DBS High Notes and Lehman Minibonds

This blog is a condensed version of what that has been published in the Straits Times where financial experts were consulted.

Think of hamper when you think of structured financial product. Like hamper, the structured financial product constitutes of many goods – in this case, equities, bonds and other financial derivatives.

Type of Structure Products

There are a few categories, namely capital-guaranteed, capital-protected and not capital-guaranteed or protected. Capital-guaranteed products are those with a “guarantor”. So if the issuer folds, the note holder looks for the guarantor. In the case of capital-protected, it refers to the structure of the product. In order to “protect” the product, typically, the issuer will invest the bulk, say 85% in bonds and the balance 15% in higher risk equities.

DBS High Notes and Lehman Minibonds fall under the third category “non-capital protected”.

The Terms and Conditions

Table below compares the two structured products.



To understand the risk, we need to first understand what a credit event is. In the most simplistic term, credit event refers to the event whereby a company fails.

Basically, the buyer of DBSS High Notes Series 5 is betting that all the 8 reference entities (see “Make-up” row in the table above) will not go belly up. That is to say, the more reference entities, the riskier the product. Unfortunately, Lehman did go under and this triggered a credit event. In the case of Lehman Minibond, the 6 reference entities are still standing but not Lehman – the issuer. Hence, investors get their fingers burnt.

Wild Wild Wet

The final year examination is finally over! Another bonus - last Monday was the Festival of Lights - hee, we saw light at the end of the examination tunnel in a sense.

That called for some celebration. So on Monday, the Lim family celebrated in swimsuit style at Wild Wild Wet, Singapore's biggest water theme park at Pasir Ris.

We arrived slightly before the theme park was open at 10 am, picking up the time slack with some munching for Papa Lim who refused to tuck in wholemeal bread at home and the rest changing into our swimming gears all ready for the water action.

When the clock struck 10, my two boys could barely contain their excitement. They dashed towards the gantry and made their way to the "Shiok River" leaving their darling daddy behind, busily packing our stuff into the locker. And mummy? That's me. I too, forsook daddy, hurrily behind the fast fading backs of the two boys. I managed to catch up with them and got them to don on the free life jackets that came in various sizes. These jackets were widely available throughout the theme park, together with clear instructions printed on colorful signpost.

P was the first to grab the doughnut float and glided in the "Shiok River". Mummy and R were still trying to find a way to get onto the float. Before long, daddy joined in. The Lim family then laid on the floats and watched the clouds drifted past. It was quite a relaxing ride to go with the flow and let the river carry us around the 335 m perimeter of the park.

Of course, kids being kids would not be satified with seeing the world drift past. They wanted action. And action they had with the "Ular-Lah" raft slide. The last time, we came, Ryan did not meet the minimum height. This time he cleared this time round! We climbed up at stairs to the at least 3-storey tall building and joined other companions on an inflated circle-shaped raft that seat 5 persons, down a flume. Together, we braved the rapids but not before screaming out our hearts - okie, more for me as I was one timid rat.

After the "Ular-Lah" which had my heart lodged in my mouth during the short probably less than 2 minutes ride, I decided to do some less thrilling stuff. This included being the child minder while P and R had fun at the water playground, with a number of scientific-looking fixtures appealing to the kids.

Our last stop was at "Tsunami". Names could be misleading. Tsunami was not one of those heart-stopping thrill rides, it was essentially a wave pool. As it was in a controlled environment there was no choppy currents, so we were there just to hit out at the waves as they came crashing in.

After two hours of fun, the Lim family was exhausted. While our hearts would want to continue, our water-sagged skins shrieked no. But, with so much fun and Wild Wild Wet just in Singapore, you bet we will be back again...

Toastmaster Project 3 : Get to the Point

Usually, I will try to draft my script "one project" earlier with ideas from my recent day-to-day experiences.

Change of Plan

I have already drafted my script for Project 3 and am reading the objectives for Project 4 "How to Say it". There are three main objectives, namely, 1. Select the right words and sentence structure to communicate ideas clearly, accurately and vividly; 2. Use of rhetorical devices to enhance and emphasize ideas; and 3. Eliminate jargon and unnecessary words and to use correct grammar.

