Wednesday, November 12, 2008

Morgan Stanley hotline for Pinnacle notes

Dear Mr Tan,

I called my distributor OCBC secruities many times to check the reason about Pinnacle Note for the distressful price, but the only thing they can tell me is to wait for the Q& A, and I never get it until now after many weeks chasing.

I have to make many calls and finally I found Morgan Stantly has set up two hot lines for Pinnacle Note holders. I asked MS people why they didn't tell us the hot lines which can address our concerns. They should understand how flucstrated their holders are facing now, but they just to say they are waiting for us to find these hotlines. Is it make sense? If they did not publish it or inform their distributors the hot lines but wait the investors to find it by ourselves. What kind of service it is?

The hotlines for Pinnacle Note holders are : 68346510/68346512, and it only open from 9:00am to 12:00am.

A desperated investor


Anonymous said...

"..they just to say they are waiting for us to find these hotlines.."

I ran out of words to describe this quote. I find nothing appropriate.

At the moment that is.

Anonymous said...

They make every1 like wild goose chase...
The mastermind, the L.Bros CEO (sacked) now had 5 mansions, each one 20..30 million USD, enjoying life....We all like footfall being kick around. The entire BUSH team won't give a damped for those exporting TOXIC CDOs to our bankers, corrupted them with Lucrutive USD commission in Swissbank Account. You know, HK had 16.5 Billion HKD being SUCKED into all these CDOs..bonds..
How how, politicians, Authorities all in a fix.
They now ' TEH-Nong' , nothing you can get back if you don't CRY in front of them like AH PEK, AH SOH does. , What a mess.?
Someone must make a police report since this is a fraud and read the articles...following

Anonymous said...

When you realise that AIG is the worlds largest insurer and when you understand what they have done you'll begin understanding the meltdown.

I chanced upon this article in my daily readings and decided to share it with you. Read on..........

How AIG's Collapse Began a Global Run on the Banks
By Porter Stansberry
October 4, 2008

Something very strange is happening in the financial markets. And I can show you what it is and what it means...

If September didn't give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they'll get much worse.

They'll get worse for the obvious reason: because more people will default on their mortgages. But they'll also remain depressed for far longer than anyone expects, for a reason most people will never understand.

What follows is one of the real secrets to September's stock market collapse. Once you understand what really happened last month, the events to come will be much clearer to you...

Every great bull market has similar characteristics. The speculation must – at the beginning – start with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats.

Some of these limitations are obvious to any intelligent observer... like the need for a substantial down payment, the verification of income, an independent appraisal, etc. But human nature dictates that, given enough time and the right incentives, any endeavor will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. You already know all the stories of how this happened in the housing market, where loans were eventually given without fixed rates, without income verification, without down payments, and without legitimate appraisals.

As bad as these practices were, they would not have created a global financial panic without the second, more critical element. For things to get really out of control, the farce must evolve further... into fraud.

And this is where AIG comes into the story.

Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.

Here's how it worked: Say you're a major European bank... You have a surplus of deposits, because in Europe people actually still bother to save money. You're looking for something to maximize the spread between what you must pay for deposits and what you're able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding sub prime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.

So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year.

'What would it cost me to insure this sub prime security?' you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, 'Not too much.' After all, the historical loss rates on American mortgages are close to zilch.

Using incredibly sophisticated computer models, he agrees to guarantee the sub prime security you're buying against default for five years for say, 2% of face value.

Although AIG's credit default swaps were really insurance contracts, they weren't regulated. That meant AIG didn't have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what's called 'mark-to-market' accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.

Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year – long before the actual profit on the contract was made.

With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime 'toxic waste.' The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in 'profit' each year, without having to pony up billions in collateral.

It was a fraud. AIG never any capital to back up the insurance it sold. And the profits it booked never materialized. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.

Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralize the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.

On September 15, all of the major credit-rating agencies downgraded AIG – the world's largest insurance company. At issue were the soaring losses in its credit default swaps. The first big write-off came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came; AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn't have the money. The world's largest insurance company was bankrupt.

The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company's equity.

Most people never understood how AIG was the linchpin to the entire system. And there's one more secret yet to come out...

AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.

I'd wondered for years how Goldman avoided the kind of huge mortgage-related write downs that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded; Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.

The collapse of the credit default swap market also meant the investment banks – all of them – had no way to borrow money, because no one would insure their obligations.

