07:00.000+08:002008-09-26T12:07:00.000+08:00"Also another feature of any financial product tha...<I> "Also another feature of any financial product that you buy, it is required by regulatory agency to illustrate what you can potentially earned based on government projection." </I><BR/><BR/>Government projections? LOL, no.Gilbert Koh aka Mr Wanghttps://www.blogger.com/profile/01027678080233274309noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-50997203808774944572008-09-26T12:03:00.000+08:002008-09-26T12:03:00.000+08:00"Ah there's the rub. At what stage did they know?"...<I>"Ah there's the rub. At what stage did they know?" </I><BR/><BR/>Know what? That Lehman was going to file for Chapter 11? <BR/><BR/>I guess that would be around the time when it was reported in the news. <BR/><BR/>LOL, you must think that bankers are psychic.<BR/><BR/>Do I know if any other banks will go bankrupt in the next six months? No, I don't. <BR/><BR/>Can I guess? Sure, so can you. So can Temasek. So can GIC. So can Tan Ah Kow.<BR/><BR/>And some of us will be right. And some of us will be wrong. Simple as that.Gilbert Koh aka Mr Wanghttps://www.blogger.com/profile/01027678080233274309noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-69277180379104146322008-09-26T10:28:00.000+08:002008-09-26T10:28:00.000+08:00/// Anonymous said... In the UK, there is a pus.../// Anonymous said...<BR/> In the UK, there is a push for financial prospectus to use plain English.<BR/> September 26, 2008 3:23 AM ///<BR/><BR/>I think those in Singapore are already in plain English. Look at the prospectus in the link below and see how plain it can be.<BR/><BR/>http://masnet.mas.gov.sg/opera/sdrprosp.nsf/936bad13609791c948256b3e001ed49f/DF9E0F70EB99FC994825747800232980/$File/001%20-Preliminary%20Prospectus.pdf<BR/><BR/>The Prospectus comprises 231 pages, with 10 pages detailing all kind of risks. Examples:<BR/><BR/>We operate in the highly competitive sports fashion and other footwear industry.<BR/><BR/>We may face rising labour costs in the PRC.<BR/><BR/>As stated by Mr Wang, the problem is not that the risks are not specific, in small prints or not spelt out. The main problem is that they are spelt out specifically in minutiae and they are so kiasu that they thrown in the whole laundry list, so much so that most investors just ignore them, treating them like SOPs.Thehttps://www.blogger.com/profile/02941744057903049051noreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-51813401163909843062008-09-26T10:26:00.000+08:002008-09-26T10:26:00.000+08:00Dear Mr Wang,As you wrote,"not as if your average ...Dear Mr Wang,<BR/><BR/>As you wrote,"not as if your average banker KNEW what was going to happen, and deliberately withheld information from Tan Ah Kow and Lim Ah Seng, so as to make them suffer losses."<BR/><BR/>Ah there's the rub. At what stage did they know? A question which is often asked by an investor (I am talking about your average Joe) is, "How secure is my investment?" and "What exactly are the risks?" I have as yet to hear an IO just say, "Read the prospectus." Usually they would reply and provide an opiion. That opinion could be misleading. What then? The IO to say, "But you should read the prospectus." Sure but what if your reply does not highlight the relevant parts of the prospectus?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-71559100487648370772008-09-26T06:21:00.000+08:002008-09-26T06:21:00.000+08:00hmmm..my oh my Mr.Wang..same debacle..different vi...hmmm..my oh my Mr.Wang..same debacle..different views in HK and Singapore, probably different outcomes too.<BR/><BR/>The thing that I don't understand about Singapore is that when a humble boy goes up the society's ladder, sometimes on the back of the poor and disable using public funded scholarships no less, he becomes a totally different creature.<BR/><BR/>He says from the top of the ladder, "you poor lot never study hard enough that's why you lot deserved to be cheated by people who are more clever/smarter/intelligent than you"<BR/><BR/>In Singapore, compassion is dead.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-56582393019644318282008-09-26T03:23:00.000+08:002008-09-26T03:23:00.000+08:00In the UK, there is a push for financial prospectu...In the UK, there is a push for financial prospectus to use plain English.<BR/><BR/>Also another feature of any financial product that you buy, it is required by regulatory agency to illustrate what you can potentially earned based on government projection. Of course, there is a danger that people might take that as illustration, but what it does is show you what you might earn, minus the charges, etc, in some many years.<BR/><BR/>It will have to illustrate with at least two scenario one of which is an optimistic one and the other based on (government projected interest/actuarial rates). Of course the provisio past performance is no guarantee for future performance. And a risk rating system based on financial instrument classification (i.e. Hegdge fund high risk, saving low risk).