by Steven Chan
19 October 2008
A Hong Kong newspaper reported on 12 Oct 2008, the account of a retired security guard who never gambled on the horses or the lottery and would normally declined when his banks tried to sell him investment products – of how he may have lost the two million Hong Kong dollars (US$257,828 or RM907,555) of savings he and his wife had built up since he arrived there penniless from the southern Chinese city of Guangzhou in 1955. The man and his wife had saved the money over almost four decades. He worked as a wood craftsman during the day and a security guard at night, while his wife was a cleaner.
According to the news report, in mid-August, 2008 his long-time financial advisor at a Bank advised him to place his hard-earned funds in an attractive ‘savings plan’ offering interest of 3.8 per cent, significantly higher than the 2 per cent he was getting. He was told that the plan was great and that there would be no risk at all. Being barely literate he had never heard of Lehman Brothers when he was sold the so-called mini-bonds, a complex financial instrument linked to both bonds and derivatives. Apparently, the document that was shown to him contained a scribbled Chinese note on one page saying the products were ‘principal protected’ and at another place it was also stated that there is ‘a risk that any investor may lose the value of their entire investment or part of it.’ Such apparent contradictory statements somehow did not raise any alarm to him – perhaps he may not have read them carefully.
After Lehman filed for bankruptcy on September 15, 2008, he was informed that his funds had in fact been invested in Lehman Brothers structured financial products and that he may lose most of his investments. His Bank subsequently showed him the document he had signed, drew brackets around the words ‘Lehman Brothers’ and asked him: ‘Here, can’t you see the name of the issuer bank yourself?’ The news report disclosed that the man was now having trouble sleeping and eating, and his wife was suicidal.
It as reported that in Hong Kong and Singapore, many retirees had invested their life savings in financial products linked to Lehmans and other institutions. Many of them now felt ‘cheated’ and ‘betrayed’ that the banks did not fully inform them of the risks when they were offered the products.
During this period of financial upheaval emanating from the Western world and spreading its pain throughout the entire world even as far as Asia, the words of our Lord Jesus in Matt 6:19-21 serves as a good reminder of the temporal and often transitory nature of our wealth on earth: “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”
Some may have thought that with our modern technology and renewed emphasis on good corporate governance ala Sarbanes-Oxley (post-Enron & WorldCom), our wealth would not be easily susceptible to destruction by “moth and rust” and neither would “thieves be able to break in and steal”. The recent destruction of wealth in terms of losses from the rapid falling values of shares or equities, or the almost total destruction in value of some structured investment products which had often been given very high ratings by international rating agencies, supposedly indicating a very safe investment because of extremely low probability of default, have suddenly brought home to us once again that indeed the wealth of this world is not permanent in value!
Horror stories of many people who had invested their hard earned cash in so-called mini-bonds structured by Lehman Brothers, until recently the 4th largest investment bank in Wall Street, in the hope of getting a meagre 3.5%-5% returns, serve to remind us not “to trust in uncertain riches but in the living God, who gives us richly all things to enjoy” (1 Tim 6:17).
The newspapers are full of stories as to why such terrible fates have befallen the economies of the world. The Bible has all along warned us: “For the love of money is a root of all kinds of evil, for which some have strayed from the faith in their greediness, and pierced themselves through with many sorrows.”(1 Tim 6:10). Some make jokes about this statement and suggest that the love of money is actually good and beneficial for our society.
The truth of the Bible stands the test of time. The ‘love of money’ and ‘greediness’ are the terrible twin perpetrating the fraud on the innocent and/or ignorant people of the world. Investors did not get to know the truth of what they were investing in. They were led to believe that the rating agencies, the supposedly reputable investment banks and the banks selling the products would look out for their best interests. They trusted them almost blindly when they should have hearkened to the warnings given by the Lord in Matt 10:16-17: “Behold, I send you out as sheep in the midst of wolves. Therefore be wise as serpents and harmless as doves. But beware of men, for they will deliver you up…” “Indeed, let God be true but every man a liar” (Rom 3:4). In John 2:24-25, the Bible recorded thus: “But Jesus did not commit Himself to them, because He knew all men, and had no need that anyone should testify of man, for He knew what was in man.” Listen to the advice of the wise man in Prov. 23:4-5: “Do not overwork to be rich; because of your own understanding, cease! Will you set your eyes on that which is not? For riches certainly make themselves wings; they fly away like an eagle toward heaven.”
In such a traumatic period of time and uncertainty, we would do well to remember the exhortation of the Bible as stated in Phil 4:6-7: “Be anxious for nothing, but in everything by prayer and supplication, with thanksgiving, let your requests be made known to God; and the peace of God, which surpasses all understanding, will guard your hearts and minds through Christ Jesus.”
The answer is in our prayer life and the importance of resisting the urge to give in to the lure and temptation of getting rich fast or of getting above normal market returns for your investments – for there is no such thing as a free lunch in the world (it is different from the realm of the kingdom of God where Jesus fed the multitude without any charge, and where we are taught: “Freely you have received, freely give”- Matt 10:8) – for the higher returns in this world, almost inevitably you are being asked to assume higher risks – and it is in your best interest to know exactly what risks you are being asked to assume or undertake for which they would pay you the abnormal profits or returns!
Finally listen to the exhortation contained in Prov 3:5-10: “Trust in the LORD with all your heart, and lean not on your own understanding; in all your ways acknowledge Him,
And He shall direct your paths. Do not be wise in your own eyes; Fear the LORD and depart from evil. It will be health to your flesh, and strength to your bones. Honour the LORD with your possessions and with the first fruits of all your increase; so your barns will be filled with plenty, and your vats will overflow with new wine.”
Have we trusted the Lord and acknowledge Him in all our ways and honour Him with our possessions and with the first fruits of all our increase?