To fund their daily operations, they've become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have borrowed $348 billion from the Federal Reserve – nearly all of this lending took place following AIG's failure. Things are so bad at the investment banks, the Fed had to change the rules to allow Merrill, Morgan Stanley, and Goldman the ability to use equities as collateral for these loans, an unprecedented step.

The mainstream press hasn't reported this either: A provision in the $700 billion bailout bill permits the Fed to pay interest on the collateral it's holding, which is simply a way to funnel taxpayer dollars directly into the investment banks.

Why do you need to know all of these details? First, you must understand that without the government's actions, the collapse of AIG could have caused every major bank in the world to fail.

Second, without the credit default swap market, there's no way banks can report the true state of their assets – they'd all be in default of Basel II. That's why the government will push through a measure that requires the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can't cover for them anymore.

And third, and most importantly, without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG's sale of credit default swaps without collateral. That was the barn door. And it was left open for nearly a decade.

There's no way to replace this massive credit-building machine, which makes me very skeptical of the government's bailout plan. Quite simply, we can't replace the credit that existed in the world before September 15 because it didn't deserve to be there in the first place. While the government can, and certainly will, paper over the gaping holes left by this enormous credit collapse, it can't actually replace the trust and credit that existed... because it was a fraud.

And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.

You might find this strange... but this is great news for those who understand what's going on. Knowing why the economy is shrinking and knowing it's not going to rebound quickly gives you a huge advantage over most investors, who don't understand what's happening and can't plan to take advantage of it.

Porter Stansberry

Anonymous said...

Hey I have an idea

Can someone(SSSS) call those so claimed hotlines, not just one, but all those provided ones for the various institutions and lodge something

Lets see how LONG they take to come back..IF they come back. and what they say when they come back.

Well at least we can make a topic out of it at future gathering.

say in Yr 2018 or 2019.

Concerned said...

So much as been said of DBS High Notes 5 and Minibond. Don't forget Pinnacle Noteholders have seen their investment decline by over 90 per cent. The underlying securities for Pinnacles Notes comprise mainly of CDOs, Swaps, complex derivatives not told to the investors during the sale process except 7 big, very stable entities. The Structure almost the same as Minibond and DBS High Notes except that Morgan Stanely the issuer and arranger has not gone belly up.

Anonymous said...

Well, my mother just lodged a complaint to Hong Leong Finance after (1) hearing their Financial Advisor tellin my mother her Pinnacle Notes Series 10 investment is going to be worthless soon and (2) receiving a letter from Hong Leong Finance stating the Morgan Stanley explained that Pinnacle Notes's "Underlying Assets" (whatever that means???) has been linked to US toxic Lehmen etc. has been downgraded to "CCC-" grade and is going to default soon.

She's almost 70 years old, with primary school education, wanted only the most conservative investment portfolio and was misled into buying these Notes with the idea that at max. she'll lose 5% of her $95K inventment.

Poor lady!

Hope the FA will buy back these risky products at full price like they did with Lehman minibonds, and not callously send this old folk to her grave. :(

We hope to meet similarly affected investors this Saturday at the Speakers' Corner to discuss further.

Anonymous said...

Likewise, read

Anonymous said...

From Porter Stansberry's explanation (5.39pm), we now know the FIs that sold the Minibond products were actually abetting to commit a fraud. I am sad to note that our legally trained leader had failed to prosecute them. There is no greatest affront to our country's legal system.

Anonymous said...

11:36 AM,

Bring your mum down to Hong Lim tomorrow, get her the publicity in media and she will get her refund fast
More sad cases will surface as each product go falling
In short, MAS failed to regulate all these past years

Anonymous said...

Anonymous said...

PN10 is Lehman-linked!

Anonymous said...

I have just gone through the prospectus for Pinnacle Notes. In the Risk Factors Section, there is this paragraph that states "The issuer is not required to be licensed, registered or authorised under any current securities, commodities or banking laws of its jurisdiction of incorporation and will operate without supervision by any authority in any jurisdiction"

I am wondering whether MAS has liberalised its policy so much that it allows such cover for Pinnacle Performance Ltd which is incorporated in the Cayman Islands. Conversely, if MAS sanctioned this, then if Morgan Stanley flouting the laws?

Anonymous said...

Astonishing to hear about such ridiculous liberal MAS policy as to allow Morgan Stanley with incorporation in Cayman Islands to sell such toxic products to Singaporean. Has MAS been negligient, or is it again to put all blame on investors? What fairness here to our poor countryman! It's unreasonable for government to expect original investor/citizen to have such indepth knowledge on the pinnacle notes. Why do we need MAS at all?

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