Opinions are like A-holes. Everyone's got one.
You mean this?
“They (residents) should thank the Town Council for
working hard to come up with a diversified portfolio
to generate income so that residents do not have
to fork out more money.”
I don't know if we should thank him now for "losing" millions of dollars?
Why in the first place TC wants to invest with residents money to catch up 2007/08 7% inflation or GST? And then MP arrogantly concluded that residents should be thankful to TC for diversifying the portfolio so residents no need to pay more money? What more money?
I don't feel that the TCs did anything wrong. Despite what most of us read on the forums or in the papers minibonds and high notes are not really considered high risk products. The TCs merely invested in a product that was considered lowrisk.
If you put money in a high note say, the money is deposited in a SPV and used to buy a very safe asset (eg govt bonds). At the same time the SPV will sell a credit default swap to out side investors where the underlying is a basket of bonds.
A credit default swap works like this. I sell a CDS with DBS bond as the underlying asset to Tommy. Tommy pays me 4% of the bond's par value for the CDS. Lets say that DBS bonds sell at $100 if the bond does not default. If the DBS bond defaults, the market price is only $30. If the bond defaults, Tommy has the right to sell the defaulted bond to me at $100. So you can think of CDS as bond insurance.
So back to the high note example, if nothing goes wrong the investor will receive the return on the low risk asset (assume 3%) + the money received from selling the CDS (assume 4%) giving a total of 7% return (before minusing the company's expenses, commissions etc). If one of the underlying bonds of the CDS defaults, you stand to lose part or whole of your principle depending on the market price of the defaulted bond. In the case of High Note, Lehman bonds was one of the underlying bonds. When Lehman went bankrupt it's bonds were worthless causing the High Note investors to lose all their principle.
So why do I say that these structured products are not high risk products? Well, the risk or losing your principle depends on how likely it is for one of the underlying bonds to default. When these structured products were sold Lehman has an S&P rating of AA- which means the chances of it going bankrupt is the same as DBS (also rated AA-). Do you trust DBS with your money? If you consider fixed deposits with DBS as risk free then why consider High Notes as high risk? Yeah the govt guarantees all our deposits in banks now but a few months ago that wasn't the case. The govt only guarantees X amount per account holder per bank.
the TCs should be thankful those investments that went up in flames still kept their jobs & they had so much $$$ in their pockets to play with!!
... & lastly dun need any form of accountablility for loosing coffers $$.