IT is the sound of running tap water as I brushed my teeth this morning which provides the backdrop to this entry.

Just over a week ago, Starbucks and Spinelli turned off their taps here. Eyebrows were raised over the controversial method which they adopted worldwide to wash their utensils - leaving the taps turned on the whole day!

Considering how scarce and precious water is in Singapore, it still amazes me that their management hadn’t stopped the practice before someone raised an alarm bell over it.

This makes me wonder if it is a reflection of the far wider meltdown that is afflicting the ailing global banking system.

Have some companies literally gone on autopilot after becoming phenomenally successful in recent years? What happens when the first big disaster strikes? 

Take Morgan Stanley. The Daily Telegraph reported that even as the company was casting around for a white knight to recapitalise its wobbly capital base in the last few weeks, it was still planning to award its staff nearly US$10 billion in bonuses this year.

The British newspaper went on to note that if these staff  had chosen to pool their bonuses together, it would have been sufficient to buy up the entire firm at one point!

Then there is the odd local example worth relating too.

Last month, AIA bravely pressed on with a $300,000 party at the Singapore Flyer during the Formula One race, just days after its beleaguered US parent AIG was bailed out by the US government.

The New Paper reported that the event was planned long before the crisis.

Pressed for an explanation for the decision to go ahead, it quoted an AIA spokesman as saying:  “We’re not having a party. There’s no party. We’re just hosting our clients during the F1 race.”

It is not surprising to find investors in a jittery mood when they are confronted with such paradoxes.

How do they reconcile the efforts made by governments and central banks to spend billions to rescue banks when some of the affected financial institutions seem to be partying like it is still early 2007?

Somehow, there is a sense that accountability is lacking - that the phrase made famous by US President Truman that “the buck stops here” doesn’t have currency anymore.
 
But accountability is a much treasured commodity, as banks and broking houses involved in the on-going saga of mis-selling of Lehman minibonds and other financial products are discovering belatedly.

Surely, getting the problem solved swiftly should be management’s top priority. The beatings taken by some of these firms’ stock prices is becoming too painful to behold.    

That brings me to the final point in this entry.

In many ways, the stock market behaves like a giant thermometer taking the temperature of each individual stock as well as the entire market.

When a stock falls sharply, it is an indication that investors sense that something is not right with the company – even though they couldn’t place the problem.

Recently, there have been plenty of examples.

In August, I flagged concerns over a steel-coil maker by the name of Ferrochina whose share price fell 30 per cent in two weeks, despite reporting that its second quarter profits had tripled to 230 million yuan.

It has now gone bankrupt, after banks refused to roll-over its short-term debts.

So even as the market experiences another dead cat bounce, investors should take care not to be suckered into stocks which have fallen to “attractive” levels.

The smart investors may simply be voting with their feet, leaving the others with the soon-to-crumble pieces.

As the nursery rhyme goes, when Humpty Dumpty had a great fall, all the king’s horses and all the king’s men couldn’t put Humpty together again.