Alchemy is the supposed technique of transmuting base metals, such as lead and mercury, into silver and gold by the philosopher's stone. It never happened. Many people were cheated over the centuries.
The modern form of alchemy is "financial innovation". It has led to massive transfer of wealth from ordinary people to the investment bankers, and to the collapse of the global economy.
Tuesday, September 08, 2009
Lehman Brothers set for landmark appeal
By Anousha Sakoui FT, August 4 2009
Lawyers for the Lehman Brothers US estate will appeal against a decision by English courts that retail investors from Papua New Guinea, Australia and New Zealand should be paid ahead of the failed bank in the unwinding of a complex structured vehicle, according to people familiar with the situation.
The case over the ranking of creditors to a special purpose vehicle – SPV – called Dante, to which Lehman was a swap counterparty, is being closely watched for its potential implications for the securitisation and derivatives market.
It highlights the Lehman administrators’ fight to unwind 1.2m derivative contracts worth a net $40bn (€28bn) to which the bank was a counterparty, of which Dante is one such transaction. The gross notional value of derivative assets is $39,000bn for Lehman entities in Chapter 11.
Dante is one of a string of SPVs created that issued credit-linked notes to investors and to which Lehman is a swap counterparty. Swap counterparties are normally repaid ahead of other creditors, unless the counterparty is in default.
As Lehman is in default, investors in that SPV represented by Perpetual Trustee Company as trustee believe they should be paid out ahead of Lehman, as is set out under the English law documents governing the transaction. The Lehman estate is owed $100m, according to these people.
But lawyers for Lehman Brothers Special Financing believe the subordination of Lehman’s claim is contrary to US bankruptcy laws, which do not allow forfeiture of assets on bankruptcy.
While the English courts sided with the investors, unusually the judge stayed any enforcement of the collateral until any appeals have been heard.
“In staying the effect of his ruling, the judge both permitted Lehman to pursue its appeals in the English courts and, more importantly, recognised that the application of US bankruptcy law could compel a different result,” said a person with knowledge of the case.
The case could take years to resolve and highlights the difficulties lawyers face unwinding many structured vehicles, legacies of the credit boom, which were not set up with failure or insolvency in mind.
Analysts believe the case could have important implications for the securitisation market.
“A ruling against the investors would be hugely negative for the credit markets as the concept of bankruptcy remoteness will most likely not be value for any transaction if the swap counterparty has a US connection,” said analysts at Creditsights in a report. They believed such a decision could lead to further rating downgrades for similar collateralised debt obligations and could force rating sensitive investors to sell their holdings, pushing spreads up.
Lawyers for the Lehman Brothers US estate will appeal against a decision by English courts that retail investors from Papua New Guinea, Australia and New Zealand should be paid ahead of the failed bank in the unwinding of a complex structured vehicle, according to people familiar with the situation.
The case over the ranking of creditors to a special purpose vehicle – SPV – called Dante, to which Lehman was a swap counterparty, is being closely watched for its potential implications for the securitisation and derivatives market.
It highlights the Lehman administrators’ fight to unwind 1.2m derivative contracts worth a net $40bn (€28bn) to which the bank was a counterparty, of which Dante is one such transaction. The gross notional value of derivative assets is $39,000bn for Lehman entities in Chapter 11.
Dante is one of a string of SPVs created that issued credit-linked notes to investors and to which Lehman is a swap counterparty. Swap counterparties are normally repaid ahead of other creditors, unless the counterparty is in default.
As Lehman is in default, investors in that SPV represented by Perpetual Trustee Company as trustee believe they should be paid out ahead of Lehman, as is set out under the English law documents governing the transaction. The Lehman estate is owed $100m, according to these people.
But lawyers for Lehman Brothers Special Financing believe the subordination of Lehman’s claim is contrary to US bankruptcy laws, which do not allow forfeiture of assets on bankruptcy.
While the English courts sided with the investors, unusually the judge stayed any enforcement of the collateral until any appeals have been heard.
“In staying the effect of his ruling, the judge both permitted Lehman to pursue its appeals in the English courts and, more importantly, recognised that the application of US bankruptcy law could compel a different result,” said a person with knowledge of the case.
The case could take years to resolve and highlights the difficulties lawyers face unwinding many structured vehicles, legacies of the credit boom, which were not set up with failure or insolvency in mind.
Analysts believe the case could have important implications for the securitisation market.
“A ruling against the investors would be hugely negative for the credit markets as the concept of bankruptcy remoteness will most likely not be value for any transaction if the swap counterparty has a US connection,” said analysts at Creditsights in a report. They believed such a decision could lead to further rating downgrades for similar collateralised debt obligations and could force rating sensitive investors to sell their holdings, pushing spreads up.
