Life Without Principal? Its Just Money

First things first, the heading was my play on the title of Johnnie To's latest film about "financial markets and the ruination of people's lives". The movie title Life Without Principle was aptly taken from the insightful writer Henry David Thoreau, whose lecture given in 1854 (can you believe that) which then evolved into a masterfully persuasive essay. Its easy to see how and why his words still ring true (or truer for financial markets) till today - because when you correctly criticise the deviation from the true north on human dignity, respect, righteous values and integrity ... you are bound to be right for a very long time. The essence of our lives is too fixated on the notion of money - I may not be able to tell what the true essence of our lives should be, but money is not and should not be the focal point to our pursuits.

To sum up Thoreau's essay, his themes were:

1. Don’t cheat people by conspiring with them to protect their comfort zones.
2. Don’t make religions and other such institutions the sort of intellectual comfort zone that prevents you from entertaining ideas that aren’t to be found there.
3. Don’t cheat yourself by working primarily for a paycheck. If what you do with your life free-of-charge is so worthless to you that you’d be convinced to do something else in exchange for a little money or fame, you need better hobbies.
4. Furthermore, don’t hire someone who’s only in it for the money.
5. Sustain yourself by the life you live, not by exchanging your life for money and living off that.
6. It is a shame to be living off an inheritance, charity, a government pension, or to gamble your way to prosperity – either through a lottery or by such means as prospecting for gold.
7. Remember that what is valuable about a thing is not the same as how much money it will fetch on the market.
8. Don’t waste conversation and attention on the superficial trivialities and gossip of the daily news, but attend to things of more import: “Read not theTimes. Read the Eternities.”
9. Similarly, politics is something that ought to be a minor and discreet part of life, not the grotesque public sport it has become.
10. Don’t mistake the march of commerce for progress and civilization – especially when that commerce amounts to driving slaves to produce the articles of vice like alcohol and tobacco. There’s no shortage of gold, of tobacco, of alcohol, but there is a short supply of “a high and earnest purpose."

I chose to replace the word "principle" with "principal", which is capital. Life without capital. When ordinary folks try to make their way through the financial maze of humdrum earnings, many have to do so via limited capital. Limited capital is by nature nothing bad, but when you try to use limited capital for maximum gain or even multiple gains, you would be stepping on the wonderful world of leverage. Leverage magnifies minimal gains. I do not have to go into how that can be a killer weapon or a rope long enough to hang ourselves when we use that recklessly in property, stocks or futures.


Money is a great equaliser. A guy who is a 15 year analyst may not be as smart as a housewife who has played the property markets brilliantly in China and Singapore. When a person is given a facility or line of credit, he/she is NEVER vouched or tested for their brilliance or aptitude when it comes to investing or speculating. You have the limited capital, a steady job, you get the line. A person has to be able to DRIVE to be granted a driving license, ... you graduated from LSE in business or you may be worth $5 million has no bearing on you getting the driver's license. WHY then there is no such "licensing" when it comes to investing? Is it less dangerous than driving? Lives can easily be ruined and families badly shattered owing to people over extending themselves in a field where they do not have the "proper expertise".

I do not have anything smart to recommend as a solution. Markets will boom and bust, Cycles will cycle, Impoverished investors will rebuild their nest and re-enter as if nothing ever happened, Financial firms and banks will do silly things and ask for bailouts, Greed will always prevail in financial markets as everyone tries not to be the caught ...


My parting shot: The markets will always be there ... it is us who may not be. Even if we managed to stay the course, did we stay fairly true to the true north of our souls?






Movie Review by FinanceAsia: The best feature movie so far about the crisis comes, perhaps surprisingly, from a Hong Kong director better known for stylish, often violent triad thrillers. "Life Without Principle" is out in Hong Kong theatres. It is directed by Johnny To, a veteran known for popular (but a little cheesy) shoot-’em-ups like "Expect the Unexpected", "The Mission" and "PTU", as well as the complex, rich and disturbing epic, "Election".


