Singapore - More than half the investors who lodged complaints over the way they were sold investment products linked to Lehman Brothers will get some money back.
And about a quarter will be fully compensated, ending months of worry that started when their investments went belly-up together with the collapsed US investment bank.
This is so wrong. Greed should not be guaranteed. Instead, these investors should be given a goodwill payout NOT AMOUNTING to an admission of guilt.
There is a huge difference between an outright compensation and a goodwill payout. The premise of the former suggests that there are some greed that are more acceptable than other greed. There are some gullibility that are less heinous than other guillibility. It also assumes that when you are old, you need not be responsible for your actions.
In the latter, you acknowledge that all are placed on an equal slate and then judged and sentenced equally. But out of goodwill, a certain more vulnerable group is given a little assistance to alleviate their sufferings from their mistakes. This, itself, is already a less than ideal situation but to give an almost outright compensation to the "old and guillible" is really BS.
Surely, these OAGs, being salt of the earth compared to the young and rapacious, should know better the downfalls of the greedy, especially over an additional 1% interest per annum.
I feel sorry for those who did not get any money back in this circumstance, though my definition of the ideal case is for all investors to suffer comparable (percentage) losses.
9 comments:
More to the point, surely, are the "investment advisers" who were paid handsome (and usually undisclosed) commissions for directing, ah sorry advising their clients to invest in a particular "product".
Now those who invested in Lehman (your example) probably would not ever have heard the name until it crashed. What they were (I suspect)thinking is that they were investing in an absolutely solid gold standard bank paying perhaps 2 to 3% more than the market.
The nature and the risks of those products were probably never disclosed.
On that basis, why should your grandmother lose her life savings?
The short answer - yes! My grandmother had two sons who were more rapacious than Madoff and Lehman combined. But then I digress.
The Lehman product here seemed to only offer a 1% premium over the government fund, which is GUARANTEED at 4%.
I've seen those people in action. They will give the customary warning that you might lose everything if the fund collapses and in the same breath say that such is an almost impossibility. Even diamonds are not forever!
Yet, for 1% more, if my grandmother were to agree, then she probably deserves to lose her life savings. What to do? Greed is inherent in all humans.
Then you bring me to my next point. With this compensation, a lot of brokers who have earned their commissions through these shady deals are likely to face a claw back. Many of them are going to sell of their penthouses and branded bags, shoes and what have you.
I can't wait for more melee! Yay...
Oh please, anybody who is greedy will never be investing in lehman brothers minibonds in the first place. Afterall, why settle for a meagre 5-7% yield when your greed dictates that 20-30% is much better?
Its a clear case of cheating and conning on the part of lehman brothers to call their structured product a "bond". Everyone knows that there is a structural difference between a Bond and a Derivative linked product. But not everybody will know what a complex structured product is if its called a "Minibond". Even CPF didnt know. Thats why series 1 and 2 was SRS approved and subsequent series wasnt( presumably after they realised their mistake)! It has since defaulted by the way...
Ah, see!
5% - 7% returns represent a 20% - 60% increase over the 4% guaranteed by CPFSA. Eh, 60% *more* than CPF. Ah pek, ah mm, ah beng, ah lian, ter tao, gong kia, twa neh, bo nao, etc etc will all dive in.
The problem with these stupid folks is simple - they should have paid attention during English and Math classes!
Well, one thing is for sure- those banks and financial institution preyed on their goodwill and inability to understand English or Maths.
And for that matter the issuer also preyed on CPF's inability to understand the word "Minibond" and got them to place the SRS chop on the investment product. Maybe they need to attend English and Maths classes too...
Shade, one of the strangest parts of the whole thing is that major investors in these "derivative products" were in fact other banks and finance houses.
The "loser" grandmas are those who invested in the banks and finance houses - even reputable banks got caught out.
A "mini-bond" issue might be for USD10 million, just to support one transaction in the higher market. Once you get your head around that, begin to understand that the "mini-bonds" were the problem, but the real issue is whose money was lost.
It is all in the name of margin. A gain of 0.2% on a $10 million investment is $20,000; almost half of my annual salary.
Exactly my point! Even the banks didnt know what they were selling to the consumers! They marketed it as a product equivalent to that of a time deposit that gives a fixed steady yield as long as its held to maturity.
Perhaps, its even possible that the banks knew the exact nature of this evil structured product but chose to continue marketing it as a safe instrument to dump off their investments to the poor grandmas who placed their faith and goodwill with the banks.
Actually, there is absolutely nothing wrong with the products if the subprime housing bubble held up. Honestly. If the bubble kept growing, Madoff, Lehman, and what nots would be all enjoying good growth.
99-year leasehold condominiums in horrid locations in Singapore will be fetching in excess of S$1000 psf and we are still raving about the bull run that never seems to run out of steam. Perhaps we'll get $8 red packets this year, since every other person will be getting a 5 to 50 month bonus.
Chinatown and the CNY vendors could run out of things to sell (perhaps with the exception of human flesh) long before the eve of CNY and certificates of entitlement for cars would not be back in the S$100 000s.
SGX may have breached 10 000 points and the DJIA may have broken 100 000! Who knows what might have been if not for Americans running out of money.
Shade, your para 1 is wrong. Totally wrong. The banks knew what they were selling. They didn't think about what they had bought until it was too late. But they knew what they were selling...
Para 2 is correct.
Tef, it is in the nature of bubbles that they are transient. The property bubble had to go at some point.
It wasn't that the Americans ran out of money. The banks suddenly realised that they had been building houses of cards. Some of the cards at the bottom of the tower were beginning to buckle.
Think back for a moment. I put up a graphic of the global money supply. It showed (as I recall) that the traditional M1 M2 M3 measures constituted less than 10% of the total assets held by banks.
It wasn't just the money supply. How many nations were measuring economic success by the rate of economic growth? How many governments made the connection between the growth in consumption and the increase in personal borrowing?
Where did the increase in personal borrowing come from? From people who "believed" the advertising that told them they "must have"... From businesses that had to sell more this year than they did last year to keep their shareholders happy.
People bought goods on credit that they obtained from the banks (as "investments" of the excess cash that the banks had sloshing around in the vaults). People bought goods on "free credit" provided by the retailers so that they could sell the goods...
Going back to the finish on the "bubble". NZ has the second most unaffordable real estate in the world - after Australia. Measure is average residential property value divided by average annual income. Result is about 6 for Australia, 5.8 for NZ. It used to be about 3 in NZ but that was 25 years ago...
Remember my little parallel with the Mobius strip?
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