January 28, 2008
The Position Was Unwound Over Three Days in a Controlled Fashion
Here’s a look at the Eurostoxx 50 futures, which apparently made up the biggest part of Monsieur Kerviel’s $73 billion position, during the three days of unwinding. This 30-minute candlevolume chart is good for showing blasts of volume. See those three massive down bars on Monday, the 21st? I’m guessing they’re probably the handiwork of the bald and perspiring young men at SocGen trying to cut Kerviel’s already massive losses that terrible morning. There’s no graceful way to exit $73 billion of anything quickly.
Cat: | Time: 8:58 pm (utc+8)
January 29th, 2008 at 12:22 am
“The second biggest bank in France, Société Générale announced a $7.1 billion loss from a rogue bond trader involved in fraud. Was blame put on one man instead of putting their entire bank management under scrutiny? They join in the Hall of Shame the firms Sumitomo, Barings, and Kidder Peabody in lax trading oversight.” - Jim Willie, CB (Jan 24)
to answer Willie’s rhetorical question, yes, it was… victim “turns up” right when they need one: market “manipulation” to blame away the “selling”… btw, anyone that hasn’t seen the movie Rogue Trader [1999] (chronicling Barings’ collapse from Leeson’s POV), i highly recommend it — excellent flick with fantastic perfomances by Ewan McGregor as Nick Leeson and Anna Friel as his wife…
January 29th, 2008 at 2:28 am
Resulting in histories first Rogue Rate Cut.
January 29th, 2008 at 4:21 am
CSI WallStreet
January 29th, 2008 at 5:13 am
I read today that stock holders are suing the board for insider trading after they dumped their shares before the sell off.
Perhaps my tinfoil cap is too tight, but I can’t help but be skeptical that a single trader was able to do this singlehandedly. Either this is one of the worst-managed banks in history, or they knew more than they are willing to reveal.
January 29th, 2008 at 5:34 am
EXACTLY — it was not just one guy (and in this case,a low-level guy at that) that “singlehandedly”… also, Central Banks manipulation to make the selling look like it was “a mistake” to put a bid under things… any excuse will do…
January 29th, 2008 at 5:53 am
I’m willing to give SocGen management the benefit of the doubt and believe that clever young Jerome could build up a $73 billion position undetected. I’m not sure that word didn’t slip out that something was wrong over the weekend and that’s why Asia cracked first. OR it was SocGen themselves who started to sell heavily in Asia first, knowing they would break the European markets later — that’s as much as my tinfoil hat will allow.
January 29th, 2008 at 10:19 am
their management deserves no benefit of the doubt if they are like most management, which i would suspect/suggest they are… regardless, no mention of the following in the mainstream financial media yet:
Lawyer for SocGen trader: “He didn’t steal anything” - MSNBC Wire Service - msnbc.com
http://www.msnbc.msn.com/id/22869781
Associated Press
updated 3:13 p.m. CT, Sun., Jan. 27, 2008
PARIS - A lawyer for the trader accused by Societe Generale of fraudulent trades costing billions said Sunday that accusations of wrongdoing against his client were being used to hide bad U.S. mortgage investments by the bank.
“He didn’t steal anything, take anything, he didn’t take any profit for himself,” the lawyer, Christian Charriere-Bournazel, told The Associated Press by telephone, speaking of his client, Jerome Kerviel. “The suspicion on Kerviel allows the considerable losses that the bank made on subprimes to be hidden,” he added.
January 29th, 2008 at 11:04 am
v838: You would expect his lawyer to say this, which I think is both wrong and irresponsible. As Bouton said, why would you dig a hole to hide another hole, it simply doesn’t make any sense. I’m thinking more and more that Jerome put on this massive trade *intending* to sink the bank.
January 29th, 2008 at 1:30 pm
Fraud loss is insurable, no?
Maybe I should short their insurer!
January 30th, 2008 at 4:02 am
well, comments like “why would you dig a hole to hide another hole” are easy to come by and come across as political-speak to me… i agree that perhaps most of the time it would not make any sense to do so, however there are times when such might be a sensible course of action to take… of course these comments are all just speculation… if there is cover-up, then Bouton’s comment is standard tactic, not to mention how long did Bouton wait to announce the matter publicly? lax trading oversight combined with my belief the banking elite attempting to “explain away” the selling (just the same as if it was an erroneous sale for example)…
January 30th, 2008 at 4:10 am
Bouton is reacting to the lack of fraud charges like someone shoved a live snake up his ass.
No fraud = no insured loss?
January 30th, 2008 at 7:05 am
@v838: True, but I’m just not a tinfoil hat kind of guy and think that people are basically good and honest and honorable — maybe that’s why I continue to have my ass handed to me over and over again. :)
January 30th, 2008 at 10:20 am
i’m sure you’ve seen The Matrix [1999]… we’re living in one — tinfoil hats or not… as far as people being basically good etc etc, well, that’s a complicated topic… there are good people doing borderline-good and not-so-good and unbeknownst-to-them not-so-good and just plain not-good things all the time… often greed plays a part… mistakes and many many other situations and factors as well… and for groups of people as well… :>) …when it comes to money, for the most part i don’t put it past anyone to do anything at any time…
January 30th, 2008 at 10:40 am
v838: You’re probably right, I’m just a corn-fed redneck … my deeply sheltered childhood watching The Brady Bunch and Happy Days made me completely unprepared for the real world.
January 30th, 2008 at 10:46 am
my apologies as i certainly wasn’t trying to lecture anyone… and certainly didn’t say nor imply you were “unprepared”… if you were joking then i guess i didn’t get it…
January 30th, 2008 at 10:54 am
v838: Yes, I was joking, should have left a smiley face in there … humor is so hard to communicate in text sometimes. That said, I *have* always been unprepared to cope in the real world.
January 30th, 2008 at 11:51 pm
whew, i was a little worried there — you know, don’t want to tick anyone off… agree, text communication can be a bit like (being under-30 and) having a telephone conversation with the opposite sex in a budding relationship — very easy to (mis)interpret things the wrong way without the in-person non-verbal communication to help with context…
the redneck comment was of course brutally harsh (on yourself) — i’m actually currently living in Mississippi (long story but -in short- doing post-Hurricane Katrina volunteer work for much longer than intended) and this area IS the very definition of “redneck” (i’ve never seen so many 3-legged dogs in my life)… obligatory redneck joke — Question: What are the most common final words of a redneck? Answer: “Hold my beer… Watch this.” …all of this said, since i think the “real world” for most is not the “real world” for me, then i fall into the same category as you, though rather than “unprepared to cope”, a little bit more accurate for me would be “barely able to function”…
January 31st, 2008 at 7:48 am
v838: I frequently have communication problems in my budding sexual relationships with under-30 year olds. :-) Loved the redneck joke, though of course I’m an upstate NY redneck, very different from a southern redneck. One of the biggest rednecks I know is from Long Island, which many people don’t know is full of them (the eastern end). I’m functional, but a deeply sheltered childhood has left me permanently naive.