But To turns out to have a deft touch when it comes to unravelling a true crime. His latest movie weaves the story of a wealth manager at a local bank, an old lady looking for double-digit returns, a loan shark, an illegal boiler room, a cop’s wife trying to afford a nice flat and – this being Johnny To – a coterie of gaudy triad bosses and flunkies.


This is a must-see movie for anyone involved in the flogging of investment products in Hong Kong. Denise Ho, a Cantopop star who looks good in a corporate Armani suit and heels, plays a bank teller who is pressured into selling an old lady a Bric fund that she clearly is unsuited for.



The film takes us through the painful process that a fund sale requires, including the recording of a questionnaire in which the old lady, played by TVB veteran Soh Hang-suen, who is portrayed sympathetically, a victim complicit in her own undoing. She is just as greedy for high returns as the loan shark who laughs at Ho’s offer to put his HK$80 million on deposit into investment funds for a 2% fee – and just as impatient as a policeman’s wife who takes a dangerous bet by seeking a loan for a down-payment on a new apartment in Sheung Wan.


Johnnie To, with the financial crisis as a backdrop, uses a market crash and the mayhem it causes on all of these bets to cast a cynical eye on financial products and deals. In his world there is little difference between a fictional bank’s ruthless purveying of funds, customers’ greed for high returns, a housewife who obsesses on owning a flat, a triad’s attempt at charting the Hang Seng Index and a fundamental analysis of a company’s stock.
What is investing? asks a rich, sleek triad boss to the hapless servant who tried to swindle him. It is predicting the future. Get it right, you win; get it wrong, you get stabbed in the chest. Capital pricing models, behavioural finance, and coteries of well-heeled financial analysts are, in total, as relevant as the superstitious bets placed on the Macau tables.


As the market tumbles amid background screams of “I kill you later” – the wry play on the Hong Konger’s accented rendition of “accumulator” – To makes the case that in the real world, commission fees and leverage can be as deadly as a gangster with a gun.

Temasek & Its Bank CEOs

What is it about Temasek and its banks CEOs. One or two resignations may be coincidence, but the number of frequent "resignations" by Temasek owned bank CEOs may hint at something very wrong with the way Temasek manage their units.



Temasek has lost billions during the crisis. Their Bank CEO in India was pressured into leaving. Their Indonesian CEO (Bank Danamon) also recently resigned under pressure, and now Bridget Lai.

The DBS Bank CEO position is also a hot seat. The Asian-American's predecessors - Frenchman Philippe Paillart and American John Olds - each didn't last more than 2 years. It's not bad that Jackson Tai managed to stay in the largest bank in ASEAN for six years. Still one can't help but think why the rapid changes. Were they "pressured" to resign?

The problem I think stems from the way Temasek wields its power. Its the inability to "let go" and empower their CEOs. Its also they way they appoint "people onto the boards of the bank". Those appointed are probably "too beholden" to Temasek, and rather than having a synergistic board, you have a board that continuously watch over and second guess every major decision by the CEO.

Temasek better change their ways. You live or die with the CEOs you appoint - once you have appointed them, unless they do something drastically that impairs the value of the bank, then you do something. You look at the entity they are managing and then sit down to set reasonable targets on metrics to be achieved, then leave them to do it. No one in the CEO position wants their every move to be second-guessed, no one in those position wants to have "micro bickerings" and "fine tuning suggestions" every month from the top.

Temasek do pay top dollar, so compensation is not an issue. Temasek needs to re-evaluate how they do things. Temasek has shown that they have been very poor in reading macro signals, very poor in digging deep on financials when buying those large banks. They have been too driven by "top strategy decisions to get into big banks and big financials" in a big way without proper understanding of business cycles or a decent understanding of the various underlying business models of the big banks.

Then they get too "close" with the smaller banks and their CEOs, to the extent of frustration for many of these CEOs. The board is no help to the CEOs as they act like sheriffs for Temasek rather than a cohesive board.

Temasek have proven that they cocked up royally when investing in big banks. Now with smaller banks, where they can appoint most onto the boards, they have also shown a great affinity to piss off CEOs.


p/s photos: Rina Chinen