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9/18/2011

Rogue trader lost $2.48 billion

I thought Nick Leeson would be the last rogue trader and all big institutions would have learnt that lesson and all kinds of controls would have been put in place. We are seeing more rogue traders appearing as if no one knows how to prevent such excesses.

This guy in UBS could have walked away smiling if he had done them openly and pass the loss to the bank. Many big institutions have lost billions or hundreds of billions without losing any sleep or anyone being made accountable. It is a game that more than meets the eyes.

In this modern world of high finance, deregulation and minority shareholders all sleeping or unable to do anything, it is so easy to rob a bank or sell off a bank with a ‘rogue’ trader. Some silly big investors even willing to put money in institutions without have any management rights or representation, so trusting, innocent and na├»ve, believing that the management are all honourable people that will not rob the institutions to line their own pockets.

I got this strange feeling that we are reading Alice in Wonderland, where little innocent children were running around with bags of cash and passing them around like a game of monopoly. But then again I am just too unsophisticated and untrusting of strangers and always think that I can be cheated by decent and respectable men in ties and suits and a string of degrees from the Ivy League universities.

Of course I am wrong. The world is full of honest people. And they get more honest in high places when they are paid their rightful dues. All those rogue traders simply happened by a slip of management supervision. That’s all.

10 comments:

Anonymous said...

pssst....it's billion...2.48 million is nothing...

Anonymous said...

btw lesson wasn't the last...you forgot about the SocGen incident where Jerome Kerviel lost Euro 4.9 bn in 2007...

Chua Chin Leng aka redbean said...

Thanks for correcting me. Nowadays millions and billions don't make any difference anymore. The billions today are just like the millions yesterday.

UBS CEO did not feel any need to resign. Why should he? Only $2.48b. There were fund managers who lost hundreds of billions and still smiling as if nothing has happened.

Anonymous said...

to be honest, it is the traders that are screwing around and not the fund managers. Fund managers are liken to insurance agents selling products. Yes, they can mis-sell but they don't "gamble" on products outside of the bundle of stocks/products the funds they represent (e.g. tech funds, etc) and they can't switch from one stock/commodity to another so it is incorrect to say that fund managers are responsible for the current loss. A trader on the other hand gambles on different products and there is no fixed bundle that he maintains as long as it is a product allowable under his trading desk (in this case Delta-1). Thus, there is a distinct difference between a fund manager and a trader. One is a gambler (trader) and the other manages funds in business segments.

Chua Chin Leng aka redbean said...

If a fund manager of a $100b fund places his chips in a list of selected companies, is he gambling or managing his fund?

Traders may be trading for his banks or funds who has a head responsible for the banks or the funds. They are all parts of the gambling syndicate.

The CEO of UBS is not a trader. But he is part and parcel of the whole works. Who is involved in Kweku's indiscretion, up to what level of management? Kweku or Nick Leeson would not be able to do all the damages alone.

And the screwing around of the traders, the fund managers goes all the way to their CEOs and to the regulators, in the case of the US, congressmen, who are not allowing laws to rein them in.

The loot is paying all the way to lubricate the theft.

Chua Chin Leng aka redbean said...

The fund managers trade in different ways. Some big funds would have their own traders. Banks and broking houses who are in the business of bankings and broking, also have their own house traders.

Their traders trade. The funds invest. Any different? Maybe a matter of long term and short term. GIC and Temasek are SWF. They never trade?

Anonymous said...

In the story of Ali Baba and the 40 thieves, Ali was the good guy. Now it is indistinguishable who is the good guy and who are the thieves.

Anonymous said...

It seems GIC is quite a substantial share holder of UBS and GIC is heavily committed to UBS under Tony Tan's watch. Looks like GIC is likely to lose tens of billions of dollars in this investment in UBS. Tony Tan has been saying especially during the presidential election that he has vast experience in financial and investment business and is the best person to protect Singapore's reserves and investments. Surely Singaporeans would like to hear from him now how come GIC got into this UBS investment nightmare and how is he going to recoup these colossal losses.
SG

Chua Chin Leng aka redbean said...

In today's paper GIC have said they have recouped all the losses. Yes, it will be good if they could just reveal a few of their great success stories of how the money was made to patch up the big holes.

I have posted an article on this today.

Anonymous said...

Alice in Wonderland. I don't know whether I am being amused or bemused by by GIC's claim that it has levelled up the losses. Are those GIC investment talents in magic wonderland where magic works and losses can be recouped in seconds by waving a magic wand. May be gullible daft Singaporeans have no problem in believing such claim slthough they may be puzzled at first.

SG