It would seem to me that something descriptive would be good as a topic for Project 4 which my earlier script for Project 3 would be very suitable. Of course, with some enhancements taking into account the objectives for Project 4.

So, I am back to drafting another script for Project 3. The revision for Project 4 will come later.

Back to the objectives for Project 3:
1. Select a speech topic and determine its general and specific purposes.
2. Organize the speech in a manner that best achieves those purposes.
3. Ensure te beginning, body and conclusion reinforce the purposes.
4. Project sincerity and conviction and control any nervousness you may feel.
5. Strive not to use notes.

Time: 5 - 7 minutes

To Be Better Than I Was Yesterday

Good evening Club President, District Officers, fellow toastmasters, friends and guests,

"Hi, I am Uzumaki Naruto. I live to be the next Hokage of Konoha."

Naruto is a popular Japanese Anime series, revolving around the life of a boy, a ninja - Uzumaki Naruto. Naruto lives in a ninja village, Konoha. As a little boy, he is shunned and detested by the villagers. Because his body sealed Kyubi or the nine-tailed fox in English, which is an evil demon fox with great fury and power that wreaked much damage to the village a long time ago.

To prove himself worthy of love and admiration, Naruto has a dream - to be the next Hokage, the strongest ninja in the village of Konoha. Though he is clumsy and not very bright, he has a will of steel. Through his fierce determination and hard work, he has time and again proven others wrong - finding the light at the end of the tunnel when others have given up hope. Turning mission impossible into mission possible and into mission accomplished.

Like Naruto, I wasn't a good public speaker when I was young. I was terrified, pertified and horrified to speak even among friends, let alone on stage.

I can still remember vividly a scene more than 20 years ago. Yes, 20 years ago when I was in Secondary School and asked to read a passage aloud in class.

"How do you say "TV" in full?"
"It is 'aid' not 'AIDS' - the HIV disease"

The whole class burst out laughing. But not me, to me, this was not humor but humiliation. If there were a hole then, I would sink my head in it like an ostrich.

The stern voice of my English teacher still resonated in my mind. I could not pronounce the word "television" and I always added "s.." after every word. My classmates commented that I had a strange slang.

I felt discouraged and my first inclination was "avoidance". Try not to speak as far as possible. After all, the more I talked, the more mistakes my mouth would sprout out.

In fact, one of the reasons that I chose to do Mathematics was that I didn't have to use English so much. In Mathematics, I used not English but "Symbolish" - the language of symbols - things like infinity or a very large countable number, delta - a small change and etc. Hurray, that was my ultimate escapee from public speaking!

Then, I completed my formal education and progressed into the university of life. I found poor pronunciation a hindrance in communicating with my colleagues. Worse, I would have cold sweat and many sleepless nights whenever I needed to do a presentation. Each blunder just reinforced my belief that I was just not cut out for it.

It was fate that I took a year of sabbatical leave to stay in the United States. There, I met Naruto in Cartoon Network, a Television channel. His grit and determination impressed me. With more time in my hands, I began to learn phonics. To practise my pronunication skills, I read aloud every night without audience, after my kids were aslept.

When I returned to Singapore, I continued with my quest to improve my spoken English - both through self-study - picking up difficult words and try to pronounce, and also actively sought out pronounciation courses. Of course, knowing how to say it right is one thing, and saying it right in front of an audience is another.

So I trawled the internet and found toastmaster club. Here, I found a group of like-minded people coming together to improve our public speaking skills.

The club has given me a lot of encouragement and opportunities to talk, like for today. Though I am still a pretty young member, I have gained much confidence.

With this new-found confidence, I have in July this year, together with some of my colleagues, involved in a 15 minutes skit for my company. I was the script-writer, narrator and actress in the skit. The most memorable role was that of the narrator, where I addressed on stage in front of a 400 or so strong audience.

From a girl who has difficulty pronouncing the word "television", I have come a long way. I first started by avoiding to do public speaking. Then I found courage to face and conquer the fear.

From Naruto, I learn to dream again, to dream to become a good public speaker, to be better than I was yesterday.

