Coping with Loss

By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 8 October 2009, 7.50 am and 7.20 pm)

Last December, just after Bernie Madoff was arrested for his US$50 billion ponzi scheme, one of his victims, Mr Rene-Thierry Magon de la Villehuchet, began his nightmares.

You see, Mr de la Villehuchet, a French aristocrat and the CEO of a boutique investment firm based in New York, had put more than US$2 billion of his firm’s money with Madoff.

Besides losing most of his clients’ money, he had lost his entire savings. He was overwhelmed and depressed.

On the night of 22nd December, Mr de la Villehuchet locked the doors to his office. He then swallowed a dose of sleeping pills and slashed his left arm with a box cutter. He was found dead the next morning.

Suicide is the most intimate of acts. No one knows exactly what Mr de la Villehuchet was thinking. It’s possible that he was upset for making the fatal mistake of putting all his eggs in one basket.

Because for some inexplicable reason, Mr de la Villehuchet increased his firm’s total exposure in Madoff’s funds, from 30% to 75%, just a few months before the fraud was exposed.

Actually, the mistake he made is quite common even among seasoned investors. And that is to be overconfident and assume that the good times will continue.

For Mr de la Villehuchet, his money with Madoff had earned consistent returns over the years. He assumed that this would continue. He was not mentally prepared for the worst. When it struck, he could not cope.

Many of us are like this. We are not mentally prepared for the many certainties of life. Since this Saturday is World Hospice and Palliative Care Day, I shall highlight this with an example from hospice care. This is a branch of medicine caring for the terminally-ill patients.

For a long time, doctors have wondered whether discussing end-of-life issues with a terminally-ill patient would be better or worse for the patient’s emotional well-being.

A research study, conducted by the Dana-Farber Cancer Institute, and published in last October’s Journal of the American Medical Association, may have found the answer.

The study found that if patients had discussed end-of-life issues with their doctors, the patients were more likely to enjoy better quality of life right to the end. On top of that, the bereaved survivors were more likely to overcome their losses faster.

It seems that these end-of-life discussions force those involved to be mentally prepared for death. Once death is accepted, the remaining days would be spent tying up all the emotional loose ends that need to be tied up to bring about closure.

In cases where death is not accepted, the usual option is for more aggressive life-prolonging treatments. These tend to cause upsetting side effects and give the patient less opportunity to tie up the emotional loose ends with loved ones.

In the end, the patient’s quality of life is made worse off. And this in turn, slows down the recovery process of the bereaved survivors.

We can learn from this. As investors, we should also be mentally prepared for the worst. Some of our investments can be a total loss. With this in mind, putting all our eggs in one basket is not likely. Any sudden loss can be overcome more quickly. Most importantly, the quality of our lives will be better.