What is the 6th number?
1, 2, 6, 42, 1806, ________? So what is the next number???
Give your answer here.
Friday, May 29, 2009
Engineer Quiz
It is said that engineers take 3 minutes to resolve this, architects 3 hours and doctors 6 hours.
What is the 6th number?
1, 2, 6, 42, 1806, ________? So what is the next number???
Give your answer here.
What is the 6th number?
1, 2, 6, 42, 1806, ________? So what is the next number???
Give your answer here.
SCMP:400 investors lose millions in echo of minibonds scandal
30 May 2009
In a disturbing echo of the Lehman minibonds scandal, the Hong Kong Monetary Authority has received more than 400 complaints from people who have lost hundreds of millions of dollars on a complex credit-linked product designed and sold by US investment bank Morgan Stanley.
The bank sold HK$2.1 billion of the products, called Octave notes, through 16 local retail banks, including ABN Amro, Bank of China (Hong Kong) and Wing Lung, between 2004 and 2007. Eighteen series of the notes were sold, of which 10 have lost more than 90 per cent of their value. Three - series 10, 11 and 12 - are worthless.
The HKMA revealed the complaints yesterday. It said the banks had sold the Octave notes to about 8,300 customers.
Lawmaker Regina Ip Lau Suk-yee called yesterday for much stronger regulation of financial products sold to retail investors.
She said she had been contacted by people who had suffered big losses on the Morgan Stanley products but had not understood their nature. "The people who have contacted me are ordinary grass-roots people. They are not wealthy," she said.
Like most minibonds, the Octave notes contain synthetic collateralised debt obligations (CDOs), which in the United States and Europe are sold only to professional investors.
"They [Octave investors] sounded very similar to the Lehman investors, who didn't know the products they bought were so risky," Mrs Ip said.
Some 48,000 Hongkongers lost most of the HK$20 billion they invested in minibonds issued or guaranteed by Lehman Brothers when the bank collapsed in September.
Synthetic CDOs are complex, conceptual products that mimic the financial health of a pool of companies. When businesses collapse, the CDOs lose value. Many of the Octave notes are virtually worthless because they were connected to the financial performance of firms that went bust.
Information that Morgan Stanley has posted on a dedicated Octave website illustrates the toxic mess.
Octave series 21, for example, is now worth 0.37 HK cents per dollar invested. It contained a CDO linked to the financial performance of some very troubled companies. These include Icelandic bank Glitnir, which collapsed in October, and US carmaker Chrysler, which entered bankruptcy protection on April 30. Notes that were priced at a fraction of their original value had a high chance of becoming worthless soon, informed sources said.
Only one Octave note is trading at anything approaching a healthy valuation. Series one, issued in 2004, is priced at 68 HK cents per dollar invested.
A spokesman for the regulator said it had taken steps to stop such a debacle recurring. "The HKMA has taken a number of steps, including the issuance of circulars and reminders, to ensure that banks implement adequate measures to manage the risks associated with retail investment products," he said.
The regulator has also asked banks to keep their relationship managers well briefed so they can handle customer inquiries.
In a disturbing echo of the Lehman minibonds scandal, the Hong Kong Monetary Authority has received more than 400 complaints from people who have lost hundreds of millions of dollars on a complex credit-linked product designed and sold by US investment bank Morgan Stanley.
The bank sold HK$2.1 billion of the products, called Octave notes, through 16 local retail banks, including ABN Amro, Bank of China (Hong Kong) and Wing Lung, between 2004 and 2007. Eighteen series of the notes were sold, of which 10 have lost more than 90 per cent of their value. Three - series 10, 11 and 12 - are worthless.
The HKMA revealed the complaints yesterday. It said the banks had sold the Octave notes to about 8,300 customers.
Lawmaker Regina Ip Lau Suk-yee called yesterday for much stronger regulation of financial products sold to retail investors.
She said she had been contacted by people who had suffered big losses on the Morgan Stanley products but had not understood their nature. "The people who have contacted me are ordinary grass-roots people. They are not wealthy," she said.
Like most minibonds, the Octave notes contain synthetic collateralised debt obligations (CDOs), which in the United States and Europe are sold only to professional investors.
"They [Octave investors] sounded very similar to the Lehman investors, who didn't know the products they bought were so risky," Mrs Ip said.
Some 48,000 Hongkongers lost most of the HK$20 billion they invested in minibonds issued or guaranteed by Lehman Brothers when the bank collapsed in September.
