Managing the human greed

It has only been a mere 3 months since my last blog … but what a 3 months that is …. Within this 3 months, none of the investments banks in US are left standing.  Who would have thought big investments banks like Leman Brothers, Morgan Standley, Merrill Lynch, etc would file for bankruptcy or needed white knights to inject cash.   And Who would have thought AIG need cash so badly that it had to be bail out by the US government.  But… fall they did, one by one … like a stack of dominoes.

Back in Singapore, the fall of these US banks spelled trouble for the local investors as well. The bone of contention lies with structured products (that are backed by Leman Brothers) sold by local banks.  The structured products are super complex, involving swaps and options and what-not, piled upon the primary assets layers after layers like sugar icing on a cream cake.  Nice to see, sweet to the taste, but if anything goes wrong, leaves you with a terrible migraine and excruciating heartache as what is felt my many people now.

As one would expect …. people are now out braying for blood. ” I have been mis-sold the product, cheated. Life savings gone!” they all cried in unison. Looking at the complexity of the structured products, it is not difficult to empathize with these people. Even a professor might take several hours or days to fully comprehend the complexity behind the product or to figure out what the actual underlying asset is.  While my heart goes out to all the people who had invested and stand ready to lose their investements, I cannnot help but feel something is terribly wrong.  While I try to pin point the problem, lets try to answer some simple questions:

1. Is there a chance that people are being mislead to purchase the products?

I would say … probably there is.  Looking at the complexity of the product being sold, it would take a huge effort by the relationship managers to try and explain the product to the investors.

2.  Are all the affected investors victims of mis selling?

I think not. in fact, to be more realistic, probably only a handful of them are. The rest I felt are more victims of their own greed and that is where the entire problem lies.

And why do I say so?  Let me try to explain.

I believe at least 90% of the people would know the concept behind “Putting all your eggs in one basket”.  If not for greed, why would someone, who is retiring, decided to put all their life savings into a product that they cannot even understand? This simply flies in the face of being rational and logical.

The money belongs to the investors. Ultimately, the relationship managers did not resort to using force or fraud to force investors in parting with their money.  I am quite sure that if Lehman did not fail and these investors got their expected gains, none of these allegations of mis-selling would have surfaced.

Even without considering the above points, I am sure all of us knows the phase “if it is too good to be true, there much be a catch some where” or “there is no free lunch”.  If the investors can take a step back and think about the question “Why is this product that I am investing in has the potential to generate so much higher return as compared to a normal fixed / time deposit?” or even stop and ponder “DO I truly understand what I am investing in?” I am sure the tragedy that is playing itself out now would not have occurred.  Some how I have a nagging feeling that such questions had flashed across their mind at one point of another, but was summarily brushed and swept aside into the deepest recess of their mind by their own greed.  Because after all, they are investing their life savings… something which they cannot afford to lose, i.e. the money that is going to sustain them for their retirement.

Lets wind back the clock to maybe a year back …  economy is doing well, equity prices are rising, interest rates are all time low. Even if the RMs had dutifully explain the derivatives that are embedded within the structured products to the investors and carefully pointed out that there is a chanse that banks backing the assets of the products would fail and the the investors might not get their capital back.  I can bet my last penny that with an anticiapted return of 7 to 8% per annum, there would still be people buying into the product, dispite not knowing a tenth of what the product is all about.

The cost of being “GREEN”

The words “clean and green energy”, “global warming” and “recycling” are certainly creating a buzz recently. The effect was also heightened by the unusual bouts of weather we are facing currently, for example droughts and then floods and I swear I do not need to go to the Antarctica or the Artic to see the effects of global warming … I can feel in in my everyday life. The difference in temperature has never felt so great between an air conditioned office and the open air car park. It never felt that hot during this period of the year and I do not remember getting sun burnt just by walking under the sun for an hour.

