Rogue Trader defrauds Bank out of € 4.9 billion !

[Bagehot]

Personally I like the SocGen ads for Covered Warrants that are plastered all over the T2W home page at the moment: "strictly limited downside, unlimited upside potential" is the strapline. Maybe Jerome should have stuck to those 🙂

 

[BSD]

Personally I like the SocGen ads for Covered Warrants that are plastered all over the T2W home page at the moment: "strictly limited downside, unlimited upside potential" is the strapline. Maybe Jerome should have stuck to those 🙂

😆😆😆

 

[DannyBly]

Looks like Jerome is going to walk:

Jerome Kerviel Free, Fraud Charges Dismissed

The Société Générale affair descended deeper into the mire last night as investigating judges threw out the most serious accusation, attempted fraud, put forward by prosecutors against the trader behind the €4.9bn losses, Jérôme Kerviel.

http://www.guardian.co.uk/business/2...nbanks.banking

 

[BSD]

Michael Lewis, author of the fantastic Liar's Poker is an absolutely first class writer:

"Inner Life of Jerome Kerviel, Accidental Rogue: Michael Lewis

Commentary by Michael Lewis

Jan. 30 (Bloomberg) -- When a person loses $7.2 billion of other people's money, other people naturally want to know more about him. They badly want to believe that he is in some way unusual. To blow up $7 billion -- to buy more than $75 billion in equities in private -- must require some kind of genius.

But despite some seriously sweaty journalistic effort, all we know about 31-year-old Jerome Kerviel is that he was a mediocre student, a green belt in judo and unsatisfying to his wife.

A few stories have pushed the serial killer angle of the quiet loner; a few others have tried to sell readers on the notion that he's a dead ringer for Tom Cruise. And while you have to admire their effort to make the young man interesting, the journalists have been undermined by the testimony of old friends (``an ordinary guy'') and the mug shot of Kerviel's sad thin face, which doesn't look a bit like Tom Cruise's.

Right up until Jan. 18, when his bosses discovered what he'd been doing with the bank's money, no one thought of Jerome Kerviel as anything special. And he wasn't.

As in most of the rogue-trader cases, including Nick Leeson's, the main character of the drama appears as flat as a character can be. Dull people can do exciting and unusual things, too; indeed, those less capable of finding interest in the ordinary have greater incentive than interesting people to engage in activities with surface thrill -- such as, say, cliff diving, or buying $75 billion of European stock-index futures.

The story of Jerome Kerviel is less a tale of an evil genius at work than of a dull young man being acted upon by events almost beyond his control. I may be wrong about this, but so long as everyone else is guessing I might as well, too.

Just My Imagination

And here's my guess: Jerome Kerviel never imagined himself in anything like these circumstances. They just sort of happened to him in stages.

Stage 1 would have been his initial decision to be more like what he imagined a real trader to be than what he actually was -- a functionary on a trading desk. His job was to arbitrage price differences between identical stock-market indexes.

In doing this he naturally developed a view of the stock market, just like a real trader. His view was that it was going up. Thus, one day, filled with conviction, instead of buying one market and selling another, he buys one market -- and then neglects to sell the other. It's such a small act of rebellion that he barely bothers to hide what he's done.

One of the striking things about rogue traders is that they always lose money. Perhaps they just are born with an incredible knack for being wrong about future market direction. Or perhaps, if they guess right, they aren't exposed by their employers as rogues.

Losing Bets

Whatever the reason, they tend to be the people whose bets lose money pretty quickly. Kerviel's lawyers imply that his first bets worked -- that at one point he was up as much as $1.5 billion euros ($2.2 billion). Somehow I doubt it. I doubt that if young Jerome had ever been up as much as $10 million he would have kept this wonderful fact to himself, or that his bank, upon learning of this luck, would have let him run with it.

He would have let it slip that he had been doing a bit of ``trading,'' and Societe Generale would have shut him down because even French bankers are smart enough to know that they can't make a living betting on the direction of the stock market. (``Nice work, Jerome. Don't do it again, n'est-ce pas?'')

As I imagine it, young Jerome pretty quickly finds himself staring at a shocking loss. Thus he enters Stage 2: doubling up and averaging down.

One Thought

The market is falling but he's buying it ever more cheaply and if he just keeps doing it the market will eventually rally, and he'll make it all back. Now all of his day is spent frantically making bets and hiding them.

``If it rallies and I get back to even no one will ever know,'' he thinks to himself. If he wasn't a ``quiet loner'' before, he is one now.

