Monday, November 26, 2007

Pinnacle Notes Series 9 & 10

Dear Mr. Tan

What is your view about the Pinnacles Notes Series 9 & 10 that was advertised recently? It allows the investor to earn 5% p.a. plus a potentail bonus of up to 4% p.a. Is it a good investment?

REPLY

Here are some points stated in small print in the advertisement:

1. The Notes are secured by US dollar demoninated CDO securities that are rated at least AA at the time of issue.
2. The Notes are not principal guaranteed. Upon the occurence of a Credit Event (and a few other circumstances), you could lose all or substantially all of your investment.
3. You are asked to read the details in the Prospectus and supporting documents (which I understand is about 100 pages long), before you invest.

Have you heard about the sub-prime problem in USA? Many of these mortgages are repackaged into CDOs and sold overseas. The CDOs referred to in the Pinnacle Notes may comprise of these mortgages.

There are a lot of uncertainty and unclarity. Do you really want to make this investment?

You can read my general comments about structured products in this FAQ:
http://www.tankinlian.com/faq/structuredi.html

If you wish to know more specifically about the earlier series of Pinnacle Notes, you can read Dr Money's website:

http://www.askdrmoney.com/Analysis_Structured_Explained.htm.
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5 comments:

  1. AnonymousNovember 17, 2007 7:27 PM

    The CDOs will be securitized from a group of companies , as many one hundred. There is some degree of transparency. If you are not comfortable with them and if you think chances of these companies defaulting during the tenor of the notes(you need at least 10 companies defaulting to constitute a credit event), you should stay away. Remember the advice . If you don't understand forget them.
    If a credit event happens, the recovery rate is about 40%.

    ReplyDelete
  2. AnonymousOctober 12, 2008 1:10 PM

    SAN FRANCISCO (MarketWatch) -- Morgan Stanley may benefit from the U.S. Treasury's latest plan to buy equity stakes in financial institutions as the investment bank awaits a crucial $9 billion investment from Japan's Mitsubishi UFJ.


    http://www.marketwatch.com/news/story/treasury-mulls-investing-banks-morgan/story.aspx?guid=%7B9FE0351F-B483-4112-A882-ED09CCFF59BF%7D&dist=msr_5

    - Posted by Mr. Tan

    ReplyDelete
  3. AnonymousOctober 13, 2008 9:27 PM

    Mitsubishi UFJ Financial Group Closes $9 Billion Equity Investment in Morgan Stanley as Part of Global Strategic Alliance

    http://www.marketwatch.com/news/story/mitsubishi-ufj-financial-group-closes/story.aspx?guid=%7BBB51FE8D-E99F-4F47-A144-8DBB4DB1E864%7D&dist=hppr

    - Mr Tan

    ReplyDelete
  4. AnonymousNovember 18, 2008 11:25 AM

    Mr Tan

    could u advise me on Pru 3Plus Fund
    which is managed by Prudential Asset Managment (s) Ltd. I was told by my FI that is quite save cos it is managed by the manager it is true? As at now mkt rate is 20 plus.

    could u help?

    ReplyDelete
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