Nov 14 2008
Pinnacle Notes 9 and 10 Default
Morgan Stanley have officially announced today that a mandatory redemption event of Pinnacle Notes 9 and 10 has occured. Unfortunately, investors will be getting back nothing.
Morgan Stanley have published a FAQ on this event that occured to series 9 and 10.
They have also uploaded information on all the different Pinnacle series at their website:
Morgan Stanley Pinnacle Notes Website
MAS has provided some advice to investors who would like to file a complaint:
If you are a Pinnacle Notes investor and would like to talk to the press (can be anonymous), please contact me with your contact details.
Click here to leave your comments.
This is the carnage of the global financial crisis so far. Keep in mind that these companies are not exactly emerging small companies but rather blue chips.
These losses include:
• A I G -Then: $178.8 billion… Now: $5.46 billion. Down 96.95%
• Bank of America -Then: $236.5 billion… Now: $123.4 billion. Down: 47.82%
• Citigroup -Then: $236.7 billion… Now: $76.34 billion. Down 67.75%
• Merrill Lynch - Then: $63.9 billion… Now: $30.2 billion. Down 52.74%
• Fannie Mae - Then: $64.8 billion… Now: $0.45 billion. Down 99.3%
• Morgan Stanley - Then: $73.1 billion… Now: $41.1 billion. Down 43.78%
• Wachovia - Then: $98.3 billion… Now: $19.44 billion. Down 80.22%
• JP Morgan Chase - Then: $161 billion… Now: $130.2 billion. Down 19.13%
• Capital One Financial - Then: $29.9 billion… Now: $16.9 billion. Down 43.48%
• Washington Mutual - Then: $31.1 billion… Now: $3.64 billion. Down 88.3%
• Lehman Bros. - Then: $34.4 billion… Now: $0.80 billion. Down 97.6%
• Goldman Sachs - Then: 97.7 billion… Now: $40.6 billion. Down 58.7%
• Wells Fargo - Then: $124.1 billion… Now: $111.25 billion. Down 10.35%
• National City - Then: $16.4 billion… Now: $2.8 billion. Down 83%
• Fifth Third Bancorp - Then: $18.8 billion… Now: $7.9 billion. Down 57.6%
• American Express - Then: $74.8 billion… Now: $37.5 billion. Down 49.87%
• Freddie Mac - Then: $41.5 billion… Now: $0.16 billion. Down 58.7%
• Suntrust Banks - Then: $27 billion… Now: $16.07 billion. Down 58.7%
• BB&T - Then: $23.2 billion… Now: $18.4 billion. Down 20.69%
• Marshall & Ilsley - Then: $11.6 billion… Now: $4.48 billion. Down 61.3%
• Keycorp - Then: $13.2 billion… Now: $5.68 billion. Down 56.97%
• Legg Mason— Then: $11.4 billion…Now: $4.96 billion. Down 56.49%
• Comerica— Then: $8.3 billion…Now: $4.74 billion. Down 42.89%
• Countrywide Financial: Then: $11.1 billion…Now: $0.00 billion. Down 100%
• Bear Stearns— Then: $14.8 billion…Now: $ 0.00 billion. Down 100%
Together these 25 companies alone have lost investors a total of $992,690,000,000 over the last 12 months… or nearly 1 trillion dollars.
And they say USA is the Land of Opportunities.
VSL
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Small nitpick: the %age is wrong for Freddie Mac.
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The government better investigate where our invested $ has disappeared to!
It just can’t disappear into thin air!
Someone must be pocketing it & cheating us in the process!!
WHO???
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Hi Ed,
It’s not fair for you to say ‘cheating’ before you prove your case.
Everything is laid down clearly in the prospectus. The risks, how the structure works, and when you will lose your principal.
To answer your question directly, your money didn’t disappear into thin air. Your money was paid out to the ‘buyers’ of the CDO insurance. That’s how your coupon/interest payment is generated: from the sale of ‘insurance’ to the buyers of the insurance.
It’s just like NTUC income collects your insurance premium, if you fall sick, you make a claim. Now, the roles are reversed, you are selling the insurance, and someone has just made a claim against you.
It can be attributed to your fault of not asking the relevant questions if you are unsure.
Of course, if the Relationship Manager who sold you the product gave you false information that conflicts with the prospectus, then the bank is in the wrong. But if it’s due to you NOT asking questions, then it’s your fault.