<BR/><BR/>Simple straight to the point.<BR/><BR/>Also another thing about the UK is the BBC financial programme. Many of the high class presenters like Evan Davis and other investigative journalist when reporting about financial affair try to speak in laymen term.<BR/><BR/>Whereas in Singapore, listening of ChannelNewsAsia especially, there is no attempt to really speak in plain English. I guess maybe it's because they like to speak in tech speak just to hide they inadequacies. Maybe they think by speaking in plain English makes them look stupid.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-66976313924863987252008-09-26T03:11:00.000+08:002008-09-26T03:11:00.000+08:00Therefore hefty fines, for inadequate disclosure, ...<I>Therefore hefty fines, for inadequate disclosure, is unheard of (as far as I'm aware). A regulator would not fine a bank for issuing a prospectus which the regulator ITSELF had previously given approval for the bank to issue ....</I><BR/><BR/>But the regulator itself could be found guilty in law for being negligent in its duty.<BR/><BR/>One example to my mind is the US Florida Department of Insurance, which is being sued for not doing its job.<BR/><BR/>I supposed in uniquely Singapore's legal system, regulators are considered to do no wrong so can't be sued.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-81520979437110428812008-09-25T23:28:00.000+08:002008-09-25T23:28:00.000+08:00This is yr most sensible post yet. You should stic...This is yr most sensible post yet. You should stick to such subjects. The real problem in my view is that there's a terrible mismatch of understanding between the average customer and the financial institutions, as reflected in the following ridiculous letter that was sent to MAS,a copy of which was 4warded to me: <BR/><BR/>Subject: $20,000 is very low protection for bank deposits<BR/>To: consumers@mas.gov.sg<BR/><BR/>Dear Ms Angelina Fernandez<BR/><BR/>I read in your article in the Straits Times today about insurance companies in Singapore needing to set aside 120% for their liabities to all policyholders. This is reassuring, as it means that there is 100% protection for all premiums put into insurance policies. Annuities, for example, can be redeemed or must be honoured 100% minus any payouts already paid out by the insurance company to the policy holder, even if the company goes bankrupt, I conclude.<BR/> <BR/>However I was alarmed to read that for any depositor in any major bank in Singapore, the MAS ruling is that only $20,000 is protected. So if, for example, a person has $40,000 in savings and $60,000 in fixed deposits, the depositor can lose $70,000 of his savings. The protection of $20,000 is far too low! It may cover 80% of depositors. But what about the 20% who have deposited more than $20,000 in a bank through hard work?<BR/> <BR/>There should be 100% protection of one's savings in banks. I am not talking about risky financial instruments like unit trusts or structured deposits. The stock market is extremely volatile, all over the world. Many people have already lost a lot of money. Not everyone who has more than $20 k in a bank has enough money to buy property. Where do we put our savings for retirement or old age? Under the bed or inside a mattress? Most would likely put our money in a bank, even though receiving only paltry interest rates. It is improtant to have money saved for emergencies, major illnesses, unexpected happenings, etc.<BR/> <BR/>Now it seems that savers can lose all their savings which are more than $20 k ! It is not impossible for any bank to go under or bankrupt, even in Singapore, especially if it undertakes risky investments on a wide scale.<BR/> <BR/>It is time for MAS to protect the needs of all bank depositors, as many stand to lose as much as several tens of thousands or even some millions deposited trustingly in our banks. Savings and fixed deposit depositors are conservative with money and deserve to be much better protected by the banks, and by MAS. It is time to review your policies.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4405345292513335071.post-46009928111042272892008-09-25T22:40:00.000+08:002008-09-25T22:40:00.000+08:00Even if a fixed deposit is actually a funded self-...Even if a fixed deposit is actually a funded self-referencing credit derivative transaction, it is one which<BR/>1) is accorded higher seniority & priority when a bank's assets is liquidated to meet various liabilities;<BR/>2) is covered under the deposit insurance scheme for up to 20k per bank;<BR/>3) doesn't attract hard-selling or possibly mis-selling for their sales commission by a relationship manager;<BR/>4) is easily understood by most people and there is unlikely incidents for mis-selling by the bankers.Anonymousnoreply@blogger.com