Saturday, September 20, 2008

MINIBOND

wat a big scam

The minibonds saga came about with the collapse of lehman brothers. The whole thing is very complicated but its a clever marketing scam used to entice retail investors like you and me into believing that the investment is lucrative.

Minibonds Ltd is a company issuing the minibonds in different series targeting at different markets. In essence, Lehman Bros wanted to hedge itself from risks from any credit event i.e. default of the six Reference Entities which include barclay, deutshce, UOB etc possibly becos it possess their securities.Hence, set up this special vehicle and lehman will pay minibonds a premium to insure itself against any default of the six REs. In this case, when lehman collapses,no one will pay the premium anymore and thus, the issues will collapse as well. At this point in time, the residual value of the issues will be liquidated and returned to the investors. As most are thrown into CDOs, hence, the values of those are nearly zero or close o zero now.

The real scam lies in the fact that FI and distributors misrrepresented and misinterpretted and sold the "minibonds" as bonds and investors tot they are buying the securities of the six REs and hence, the positive outlook. In effect, the investment were linked to the six REs but the six Res had nth to do with the so called "bonds". The quarterly coupon issued to investors were collection from the CDOs and thus, investors tot they will paid due to the good and continual outlook for the big banks..well..well..it turned out that things were heading south.

So yes, pls google and find out more before buying any bonds.!Cheers