On my big sis, her debts, and getting burnt by Lehman's bonds...

Talking about getting burnt by investing in the bonds from Lehman Brothers, my sister is one of those. I would certainly have hoped that, given my eldest sister (A) is well-educated and is a financial controller in her company, she would be more discerning that the average retired/near-retirement investors who lost most or all of their savings by investing everything in the bonds backed by Lehman Brothers, claiming to have principal protection by the retail banks who were pushing them. Amazingly, my sister did not read the fine print. She's now lost probably more than US$50,000 worth of her savings which is a fair chunk.

About my sister and her debts...

Me and my other sister (J) were upset at A. Oftentimes, A is a kind-hearted and very easy-going person, but at times seems so complacent as to the point of naive:

(1) She's single, but she bought more than 6 insurance policies, at least 3 of which are whole-life and the rest term-life. She buys one every time her friends approach her. Invariably, these "friends" are new to the insurance agent game, and are always pushing to families and friends. Invariably, she would buy from them. She bought all those whole-life policies "to do savings." She would buy these policies and file them away, without bothering to reveal them for details, or investment returns (for the "savings" portion).

(2) J and I ask her why she's holding 3 term life policies when there's no one who needs support from her, should she pass away. A has no answer for it. We ask her why she hasn't kept the money herself, and do the investment/savings herself. A can't be sure of herself to do those duties. Admittedly, she's a very good financial controller for her employer. It sets me to wonder why and how some people are always better at making/keeping money for others, but not themselves?

(3) Only just last year, a friend of hers approached her about this "investment idea" of the bonds from Lehman Brothers. It's "structured product," she's told. That's about as much as she can tell us. She doesn't know what these structured product does, but it sounds impressively, and it's from a big company, and her friend told her it's "principal protection." So, she poured her life savings into it. Amazing, isn't it, how she would do that without second thought?!

(4) Sometimes, though, I think A's complacency and laid-back attitude come from her religious belief. She strongly believes that God will provide for her, and in helping others. Not that they're bad traits, but it got her burnt time and again. I don't think she ever learnt her lesson.

(5) Twenty years back, she lost all her savings "playing" gold margin. The idea is simple enough. Gold price could either go up or down. You put certain deposits in your margin account with the brokerage. If you bet it to go up, and the price goes up, you win; but if price goes down, the deposits will be pulled out to cover margin loss. Likewise, if you bet it going down, and it does go down, you win; if it goes up instead, it's your margin loss. As long as you have enough money in the margin account, you can stay in the game (as you can stay on at the gambling table); but if all money in the account is used and you don't have any money to cover margin calls, they cut you lose and you definitely lost. She won a little bit initially. That got her started. (Isn't that how every gambler gets started, to have small gains initially?) In a perfect world when she bet against the market, she might have stayed on for a bit longer. BUT, what she didn't realize at the time was that, the so-called "price" quote from the brokerage does not always sync with the open market. The brokerage constantly "tweaks" or delays their price quote, knowing which of their customer(s) would not be able to make the margin calls, and the brokerage would be able to cut them out and pocket the profit itself. Gold margin is a 24x7 market. During the height of her "game" in gold margin, she hardly had a good night sleep as she's constantly calling in to the brokerage's hotline to check the price... until they cut her lose for coming up short with the margin calls. In the end, she lost close to US$200,000 in all - her total savings.

(6) Twenty years on, she's doing it again. This time though, it's not just these "structured products" or various life insurance policies. Afterall, investment loss (unlike margins and derivatives when the loss can be unknown for a long time) is only limited to the amount you put in. Apparently, A never learnt her lesson. This time, though, it's worse. The "holes" that she dug herself include not just these investment products, but her so-called boyfriend (bf).

(7) Now, I have to say something about this bf of hers. He's a sales. He used to earn big money in the 1980s doing import/export (I/E) from Asia to US. That was before China got in the direct-manufacturing game, and all big Western buyers go straight to the Chinese manufacturers for finished products. The middleman profits were very handsome back then, and he didn't need to do much hard work. In the 1990s, he split from his previous employer and tried his luck to be his own boss, dabbling in blackmarket watch dealing in/out of China. He paired up with a couple of shady mainland Chinese to start a shop at the border of China/Hong Kong. My big sis started dating him around the time when he started out on this. The money was good for a while, and then the mainland Chinese guys decided that they knew all his merchandise source, and since they knew how to sell now, they wanted to kick him out. What followed were a couple of armed robbery to the shop, and all watch inventory were "cleaned out." He got kicked out of the venture, with the mainland Chinese guys maintaining that he still owed them half of what's lost in the lost inventory. All he got left were some very old inventory from the previous I/E venture.

(8) For the past 5-6 years, he wanted to make a "comeback," first in the watch dealing, then the I/E side. He sunk all his own savings, sold off all his properties, saved the last one he's living, but re-mortgaged it too. But you know where it's heading... my big sis, being kind-hearted and gentle as she is, she sunk ALL her savings to his various dealings too. In a way, she's not an investor type. She didn't even so much as asking for info on how business dealings. All she knows was to supply the cash to him. When all her own savings were gone (all sunk to his failed biddings), she asked us (all siblings) to chip in. I told her at the time, it's not for him, but it's for her own use. No matter, she sunk all the borrowings from the family to him.

(9) It's only until last week, that J and I realized that A has even used all our parents' savings (the part held in her name for them), and even overdrafted, using parents' savings as collateral. Oftentimes, she's also paying for the mortgage payment of this good-for-nothing boyfriend too. She ended up using 96% of her monthly salary to repay loans.

(10) This was the time when she thought these "structured products" might be able to make some money for her. (Can you believe a more naive reason for investment - but it's more like a gambler's excuse?) Now she's lost it all.

(11) I'm not sure what's going to happen to A now. She has maybe another 10-12 years in working life before retirement. And she's still praying for God's providence. She's crying out loud, on why God chose such a "difficult path" for her. J and I told her time and again, that that's prayers. She has chosen this path, and she insisted that God agrees with her, and delivers her the resources to go down that path. Not so - and God has shown her repeatedly that He does not condone the way.

It's always hard when news headlines hit close to home. I would never have thought or hoped that I would have stupid investors from within my family. But things happen, and God will show us, we're all humans, and we all make the same or similar mistakes. I'm still praying for my big sis to learn her way, change her attitude, and repay all her debts; although I'm not sure how. I'm not sure if it's helping her at all, by having her hit a jackpot or something and repay all these debts miraculously. She would have learnt the lesson the hard way...much harder than her last, 20 years ago.