Preparing for the Worst
Robert Kiyosaki, author of Rich Dad, Poor Dad, has a negative view about the future of the world economy. Read this article.
Monday, September 07, 2009
BBC: Capitalism, A Love Story
Read this article. It explains clearly why and how the world has got into this big mess, and also suggest a better way forward. I agree with the views made by Michael Moore.
Staged Accidents
A staged accident is created by a workshop to make a big claim on insurance company. It is dangerous. When will action be taken against these criminals? Read here.
Shape Quiz
The Shape Quiz helps to develop creativity among children. They learn to use their thinking to find the solution to the shapes. Here is an example of how Cheyenne (6 years old) tackle the quiz. She has an artistic talent and is able to see how the pieces fit into the bigger whole.
http://www.youtube.com/watch?v=xsnaXWmRXyM
http://www.youtube.com/watch?v=xsnaXWmRXyM
MAS and PM decline request for a meeting
Dear Mr Tan
I refer to your requests to the Prime Minister and MAS to meet with yourself and a representative group of investors. The Prime Minister's office has referred the request to MAS.
MAS has responded to your petition on 31 August, where we set out our approach to handling investors' complaints on failed structured notes. This has also been explained to Parliament during its 20 July sitting and detailed in numerous MAS' public statements over the last nine months. We have released our investigation findings for the financial institutions that sold the notes as well as the regulatory actions taken.
MAS has addressed publicly, the issues raised in your petition on a number of occasions. As such, we decline your request for a meeting.
Investors who are not satisfied with the outcome of the financial institutions' resolution of their complaints can approach the Financial Industry Disputes Resolution Centre (FIDReC), or seek legal advice on the recourse that is available to them, based on their own facts and circumstances.
Yours sincerely,
Andrew Khoo
Executive Director, Capital Markets, MAS
I refer to your requests to the Prime Minister and MAS to meet with yourself and a representative group of investors. The Prime Minister's office has referred the request to MAS.
MAS has responded to your petition on 31 August, where we set out our approach to handling investors' complaints on failed structured notes. This has also been explained to Parliament during its 20 July sitting and detailed in numerous MAS' public statements over the last nine months. We have released our investigation findings for the financial institutions that sold the notes as well as the regulatory actions taken.
MAS has addressed publicly, the issues raised in your petition on a number of occasions. As such, we decline your request for a meeting.
Investors who are not satisfied with the outcome of the financial institutions' resolution of their complaints can approach the Financial Industry Disputes Resolution Centre (FIDReC), or seek legal advice on the recourse that is available to them, based on their own facts and circumstances.
Yours sincerely,
Andrew Khoo
Executive Director, Capital Markets, MAS
A new society (5) - Enjoyment of work
Each person should have the opportunity to enjoy their work. They should choose a job that suits their interest and skills. They should earn a fair wage that can meet their cost of living.
They should work hard because they enjoy their work. They should not work hard just for the sake of accumulating wealth. The greed is not desirable.
The love of doing good to society, and not the accumulation of wealth, should be the key motivator to good work. This motivation can apply to doctors, teachers, religious leaders or any worker who provides service to others.
It is necessary for a person to put in additional work to set aside savings for retirement or to raise a bigger family or to give a better life for their children. But this desire should be pursued up to a reasonable limit.
If more people have the right motivation, the society can provide a happier and better life for the people.
Tan Kin Lian
They should work hard because they enjoy their work. They should not work hard just for the sake of accumulating wealth. The greed is not desirable.
The love of doing good to society, and not the accumulation of wealth, should be the key motivator to good work. This motivation can apply to doctors, teachers, religious leaders or any worker who provides service to others.
It is necessary for a person to put in additional work to set aside savings for retirement or to raise a bigger family or to give a better life for their children. But this desire should be pursued up to a reasonable limit.
If more people have the right motivation, the society can provide a happier and better life for the people.
Tan Kin Lian
A good compensation for Minibond
Hello Mr Tan
I invested a small sum of Lehman Minibond with a bank. After negotiation with FIDREC, tbe bank offered 50% less 50% of interest paid to me, and I get to keep my shareholding. Please advice if I should just accept since my is a small amount.
REPLY
If the bank is willing to allow you to keep the Minibond and to receive the future proceeds at maturity, it is a good deal for you. You should accept it.
I invested a small sum of Lehman Minibond with a bank. After negotiation with FIDREC, tbe bank offered 50% less 50% of interest paid to me, and I get to keep my shareholding. Please advice if I should just accept since my is a small amount.