Hi, my name is Aileen Chua. I live to be a better speaker than what I was yesterday.

Toastmaster of the Evening.

Memories Triggered by "Monster" Trucks

A friend of mine forwarded me some pictures of a tremendous truck, which someone coined the term "Garbage Truck". However, we cannot judge a truck by its exterior. The interior turned out to be a cosy home - fully furnished and complete with all creature comfort.

See for yourself:









Seeing these pictures brought back fond memories of my frequent family road trips in the States. When we were moving from state to state, we will look out for motels on the road. And yes, there were these "monster" trucks on the highway as my elder boy called them as they were well, so monstrously big.

At the Tourist Centre which is usually located at the border of the state, we will pick up A4 booklets printed on recycled paper and scout for discount coupons. At times, we could save quite a fair bit by staying in pretty high-class "hotel" at low, low motel rates. It was during those times that we stayed in Quality Hotel. Not bad, hence, we decided to patronise the one near Balestier Road (Singapore, this time round :)

It was also at that time that the famous US highway really hit us, it is huge and it has many arteries linking to the different parts of US. When you watch US movies, they often quote Route 66. And yes, we used the Historic Route 66 in Arizona to take in the breath-taking scenary.

See the vastness of nature made me feel the insignificance of an individual. I had a taste of what the Americans held so closely to their heart - freedom. Life is short, I want to live my life my way. And I will define success my way.

Now that I am in Singapore, I suppose I should start exploring West Malaysia with our trusted four-wheeler. Something which we have already started with our not-so-frequent (remember, it's all relative :) driving trips to Johor Baru.

I Have Completed Stock-Take of My Investments To-date

Investment guru, I am not. In fact, I was quite a moron when it comes to investing matters. I was just plain lucky not having enough cash to buy into the Minibond and the DBS High Notes.

Like most retail investors, I did buy into some structured deposit which I was quite ignorant about. I have also dabbled a bit into stocks but they really quite minimal. With a 9-5 job and a family to take charge of, I have little time to monitor the market, let alone be prolific in it. So I have relied on recommendations from friends and/or relationship managers for my investment decisions. Especially the latter, afterall, they are the experts or supposedly so.

My Investment Journey Until Now

When I first started work and managed to accumulate some money, I did my research at the point of purchase to ensure that the company stock was rock-solid. Later, I realised that monitoring was such a chore, I have decided to buy unit trust. Just pay the experts for them to work for you. Afterall, I will still get to pocket the profits after commission is deducted. In no time, I became a stock/unit trust "collector".

I knew that this was not the way to go. Hence, I went for financial courses to brush up my very lacking skills. Magazines and books on investing made it to my reading list staple.

In a sense, the global financial meltdown coupled with the Minibond and DBS High Notes Series that accelerated this process. Never before have I been bombarded with so many news articles written with the layman in mind.

As I pored through the news, one thing stood out loud and clear "the importance of being self-reliance". If a more than a century old bank like Lehman Brothers could go belly up and the experts also go wrong with their bets, I will need to do more monitoring. Afterall, it's my hard-earned money.

So, monitoring I aspire. For the past few weeks, I have digging through my un-filed documents (oh, my goodness) to take stock of the investments I have made thus far. I have even created an Excel template to key in the investment and work out the average yield for my investments made.

For the first time in my life, I see for myself the haphazard investments I have made. Now, I have a faint understanding of what the experts say about asset allocation and the talk about re-balancing your portfolio.

I shall continue to work on my investment knowledge and pen it down in my blog. Like most people, I would want my money to work hard for me.

A Brief History of Stock Crashes, Part 2

Let's move on to the 4 stock crashes in recent history.

4. The Asian Financial Crisis in 1997

The road to recovery was slow and painful, hit further by subsequent economic shocks. Perhaps one of the stock crashes most felt by Singaporeans as many saw their home prices turned south - previously almost unheard of.

Affecting largely Asian countries, the crisis was due to excessive speculative attacks to Asian currencies, particularly the Thai baht. The contagion spread swiftly and Asian economies went into recession.

Smartened by this crisis, Asia's banks are now fortified with huge reserves and are more able to face the current downturn.

