Dear CIGAs,

There is a significant error being made by these USA financial entities. They are looking at Asian investors as having the same mindset that North American or European investors have. That is a major mistake. You might be able to trash US or European investors and personally get away with it but that is not so with the new trillionaire Asian sovereign funds or personal Asian money.

Having dealt with the Chinese and Hong Kong Gold Association since 1968 and as the largest trader between 1968-82, trading there via Alex Chan then At Sun Hung Kei, I had a good look at the inner workings of Chinese finance.

The busted US financial institutions that have taken Chinese money would be well advised to pay attention to the following two key items.

1 Transactions made in Asia are made with the individual in charge as MUCH AND MORE than the bank holding company that signs the contract. The CEO of the international investment bank taking this money is looked at as the entity they have invested in.

2 Do not waste, lose, and most importantly steal their money. Steal means take the funds under any false basis.

The CEO of all accepting bank holding companies would be well advised to understand fully that he/she did the transaction, not the bank holding company. They themselves carry the personal responsibility of their firm’s actions.

For those firms who were broke or very close to broke, they are in all probability going against the wall again, this time by litigation against which they have NO viable defense.

The Chinese money is going to be wasted on attorneys in hopeless litigation which will have to be settled by the defendants in huge amounts. Litigation and settlements are going to cost these bank holding companies as much and more than they have already lost.

I would like to tell you two small stories from my personal experiences. The first will be Sun Hung Kei’s margin collection policy. The next will be Nicolas Deak and the Manchurian Candidate.

I had been trading as the largest interest in Hong Kong gold teals position for future delivery. The price of gold was ranging much greater dimensions in Asia than the then $10 COMEX limit. Debits and credits were flying all over the place.

I owned a clearinghouse, a floor trading team and a CFTC commodity-dealing firm, among other entities. I asked Alex Chan of Sun Hung Kei how in the world with so much money being made and lost does Sun Hung Kei keep up with failed or late paid margin calls.

Alex answered, “We have our ways.” You can be sure that after hearing that and how it was said, I never owed Alex anything at anytime.

The next story has to do with my friend and neighbor Nicolas Deak. He was a personality in the currency and bullion world, owning various US, Hong Kong and Swiss banks, dealerships and other financial entities.

Nick’s bank in Hong Kong went broke with rumors of a 5th column in the staff there that had enriched themselves. Nick may have been a better entrepreneur than manager.

About a year later, a lady arrived at the office of Deak & Company on Broad Street. She first went into Otto Roethenmund’s office and asked where Mr. Deak’s office was. Before Otto could answer she turned and walked down the hall right past Nick’s PA, and into his office. She opened her pocket book and withdrew a Smith & Wesson .357 and blew Nick away.

The police investigation revealed that she was homeless, and a formerly institutionalized mental patient.

She was well dressed and had just flown in from the coast. The pistol she used was brand new.

That sounds like a real Manchurian Candidate and pay back to me.

Good luck to Jimmy C. and all the CEOs that have grabbed Asian money to in all probability carry over their bank holding companies until litigation take them all to the wall again. I had told senior management at Bear Sterns five years ago that over the counter derivatives, known as structured products, was going to break them. Of course no one paid any attention to me. Their position was simple. The profits exceeded 50% of their total earnings of the firm.