Synthetic CDOs are complex, conceptual products that mimic the financial health of a pool of companies. When businesses collapse, the CDOs lose value. Many of the Octave notes are virtually worthless because they were connected to the financial performance of firms that went bust.
Information that Morgan Stanley has posted on a dedicated Octave website illustrates the toxic mess.
Octave series 21, for example, is now worth 0.37 HK cents per dollar invested. It contained a CDO linked to the financial performance of some very troubled companies. These include Icelandic bank Glitnir, which collapsed in October, and US carmaker Chrysler, which entered bankruptcy protection on April 30. Notes that were priced at a fraction of their original value had a high chance of becoming worthless soon, informed sources said.
Only one Octave note is trading at anything approaching a healthy valuation. Series one, issued in 2004, is priced at 68 HK cents per dollar invested.
A spokesman for the regulator said it had taken steps to stop such a debacle recurring. "The HKMA has taken a number of steps, including the issuance of circulars and reminders, to ensure that banks implement adequate measures to manage the risks associated with retail investment products," he said.
The regulator has also asked banks to keep their relationship managers well briefed so they can handle customer inquiries.
A new era for capitalism
“Capitalism is changing in fundamental ways. For many years to come, what’s happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies. … A new capitalism is likely to emerge from the rubble.”
- Robert Peston, business editor, BBC
EXECUTIVE SUMMARY
“Derivatives,” said Warren Buffet, a renowned US investor, “are the financial equivalent of weapons of mass destruction.” He has certainly been proved right, with failing banks around the world showing that opaque financial instruments cannot mask the effect of reckless lending. After a lull in which it seemed that the rest of the economy might just avoid the worst effects of the banking crisis that started in August 2007, consumer demand, manufacturing and trade have all fallen precipitously and the global economy is in the grip of the worst downturn since the 1930s. After close to 30 years of light-touch regulation, globalisation and free-market binges, during which some politicians claimed to have tamed the business cycle, many commentators have now suggested that capitalism itself is entering a new phase.
In this report, the Economist Intelligence Unit examines the views of the people who own and manage the world’s businesses. Has capitalism changed, and if so, what might the new landscape look like? How will organisations adjust as a result of the crisis? Do business people support the actions taken to stem the crisis and do they favour expanding the government’s remit beyond the banking sector? To answer these questions, we conducted a survey of more than 400 senior business people in companies around the world. We supplemented the findings with interviews with experts, analysts and executives, as well as analysis from our editorial team.
The most striking finding is that almost 60% of respondents agree that the current crisis has “fundamentally changed” capitalism. According to one respondent, “Much as the Great Depression did in the 1930s, this crisis will permanently change the way governments and businesses view the world.” In summary, the survey respondents believe that there will be more government oversight, more economic nationalism, less risk-taking and slower growth. Decision-making within businesses will reflect a new reality, as frugal customers and state regulators hold sway. The respondents support emergency intervention in the banking sector, but their opinions are more conservative when it comes to further reform, such as outright nationalisation of other key industries, creating so-called bad banks that buy and ring-fence toxic debts, or limits on executive pay and bonuses.
Rights issues - risk to small shareholders
During the recent credit crisis, many listed companies are have rights issue to raise additional capital. The new shares are issued at a lower price than the existing shares. This will cause the existing shares to be diluted and the price to fall.
Here is an example. If the share price is $4, and new shares are being issued at $2 (on the basis of 1 new share for 1 old share), the share price is expected to drop to $3 after the new shares are issued. This is caused by "diluation".
The practice of rights issue has the following risk to small policyholders:
a) Difficulty in finding the additional money to take up the new shares. If you are offered to 10,000 new shares at $2, you have to find $20,000 to take up these shares. If you are not able to find this spare cash, you can sell the rights during a certain period. In theory, the rights should be worth the expected drop in the price of the old shares.
b) Oversight. You may not be aware of the rights issue and you forget to take it up or to sell the rights. This will cause your investments to drop in value, as the avlue of the old shares would have dropped due to dilution. This oversight is easy to happen, as you may be busy with work or overseas, when the rights issue are announced.
At each rights issue, there will be a certain proportion of shareholders who fail to take up or selll the rights due to oversight. These investors lose out and the benefit is given to other shareholders who take up the new shares at the lower price. (In some companies, the directors take up these excess shares).
To avoid this risk, it is better for small investors to invest in a professionally managed fund, such as a ETF (exchange traded fund). The professional managers will take care of the work of monitoring the investments, including collecting the dividends, subscribing to rights issues and other matters.
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