5. The Dot.com Bust and 9/11 in 2001
Recovery took a short 2 years for this crash, with the market up and running again in 2003. This time round, those badly hit were the Western countries, especially US and the European Union.

What caused the crash was irrational exuberance towards the new on-line market. Here, a small history from the Great Depression repeated itself with stock prices of on-line businesses rocketed sky high. The bubble was pricked as newly listed start-ups folded one by one.

To investors, this re-inforces the importance of buying a stock for what it is - "its fundamentals", not what it will be - "with hope that some suckers will buy the stock for a yet higher price".

6. Sars and the Iraq War in 2003
Remembered the days when having a fever sent a chill down the spine of those on the road? These days not many people remembered the slight blip on the stock chart with fairly rapid recovery, but more of the days of quarantine during the SARS epidemic. However, in 2003, dark skies enveloped Asian economies which were just finding their feet after the 1997 Asian Financial Crisis. The breakout of the Iraq War added further gloom to the sky line.

7. The Credit Crisis in 2008
The credit crisis erupted more than a year ago due to the US subprime mortgage issue. It rapidly morphed into a financial Armagaddon due to today's very connected financial market. As many US and Europe investment banks, with even household name insurer AIG marred by the toxic subprime mortgage, fear and panic overwhelmed the global bourses.

Today, many stock bourses rallied finally. However, investors will need more confirmation that things are fine before treading gingerly into the market again. The road to recovery is nowhere in sight yet.

History has shown that while stock crashes are almost overnight, recovery is slow.

Lessons for Us
- Always invest with money you do not need.
- Buy a stock for what it is, not what it will be.
- While many analysts are recommending that it may be time to bottom fish, do your homework.
- No one can predict the market movement, the Great Depression lasted 12 years, the current crisis is only more than 1 year. Anything can happen, have a cut-loss mechanism and admit your mistakes early.

For me, the current crisis provided me with a lot more information about the financial market. I remembered how my heart sank when the value of my badly-beaten unit trusts fell more than 50% during the 1997 Asian Financial Crisis. But it crawled to register an annual return of more than 10% last Dec before this credit crunch set in.
With more information, I am less disturbed as I pored through the financial reports.

Another reason is that I do not have all my eggs in one basket. But, I will have to adopt a more conservative approach when I am closer to my retirement age. For now, I know that time is still on my side.

A Brief History of Stock Market Crashes, Part 1

The financial malaise triggered by the credit crunch erupted more than 1 year ago in the US, was earlier largely confined to the US and Europe. In Singapore, perhaps it is the near-collapse of AIG that brings home the fact that no one will be spared from the financial carnage. The recent weeks' plummeting of shares in the global bourses have also put spotlight onto the financial world - where many are attracted by the possibility of money snowballing. However, the focus now is the rapidly diminishing value of the money.

With the many reports on the financial news, let's us first take a look at the brief history of stock market crashes. Since the Great Depression in 1929 till the current crisis of confidence, there are a total 7 stock market crashes.

For this post, I will list down the first 3 stock crashes and their lessons for us.

1. The Great Depression in 1929
This was the stock crash that took the longest to recover - 12 years. Ironically, it was the advent of World War II (WWII) with increase Government spending that pulled the economy up.

The main reason for the crash was due to speculative play at the stock exchange. Many were willing to pay a high price for stocks as they believed that someone would pay an even higher price for it. As the stock prices were not supported by economic or company fundamentals, they eventually succumbed when things turned sour.

Black Thursday came on Oct 24, 1929 after one month of volatile trade. Prices plunged by 40% from Sept 1 to Oct 31, 1929. Over a 3 years period up to Jul, 1932, the correction was 90% downwards. In 1933, the gloom in the Wall Street filtered down to the Main Street and the world went into global depression for 12 years.

The Great Depression is now the benchmark of how far the economy can fall. It is definitely not a pleasant experience for us to re-live that experience.

2. The Oil Shock in 1973
Recovery time for this stock crash at 9 years was the second longest. Politics between the oil-rich countries and US was the main reason for the crash. Unhappy with US, oil producers raised oil prices by 4x and stopped oil shipment to US and their allies in Western Europe and Japan. This outward show of displeasure led to a strong surge in oil prices feeding into other parts of the economy.