REPLY
If the bank is willing to allow you to keep the Minibond and to receive the future proceeds at maturity, it is a good deal for you. You should accept it.
Do you like the concepts?
A few people have passed comments that the suggestions in "A New Society" are too idealistic and impractical. They asked how these ideas can ever be implemented in our current environment.
I wish to advice readers to separate the concepts from the implementation. We need to focus on the concepts and ask, "will this lead to a better world?" It will take time to educate people and to show them that a new society can be build on new principles.
Similarly, the major religions will take a long time to be understood and accepted, before they become part of the mainstream life.
Sunday, September 06, 2009
Survey: Land Banking
Dear Mr. Tan,
Appreciate that you can help, this is because land banking involves many people whom I know (more that 10 people invested) and the total amount is huge. We have no avenue to seek help. CASE doesn't take care of Investment link issue. MAS said Land investment is not under them. I believe if this goes to the speaker corner of make public, there will be a lot of investors step forward. Hope that we can meet to discuss the case in more detail. Appreciate you reply.
IF YOU ARE INVOLVED IN LAND BANKING, AND YOU WISH TO MEET OTHER INVESTORS, PLEASE REPLY TO THIS SURVEY.
"Capitalism is evil," says new Michael Moore film
Read this story. I agree with the points stated in this article. The evils of capitalism can be replaced by some of the concepts described in my articles on "A New Society". We can keep some elements of capitalism, but in a modified form.
A new society (4) - time to rejuvenate
Many people work all the time. They are afraid to take an extended break or holiday, if they face the risk of losing their job to another person.
They work for a lifetime and look forward to enjoy life after retirement. But, when they get old, they are not able to move around easily or to enjoy the retirement.
I like to propose a better system. Each person should be allowed to take one or two months off every every three years of work. This should be made a feature of the employment contract.
To fund for this holiday, they have to pay an additional 3 to 6% of their wages into a fund, which is used to pay their replacement income when they take the vacation.
This arrangement should apply to all workers, so that there is no competition for people to continue working hard to show that they are productive.
When the worker takes the extended vacation, temporary workers can take over their work. Alternatively, the employer can have a pool of these workers to replace the permanent workers on vacation. These relief work can be a good training ground for the future workers.
The extended vacation can be for holidays, for continuing education, or for taking up a hobby. When the time comes for full retirement, it is easy for the retiree to find some other ways to occupy their time or to engage in suitable hobbies.
Tan Kin Lian
They work for a lifetime and look forward to enjoy life after retirement. But, when they get old, they are not able to move around easily or to enjoy the retirement.
I like to propose a better system. Each person should be allowed to take one or two months off every every three years of work. This should be made a feature of the employment contract.
To fund for this holiday, they have to pay an additional 3 to 6% of their wages into a fund, which is used to pay their replacement income when they take the vacation.
This arrangement should apply to all workers, so that there is no competition for people to continue working hard to show that they are productive.
When the worker takes the extended vacation, temporary workers can take over their work. Alternatively, the employer can have a pool of these workers to replace the permanent workers on vacation. These relief work can be a good training ground for the future workers.
The extended vacation can be for holidays, for continuing education, or for taking up a hobby. When the time comes for full retirement, it is easy for the retiree to find some other ways to occupy their time or to engage in suitable hobbies.
Tan Kin Lian
Product issuers were probably cheating
The standard of honesty has deteriorated so much in recent years, that many people do not understand what is "cheating".
The seller of a gold ornament is cheating, if he knowingly mis-represents the ornament to be made of gold, when it is actually fake.
The seller of a property is cheating if he knowingly mis-represents the property to be freehold, when it is actually a leasehold.
The seller of a gold ornament is cheating, if he knowingly mis-represents the ornament to be made of gold, when it is actually fake.
The seller of a property is cheating if he knowingly mis-represents the property to be freehold, when it is actually a leasehold.
The financial institution that creates a credit linked note is cheating, if it writes the prospectus in a manner to mislead the investors about the true nature of the product. If the creator is aware that some of the underlying assets have already turned bad (as reflected in a severe drop in value), but they continue to mis-represent the product based on its outdated credit rating, they are cheating.
The top people in the financial institution may not be aware that the product was created to generate profits by misleading the investors. But the financial institution should take the responsibility for the actions of its employees.
The standard of honesty has become so low, that cheating is now tolerated as being part of the free market. But this is a mistaken belief. A free market can only operated if there is a climate of honesty and trust.
There is a duty on the Government to investigate cases of suspected cheating and to bring the culprits to court. The judges can decide on these cases. Quite often, the court case may not be necessary as the party may be willing to settle the matter by paying appropriate compensation without admitting liability. This approach is practiced in America.
