Pinnacle Notes Series 9 & 10

Dear Mr. Tan

What is your view about the Pinnacles Notes Series 9 & 10 that was advertised recently? It allows the investor to earn 5% p.a. plus a potentail bonus of up to 4% p.a. Is it a good investment?

REPLY

Here are some points stated in small print in the advertisement:

1. The Notes are secured by US dollar demoninated CDO securities that are rated at least AA at the time of issue.
2. The Notes are not principal guaranteed. Upon the occurence of a Credit Event (and a few other circumstances), you could lose all or substantially all of your investment.
3. You are asked to read the details in the Prospectus and supporting documents (which I understand is about 100 pages long), before you invest.

Have you heard about the sub-prime problem in USA? Many of these mortgages are repackaged into CDOs and sold overseas. The CDOs referred to in the Pinnacle Notes may comprise of these mortgages.

There are a lot of uncertainty and unclarity. Do you really want to make this investment?

You can read my general comments about structured products in this FAQ:
http://www.tankinlian.com/faq/structuredi.html

If you wish to know more specifically about the earlier series of Pinnacle Notes, you can read Dr Money's website:

http://www.askdrmoney.com/Analysis_Structured_Explained.htm.