Regards,
Intheknow
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Ed Reply:
November 19th, 2008 at 5:39 pm
Hi Intheknow,
Thanks for the explanation.
Well, its not me buying the policy. Its my ~70 year-old mom. Anyway, even if it were me who was offered the product, I doubt I have the ability to ask the correct questions. Even my accountant brother-in-law said he coudn’t understand the last letter sent to us regarding the default of PN10. If the bank’s RM explains it the way you did, bet my mom would never take the risk. Fact is, the bank’s RM gave false information (e.g. worst case scenario is a 5% value loss - according to what my mom said she was told) as well as incorrect recommendation (e.g. the RM surveyed my mom’s to be an investor with the most conservative profile, yet recommended PN10 with the assurance its based solely on 6 strong companies like Singtel, SIA, Keppel etc. - and its stated on one of the letter for PN10). Am sure my mom asked the correct questions (like worst case scenario & its performance based on what), just that the RM, IMO, is cheating by not revealing the actual facts, plus recommending a high-risk product for a low-risk investor.
My mom is a cautious person, who only wanted FD, yet was deceived by the RM touting with false information. Had my mom knew she will become an insurer for some complex toxic synthetic and unknown CDOs, she’d never be stupid enough to take up the offer. A product can have 145 strong underlying assets mixed with 5 destined-to-fail hopeless underlying assets easily - who dares to bet their life-savings on 150 total unknown factors?!
These RMs are just too much. By trying to meet their sales target, they can cause others to lose their live-savings!
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Intheknow Reply:
November 19th, 2008 at 6:23 pm
Hi Ed,
Understood and I fully agree that there is mis-selling for your mum’s case if the facts are exactly what you laid out.
Now the tough part is to prove that the RM did indeed say what he said. It’s going to be hard to prove a verbal comment versus the signed risk acceptance documents.
As I mentioned in one of my posts about these sort of products, there was not enough highlighting about the risks of the underlying securities. Sure, the brochure highlighted the risk of the 6 reference entities like Singtel, SIA, etc… but it was not clearly highlighted (in my opinion) that the product will also lose money if the pool of underlying securities went kaput.
Wish your mum all the best though!
Cheers,
Intheknow
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Ed Reply:
November 19th, 2008 at 6:39 pm
True.
With the only hard evidence being the RM ticked “conservative investor” while recommending risky PN10, its hard to prove otherwise regarding the intentional verbal misinformation.
Well, let’s hope the FI’s image IS important to the public & that MAS can exert enough pressure for them to compensate all affected investors. Worse come to worst, we will join others in taking group legal action to see how far we can go. We’re not going down without a fight! Nobody is going to cheat us of $100K scot-free!
It’ll be interesting what kinda of group legal action Mr. Tan Kin Lian can advise us come next Saturday’s gathering at Speakers’ Corner. I believe his motives are more altruistic than anything else. He gives us lost victims hope. Now, let’s hope the government follow suit.
Hi Ed,
I totally agree with you on the correct questions to ask (it is not as thou we are in tt profession). My mom and i both thought tt this is a FD product as claimed by the RM which is well supported by the strong countries. I even remember the RM rebutted us saying even if the FI collapse this product also wouldn’t collapse and have you ever seen countries collapse?
In fact he simplified the whole product in less than 20mins that you will get back your prinicpal amt when it matures (isn’t it the same as a FD?) and just sit back and relax to collect the $2K interest amt every year. He did not go into details on what r the risks involved and what they r going to do with the money
This is my mum’s whole life savings, an uneducated woman who spends centuries saving up and in the end left with a few pcs of papers ~ the FI can’t just push all the responsibility away and say sorry we tried our best to help you fight already
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Ed Reply:
November 29th, 2008 at 3:32 pm
Hi Chan,
Think many of us victims are sold based on false information given by FA’s unethical & irresponsible sales tactics.
The meeting at Speakers Corner is cancelled today, but I’m going to look at Tan Kin Liang’s website to learn more about his idea of class action.
We must make more noise before the authority will take action to compensate us.
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These two articles provide insight into the failure of Pinnacle CLN 9 & 10:
http://ftalphaville.ft.com/blog/2008/11/17/18324/from-pinnacle-to-nadir
http://josh.sg/2008/11/a_pig_in_a_poke.html
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