The market offers ready temptations to make quick money on the side. But market participants must avoid this slippery and dangerous slope.
Life is full of temptations. Quick money is one of them, and a particularly tough one to resist for those working in the financial sector. There, money, in different forms, is everywhere, available in abundance, easily within reach. But resist it they must, for this is other people's money, not theirs, and the personal consequences of being caught are grave indeed.
To dealers in financial markets, money is made, for whomsoever they work, with the touch of a few buttons or the making of a few telephone calls. This is getting easier by the day as financial markets become more and more efficient and liquid, with the advance of telecommunications and information technology. And there is volatility too, which means that the potential for profits (and, well, losses if you are unlucky) is that much greater. Indeed, many dealers now make money, for the organisations with which they work, without so much as taking any significant investment position in those markets for any significant duration, not even overnight. It is not uncommon for a foreign exchange dealer with a generous dealing limit to make, for his organisation, profits on a single day that is in multiples of his annual salary.
Human nature being what it is, there is an inevitable and understandable urge to think that, if only one had the wherewithal to support similar dealings for one's own account, riches will flood in within minutes or hours. Stop right there. Do not wander any further. Resist the temptation as strongly as you guard the most precious thing you have. Go and buy yourself something nice. Go watch a movie. Do whatever else, but not what was in your mind. The precipice lies ahead and you do not have wings. It is the misery of a life ruined ahead, not riches.
Investment managers handle astronomical amounts of money, day in and day out, on behalf of their customers on a discretionary basis and normally within rather loose parameters. They work hard to get that extra basis point for those bond investments and bank deposits, and the extra tick in the price of the shares. They stay late in the office. They sometimes even get up in the middle of the night to check how their clients' investments are doing overseas. That little pip in the bond price, that mere one-sixteenth of a percent in the deposit rate and that extra tick in the share price for their clients could, given the sheer size of the portfolios they are managing, be worth millions. They could be enough to pay off the mortgages of the investment managers, or create an education fund for their children, or at least buy that sleek sports car in the showroom around the corner, not to mention the family cruise on the Mediterranean. And for all their efforts, they do not even get, or are allowed to accept, a nice gift from those stingy scrooges. What they get, if they are lucky, is a pat on the back; or, at best, they get a "cheap" meal of abalone, shark's fin and bird's nest. If they are not lucky, and notwithstanding a very high rate of return for the portfolio, they could be chastised for not beating the benchmark return. Oh, if only those extra ticks could be for their own accounts.
Again, stop right there. The temptation of quick money is rearing its ugly head in front of you. Resist it. Rags, not riches, are ahead. That pat on the back and that sumptuous meal are worth much more than you think. If you are not satisfied and you think you deserve better, charge a higher fee or ask for a higher salary. With your ability and dedication to your work, you may even hop on to a job more financially rewarding.
Then there are those with the authority to take or are involved in taking decisions, and disseminating relevant information, which have the effect of moving markets - the true insiders. For them, the temptation of quick money is even greater, for if their judgements about market reaction are sound, the downside risks of the financial markets working against them are minimised. As the local punters say, the door to losses has been safely sealed. And you do not even have to dirty your hands. There are many in financial markets willing to offer themselves their most covert services and act as your "shooters" in the most subtle of ways. Resist it. Resist the temptation of quick money. Not only your name, your integrity and your whole life are at stake; so are the integrity of your office and confidence in the policies you are pursuing.
Recent events throughout the world have shown that crime and corruption ultimately do not pay. They also show that in the financial world the temptations to make an extremely large fast buck are stronger than perhaps in any other field. We should remember this, and give these temptations a very wide berth.
Joseph Yam
15 June 2000
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