Inflation ensued and the then-impending recession was exacerberated. It was during this period that the world experienced "stagflation" - stagnating wages with high inflation .

The short-lived stabilisation in oil prices in late-1970s was quickly overtaken by sharp spikes oil prices with the break-out of war between Iraq and Iran. Light at the end of the tunnel was only visible come 1981.

Today, this era is often used as a reminder of how oil price peaks could impact the world economy. Much progress has also been made in the search of alternative energy to reduce our heavy reliance on oil to power the economy.

3. Black Monday in 1987
This stock crash held the record with the fastest of 1 year because the world economy was healthy. The cause of the crash was due to computer glitches.

On 19 Oct 1987, a group of investors moved en masse out of stocks. This triggered the computer automation to cut traders' losses with the issue of large number of sell orders. Driven by fear, many more investors dumped stocks, causing the stock prices to dive further.

Dow Jones Industral Average plunged 22.6%. This was the biggest percentage drop in history - wiping out US$500 bil (S$742 bil) in a single day.

This episode shows the volatility of the stock market with panic over-ruling rationality. However, it also shows that if the fundamental is strong, the market will rebound in no time. Hence, the saying in the stock market that the brave will be rewarded.

End of Part 1
That's all for this post. In many analyst reports, there are a lot of congruences drawn with the Great Depression. Yet at the same time, many believe that the 1997 Asian Financial Crisis (that's stock crash number 4) has strengthened the banks' position in Asian and they are more able to weather this storm. Nonetheless, the knock-on effects from the slowdown in US, Europe and Japan, are undeniable. And it's official - based on advance estimate for 3Q08, Singapore has entered into its first technical recession since 2001.

I will be continuing on the next four stock crashes in my next post. Do look out for it.

Exam Stress

Just the other day after P's English tuition, I flipped through his work and was surprised at his atrocious handwriting which was barely legible. I asked him what had gotten into him. His reply "I am tired." I tried to probe further but the answer remained the same. A few days later, I found that he had missed out a page in his school's mock exam paper. He also seemed to be quite distracted recently.

It then dawned on me that he was stressed. So even though examination is just next week, he gets a day off. I remembered I used to have exam stress too. And the more productive way to handle it is actually to understand where the stress comes from. Is it because one feels that he or she is not sufficiently prepared for the exam? Or is it because of the tension in the air?

I choose to believe in the latter as it is difficult to elicit an answer from a 7-year old boy. In any case, he has been consistent in his school work. To brighten up his mood, I was sharing with him that I used to love exam. Yes, I did. I looked forward to the "no lesson" days during the exam period and not forgetting the long school holiday after exam.

He then looked at me in awe, I did not know whether this new way of looking at exam sink into him. But one thing was certain, he looked happily.

Doing Nothing

Recently, I am clearing my leave at times for the whole day - AM to coach my boy whose examination is around the corner and PM - to do nothing. Yes, to do NOTHING. This is often regarded as a luxury in the fast-paced Singapore, where time is such a scarce commodity.

Well, I have been keeping my "nothing" time quite busy initially. With the financial turmoil still brewing, I took the opportunity to take stock of my investment to-date. In a sense, this financial meltdown is a good wake-up call to me who have started to venture into structured investment products and stocks etc. Tempted by greed, I have started to put in some money into these high-risk products without knowing much about them. Another emotion that ran high during period was fear. Overwhelmed by fear when I learnt that AIG was on the verge of collapse a few weeks ago, I wanted to take leave to join the queue to terminate my policies. Luckily, my fear was tamed by the assurance of MAS that AIA has enough assets to remain standing. So instead of taking leave to queue, I read the fine-prints to have a better understanding of what I was into.

Next, calm or should I say emptiness set in. It is strange that when I was working, I often lamented that time was not enough. However, when time was no concern, I did not know what I should do. It seemed that I did not have any hobbies to fill the void. Then I decided that it was okie to let my hair down and just relaxed. So off, I went to go for my long over-due facial appointment and shopped for X'mas presents. I guessed I still time to get over with just letting time idle away...