Loss of $100,000 within a few days

[krafty]

i wonder which lan jiao bank is this? mr tan, thanks for providing the info., very appreciative of your move to expose these immoral banks. thanks.

http://tankinlian.blogspot.com/


Thursday, September 15, 2011
Loss of $100,000 within a few days

Two years ago, a retired couple approached me for help. They trusted $200,000 from a retirement gratuity to a relationship manager of a local bank. The RM told the couple that the bank would lend them $800,000 and the total of $1 million would be invested in certain currencies to earn a higher rate of return, compared to the interest payable on fixed deposits.

The RM invested the money in A$ which fell by 10% within a few days during the global financial crisis. As the total investment was $1 million (including the $800,000 lent by the bank), the investor suffered a loss of $100,000 within a few days. As they were not able to top up the loss, the bank closed their position and they realized a loss of $100,000.

They could not lodge a complaint with the bank as they had signed documents that absolved the bank from responsibility for the investment loss. Their mistake was to trust the RM who was not really experienced in managing this type of investment. The RM had to meet certain sales targets to sell the investment products. It was also a mistake to invest with borrowed money (i.e the $800,000).

There is also another bad aspect of this type of investment. If the A$ had gained 10%, the investor would NOT have earned $100,000. At most, the investor would have earned a slightly higher interest rate, due to the unfair nature of these "dual currency investments". If there is a gain, a major portion would be pocketed by the bank that issued the financial product - which may not be the same bank that sold the product. If there is a loss, the investor takes the full loss.

Tan Kin Lian

 

[soIsee]

The more TKL post such crap stories in his blog, the more ppl will understand why he lost his deposit in the recent Prez election! LOL

 

[krafty]

what's wrong with telling the truth? without these information, i believe there will be more pple up the lorry.

The more TKL post such crap stories in his blog, the more ppl will understand why he lost his deposit in the recent Prez election! LOL

 

[sense]

That's the hard truth on how forex trading works, unfortunately.

 

[krafty]

i like your avatar and i am curious, does it has any ambiguous meaning?

That's the hard truth on how forex trading works, unfortunately.

 

[Spiky]

That's the hard truth on how forex trading works, unfortunately.

Unfortunately, this is not even forex trading as most people would think. If you trade, either go long or short, you have a symmetrical chance of winning or losing. Of course, you will lose on commission and the bid-ask spread.

But when you put your money in dual currency investments, your gains are limited. Your losses can be unlimited.

Why ?

Dual currency investments are basically making you, as investor, sell call option on your deposit currency and sell put option on the alternate currency. Alternate currency, you choose or the RM recommends. Blur-fxxk RMs will likely recommend a volatile currency so that the option premium will be higher.

In case example, the old folks are made to sell: SGD call/AUD put.

So when AUD collapsed during the financial crisis, their 'sell AUD put' got exercised - they ended up buying AUD at the stipulated strike price.
Their SGD call got exercised. So, essentially their deposit currency, SGD got converted to AUD at the then decided strike price (which was much much higher before AUD collapsed).

Who decides the strike price ? Investor choose or RM recommends. When you let the blur-fxxk RM recommend, the RM will recommend a strike price pretty close to the spot rate so that the option premium will be high. The bank will 'eat up' about 30% to 50% of the option premium (this is the bank's profit margin) and give the rest to the customer.
,
The worst part of the deal is that the RM got the old folks to 'leverage' up. For SGD 200,000 as collateral, they get to 'inject steriod' and borrow up to SGD 1,000,000 for the
dual currency deal.

Without the leverage, a 10% drop in AUD/SGD will cause them to lose SGD 20,000. With leverage (5 times in this case), 10% of SGD 1,000,000 is SGD 100,000.
Poor uncle and auntie lost half their deposit money just like that !

As in all cases with selling options, your gains are only limited but your losses can be unlimited. You may make money most of the time since about 70% of the time, all markets trade in a range. Your 'sell option' will not get into trouble and your option premium goes safely into your pocket. But when the market starts to move big, selling options is the sure way to the poor-house.

Why do the majority of bank customers want to get involve in this kind of shit investment ? Fixed deposit rate in Singapore is less than 1%.

Not all customers are blur. Many act blur after investments go bad. But mostly, blame the bank blur-fxxk RMs for recommending such shit financial products.

 

[chootchiew]

There are many this type of lan jiao retired couple like to boast and kpkb to whole world when they made $ from investment and kpkb when they lose.

 

[po2wq]

i wonder which lan jiao bank is this? ...

ya, man! ...

witch bank is dat? ... presidential bank? ...

 

[sense]

Unfortunately, this is not even forex trading as most people would think. If you trade, either go long or short, you have a symmetrical chance of winning or losing. Of course, you will lose on commission and the bid-ask spread.

But when you put your money in dual currency investments, your gains are limited. Your losses can be unlimited.

Thank-you for the great clarification and explanation regarding dual currency investments. http://www.nabasia.com/0,,92966,00.html

Forex trading is bad enough, this dual currency trading is many times worse.

It's unbelievable that Singapore banks are offering such extreme high risk - unpredictable returns trading systems to its customers

Is MAS sleeping?

 

[jw5]

There are many this type of lan jiao retired couple like to boast and kpkb to whole world when they made $ from investment and kpkb when they lose.

Agree there are many like that.
But there are also many lan jiao relationship managers.

 

[scroobal]

This seems to be Tan Kin Lian's style. Writing silly and stupid stories. Misselling is now an avenue of recovery. Why does he not pay legal fees to help the couple recover. Why does he not fund any cases. He instead recommended them to a useless lawyer Leonard Loo who was subsequently disbarred for cheating. This coming from a man that encourages gambling.

 

[kukubird58]

This seems to be Tan Kin Lian's style. Writing silly and stupid stories. .

hahaha...the pot calling the kettle BS.......LOL.

 

[Forvendet]

It could be any bank, any RM. The problem and grievance usually arise when the client doesn't understand the risk-reward ratio relative to his risk appetite and reward expectation, the RM didn't ensure that the client understands it and the portfolio fits him. TKL is now always taking the investor's side instead of looking at both sides of the coin. There's no use crying after spilt milk when half the cause is that you don't understand the risk of the milk spilling. If TKL was to do good, concentrate on educating financial newbies instead of trumpeting untenable complaints.

 

[sense]

It could be any bank, any RM. The problem and grievance usually arise when the client doesn't understand the risk-reward ratio relative to his risk appetite and reward expectation, the RM didn't ensure that the client understands it and the portfolio fits him. TKL is now always taking the investor's side instead of looking at both sides of the coin. There's no use crying after spilt milk when half the cause is that you don't understand the risk of the milk spilling. If TKL was to do good, concentrate on educating financial newbies instead of trumpeting untenable complaints.

Good point on the trumpeting.Suggestion for TKL: Instead of capitalising on victims of bad investment products, be it 2008 mini bond, dual currency investment, etc... Do consider a more pre-emptive approach, ie. To do a brief review of existing investment offerings by the local banks and highlight those products that are bad eggs. Perhaps TKL would rather play safe and not offend the banks nor the establishment by continuing to only trumpet on post bad investment products. Let's see if TKL choose the safe path or the morally courageous path.