Tan Kin Lian
The top people in the financial institution may not be aware that the product was created to generate profits by misleading the investors. But the financial institution should take the responsibility for the actions of its employees.
The standard of honesty has become so low, that cheating is now tolerated as being part of the free market. But this is a mistaken belief. A free market can only operated if there is a climate of honesty and trust.
There is a duty on the Government to investigate cases of suspected cheating and to bring the culprits to court. The judges can decide on these cases. Quite often, the court case may not be necessary as the party may be willing to settle the matter by paying appropriate compensation without admitting liability. This approach is practiced in America.
Tan Kin Lian
Distributors were negligent
The distributors who sold the credit linked notes were negligent, but were not cheating.
Most of them were probably ignorant about the true nature of these structured products. They mis-represented the products, but not intentionally. In the greed to earn the attractive commission on the sale of the products, the sales representatives failed in their duty to give proper advice and information to the customers. The financial institutions also failed in their duty to supervise the sales representatives.
The negligence has caused loss to the investors. The investors deserve to be fairly compensated for the loss. The financial institution cannot hide under the disclaimers signed by the customers, as there was negligence and misrepresentation.
The compensation does not need to be full. It would be fair for the loss to be shared equally between the investor and the negligent distributor.
An honorable financial institution would recognise that it had neglected its duty and come forward to offer a fair settlement to all affected customers, and not only to certain customers based on educational level or age. Great Eastern Life has acted honorably and deserve to be commended.
But many financial institutions chose to look at its bottom line profit, and decided to use its financial power to fight these cases in court. And, sadly, they were backed by the Government.
When will Singapore return to its old values of honesty, fairness and justice?
Tan Kin Lian
Most of them were probably ignorant about the true nature of these structured products. They mis-represented the products, but not intentionally. In the greed to earn the attractive commission on the sale of the products, the sales representatives failed in their duty to give proper advice and information to the customers. The financial institutions also failed in their duty to supervise the sales representatives.
The negligence has caused loss to the investors. The investors deserve to be fairly compensated for the loss. The financial institution cannot hide under the disclaimers signed by the customers, as there was negligence and misrepresentation.
The compensation does not need to be full. It would be fair for the loss to be shared equally between the investor and the negligent distributor.
An honorable financial institution would recognise that it had neglected its duty and come forward to offer a fair settlement to all affected customers, and not only to certain customers based on educational level or age. Great Eastern Life has acted honorably and deserve to be commended.
But many financial institutions chose to look at its bottom line profit, and decided to use its financial power to fight these cases in court. And, sadly, they were backed by the Government.
When will Singapore return to its old values of honesty, fairness and justice?
Tan Kin Lian
Reduced air fare
A regular airline is willing to be flexible in its fare to get a business. Read this story.
New Exotic Investments Emerging on Wall Street
Read this article. The Wall Street bankers are primarily interested in earning the large fees by creating these products. They will leave it to the retail investors to face the consequences. Advice: stay away from all types of exotic products when they come to Singapore and are marketed to you.
The future will be different
A consumer told me about his personal experience. He took an endowment policy with NTUC Income and a similar policy with another company. Both policies matured. The total premium paid was $25,000 for each policy. The Income policy returned $40,000. The other policy paid $27,000. The difference was $13,000.
Here are my observations:
a) I have heard about similar experiences from other policyholders.
n) It is possible for an insurance company to give poor returns, due to high expenses and low bonus payout
c) NTUC Income gave a good return in past years, but the future will be different
Lesson: buy term and invest the difference. Read here:
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Here are my observations:
a) I have heard about similar experiences from other policyholders.
n) It is possible for an insurance company to give poor returns, due to high expenses and low bonus payout
c) NTUC Income gave a good return in past years, but the future will be different
Lesson: buy term and invest the difference. Read here:
Read this FAQ:
http://www.tankinlian.com/faq/savings.html
Cheated by a lawyer
An investor told me that he has been cheated by a lawyer. The lawyer took up his case and charged him a large fee to handle it. The lawyer did not handle the case diligently and did not act in his interest.
I advised the client to lodge a complaint with the Law Society regarding the conduct of the lawyer. But, he is not prepared to do so.
Many Singaporeans are so gullible that they can be cheated time and again. The standard of honesty in our society has deteriorated to a low level.
I advised the client to lodge a complaint with the Law Society regarding the conduct of the lawyer. But, he is not prepared to do so.
Many Singaporeans are so gullible that they can be cheated time and again. The standard of honesty in our society has deteriorated to a low level.
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