 

The earth is slowing changing…. Paranoid you might say but it is true … you can see it with your own eyes…. And in my humble opinion it is due to the human race using too much of a certain resource, causing imbalance in the whole eco system. Humans are like parasites, they multiply fast, used up a lot of resources and lay waste to the places they occupy.

 

Thus the need for cleaner energy . Something that gives off less carbon dioxide when consumed. Something that is renewable. And in comes vegetable oil, in the form of peanut, corn, plam tree, sugar beet and many many more. Clean and green these alternative sources of fuel may be … but what are the cost to the environment? Big areas of primary and secondary forest and perhaps swaps are being cleared for the production of these so called clean and green and renewable energy source …but did any one notice the cost?

 

The forest and swamps absorb carbon dioxide, the trees in their natural photosynthesis releases oxygen and you are clearing all of it away just to build something that gives off lesser CO2 … for some one who did the benefits and cost analysis … I am sure this had never some into the picture … perhaps all that the decision maker sees is just dollars and cents and GDP.

If you do not want my attention, please do not do something stupid to attract it.

Normally I do not talk about such petty stuff, but the behavior of some one I met on the street just now really piss me off.

 

I was walking my dog as usual in the evening along the beaten path, which is a small garden below my block of flats. Along came a scrawny small kid, about 4 to 5 years old, acting like a big ah beng. He was chasing cats around the garden, screaming at the top of his lungs, making the high pitch sound which kids at his age seems to love making.

 

Find you chase cats, that is your bloody business …. I never have much liking for cats anyway. However, when he saw my dog, he rushed towards my dog, screaming at the top of his voice… At that time, well, my dog was literally minding his own business, pooing on the grass patch and when he saw and heard the raving lunatic running towards it, it obviously got cold feet and ran and hide towards me.

 

I tot the kid would be satisfied and leave my dog alone … but who knows he started to run towards me, again screaming … This time round, my dog, who was hiding behind me all the while, started barking and ran between my legs to stand guard in front of me .. (he is so sweet and such a darling right? But that is beside the point)

 

The kid was so taken aback that he fell down and started crying … and that attracted the attention of his mother. ( I guess his mother must have been partially deaf from all his high pitched screaming for she only reacted to his pathetic crys) She came around, comforted the kid and led him away. Before leaving, she gave me a “it is all your fault look”. My god!! I cannot stand it … My dog did not ask for your kid to lavish him with the kind of attention in the first place … If you are that attention hungry, be prepared to accept the consequences that come together with it.

Anyway for those who are wondering what my dog looks like ….

Survival Skill Sets had changed?

Yet another poor kid drowned in a man-made pool.  My heart goes all out for the family and I offer my sincere condolences.  However, looking at the statistics, within the past week, this is already number 4^th case.  Basically for more than half the week there is someone drowning everyday …. This makes me wonder if there is really a trend ….

I am not sure about you guys, but for me, swimming or learning how to swim is one of the most basic survival skills that a child must have or would have picked up along the way while growing up. This is
Singapore and we are an island surrounded by a pool of water. Even if you are not an accomplished Olympic swimmer, at least you should be able to float or paddle to stay afloat.

My personal feeling is that kids nowadays are a whole bunch of deprived lot. Maybe the Mummys and Daddies beg to defer.  They would say “No, my kid is not deprived. Instead, my kid’s life is very enriched…. They go for tuition classes, enrichment classes, ballet classes, singing classes, etc” and the list goes on and on and even toddlers go for pre-school classes to give them a head start before they hit the academic road. But wait a minute, why aren’t there classes for self exploration, for example: climbing trees, catching guppies / fishes by the big drains, interaction with other children of other races / religion, playing catching or marbles?

Engaging in simple activities like those I had listed had prepared and equipped me with the skills I need for life. Recognizing danger and learning the skills like climbing or swimming to overcome that danger.  Maybe those activities do not enrich my wallet, but they had certainly enriched my life but to many parents out there, perhaps those activities maybe a total waste of time and dangerous.   The basic survival skills now is to cultivate skills that fill up the wallet ….