Who has time to talk? All he can think about is money, money, money. Deep down he knows he's been a bad boy, and so he's not sleeping. He used to love the simple pleasures: a stroll down the Seine, camembert on a baguette, thinly coated with moutarde. Now he hardly tastes his food.

He once thought of himself as having a way with the ladies but sex is the furthest thing from his mind. He's ceasing to be French. He's becoming American.

Now come these weird, false, fleeting sensations of total freedom. His ordinary mind cannot fully accept the reality of his situation and so it works overtime to generate fantasies. He fantasizes about dying before anyone finds out. He fantasizes that terrorists blow up Societe Generale before anyone finds out.

Go Long

He walks home one night and there is something about the durability and grandeur of Paris. It gets him thinking. He is long $60 BILLION in equities. That's more than the market value of the entire freaking bank. And no one knows! Maybe no one will ever know! Maybe he can just keep losing billions, in private.

For the first time in months he sleeps well. Then he wakes up.

Then, of course, he is caught. And as unreal as the past year has been, what happens next is even less real: All these total strangers writing and talking about him as if they know him.

They call his mother, his aunt, his old school teachers. All these other people he barely knows discuss his character in detail -- while the people who actually know him a bit and are qualified to comment keep mum. All these big shots in Davos stop worrying about the subprime collapse and started worrying about him -- as if he is something more general than himself. A Problem.

But none of these people understand: This thing had nothing to do with him. It was all a big mistake. Or, rather, it was a small mistake that took on a life of its own. Now Jerome Kerviel feels not like a genius, or even a trader. He feels like the victim of an accident.

And, in some weird way, he is."
Bloomberg.com: Opinion

Bloody marvelous:

"One of the striking things about rogue traders is that they always lose money. Perhaps they just are born with an incredible knack for being wrong about future market direction. Or perhaps, if they guess right, they aren't exposed by their employers as rogues."

LOL !

 

[FXSCALPER2]

That is an extremely bad article, Markus. Exactly the type I would expect from Bloomberg.

 

[BSD]

Hey there mate 🙂

You didn't even like the part I highlighted ?

"One of the striking things about rogue traders is that they always lose money. Perhaps they just are born with an incredible knack for being wrong about future market direction. Or perhaps, if they guess right, they aren't exposed by their employers as rogues."

I thought that was bloody marvelous myself.

But then I am in a pretty good mood right now anyway as it is the silly season here, Carnival, which means lots of alcohol and related tomfoolery and general hanky-pankies going on.

Another great advantage of alcohol of course is that it generally always helps to improve the view, outlook and surrounding scenery.

May have to rethink that whole thing sober.

Actually, think the Romans had that in common with the Soviets, matters of urgent policy would always be discussed twice, once sober, and once drunk.

I still have my sober review left to look forward to.

 

[FXSCALPER2]

Get sober and tell us what you think, why won't you? 😀 'Rogue traders always lose money'. We call them Roague only after they lose big and get caught. It is like the measurement problem in quantum physics. Is Schrodinger's cat alive or dead? Well, you have to open the box and look. Opening the box and finding out that the cat is dead doesn't tell you the cat was always dead, hence the paradox. He even says the guy has an 'ordinary mind'. Huh?

Bloody hacks. How come I don't have a job where I talk bol!ocks and get paid for it? 😀

 

[BSD]

Now then, I am afraid I need to spend tonight looking alternatively very deeply into bottles and décoltés as it is the last party night of the season.

That means I will probably be trying hard to think even halfway coherently through the muddles of a hangover tomorrow.

So, me in a very sober state is going to be awhile.

:cheesy:

Re the writing bol!ocks and getting paid for that, do you think we should ask the nice gentleman who owns this site if he would like to lessen the burden of his advertising filled coffers by sharing with us ?

Sort of on a basis, the greater the ********, the greater the profit sharing ?

Now, there is a good business idea.

Alcohol does make very creative I notice.

😀

 

[theroguetrader]

SG - unwound all those positions into a falling market - (recovered 2 days later)

so much for " Graduates ".......


SG - " strictly limited downside " ........!! is that a joke..?


😆

 

[grantx]

Markus,

I could only manage half the article; painful. Michael Lewis is a sh*t writer, apparent to anyone who could see beyond the gloss in "Liars' Poker". His description of Kerviel is petty and only illustrates his own shallowness and lack of talent.

Grant.