A repost from November 2012:
From our old MarketBeat pal, here writing at Quartz, Matt Phillips:We know how it is. You’re a young guy. You’ve got trade ideas in your heart. Cat-like instincts. Hawk-like vision. What are you missing? Inconveniently, cash. Just enough to take that position on a big, obvious, tantalizing, surest-of-sure things...MORE
The annals of finance are littered with rogue traders who succumbed to this sort of rationale.
Notable recent additions to the rogues gallery include Kweku Adoboli, a former UBS trader accused of vaporizing about $2.3 billion, and at one point putting the Swiss bank on the hook for as much as $12 billion. And then there was Jérôme Kerviel, late of Société Générale, who was just sentenced to three years in prison. You may also know him as the “Most Indebted Man in the World.”
But this list goes on. John Rusnak in 2002. Yasuo Hamanaka in 1996. Who could forget Nick Leeson, a trader who in 1995 caused the collapse of the 233-year-old British merchant bank, Barings.
Of course, these are the guys—all guys, by the way—that got caught. And as always lurking behind the rogue trader phenomenon is the notion that “rogue” traders only seem to surface when their trades are losers. It stands to reason that there must be unauthorized trades that actually end up generating massive profits too. Strangely, banks don’t seem to make a big public stink about those. So we usually don’t hear about them.
But over time, such stories have a way of getting out.
Which brings us to perhaps the most-successful rogue trader of all time. In 1857, while working as an accountant for the firm of Duncan, Sherman—a position his Wall Street banker father, Junius Spencer Morgan, had secured for him—a young John Pierpont Morgan himself heard the siren sounds of unauthorized trading. We turn it over to Ron Chernow from his wonderful read, House of Morgan: An American Banking Dynasty and the rise of American Finance.
After Pierpont started work at Duncan, Sherman during the panic year of 1857, he displayed awesome but unsettling precocity. While visiting New Orleans in 1859, he entered into a rash, unauthorized speculation. He gambled the firm’s capital on a boatload of Brazilian coffee that had arrived in port without a buyer. He bought the entire shipment and resold it at a quick profit. The first proof of his supreme confidence petrified the grey men of Duncan, Sherman. It was probably on the basis of this incident that the firm refused to make Pierpont a partner. In 1861, he struck off on his own forming J.P. Morgan and Company at 54 Exchange Place with his cousin James J. Goodwin.
For folks keeping track, Mr. Phillips is now at the New York Times.
His latest piece (yesterday) is:
A Year of Stock Market Fury, Signifying Nearly Nothing
Matt was also a winner of the prestigious Climateer Line of the Day award in 2010, which line we reprised in June of that year:
MarketBeat's Matt Phillips Does Not Win the 2010 Bulwer-Lytton Contest
Like the Germans in May 1940, a Five Star, Weekend Special, hit the ATM, lock:
Climateer Line of the Day: MarketBeat does Bulwer-Lytton Edition (ACN)
MarketBeat's Matt Phillips has a walk-off home run. Game over.
From their post "Accenture for a Penny: MarketBeat’s Investigation Continues!":
Like a rottweiler on a slightly undercooked leg of lamb, MarketBeat refuses to let go of its probe of the depths of Thursday’s Flash Crash, particularly the momentary trades that priced ostensibly healthy companies such as Accenture at one cent....
That makes "It was a dark and stormy night" read like Blake in comparison...Bulwer-Lytton.com has announced the 2010 winners. The winner was bad but the runner-up was atrocious:
Through the verdant plains of North Umbria walked Waylon Ogglethorpe and, as he walked, the clouds whispered his name, the birds of the air sang his praises, and the beasts of the fields from smallest to greatest said, "There goes the most noble among men" -- in other words, a typical stroll for a schizophrenic ventriloquist with delusions of grandeur.Better luck next year, Matt.
And don't wait until May to flex those B-L muscles.
Study the master:
"It was a dark and stormy night; the rain fell in torrents--except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness." --Edward George Bulwer-Lytton, Paul Clifford (1830)
