Wednesday, Mar 19, 2008
Rogue trade ten o'clock - tally ho chaps
telegraph online: Hunt for £100m rogue trader after attack on HBOS share price
"Malicious rumours circulated by speculators were blamed for the run, which saw more than £3 billion wiped off the value of housing stock in the UK" - said a distraught Alsop (wishful re-writing)
Posted by bystander @ 10:47 PM (1127 views) Add Comment
19 Comments
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1. bystander said...
"For market spivs and vagabonds to attempt to capitalise unfairly on the weakness of the sector with vituperative rumours is wholly unacceptable."
....I know it is poor form to post an addition, but couldn't resist this choice quote from the article.
2. enuii said...
Isn't that exactly how the current government runs the country?
Why does a run on the HBOS share price affect the value of UK housey-housey's?
We truly live in confusing yet interesting times, history in the making unfolding in front of our eyes, I wonder if it was like this in the late 1920's and early 1930's?
3. shipbuilder said...
The whole thing gets more ridiculous by the day - this is a circus, just a grotesque spectacle of greed. It's like a tank full of sharks in a frenzy, ripping chunks from each other. It would be funny if it wasn't ultimately at the expense of the rest of us - how long can this go on before we say enough is enough and consign this bunch of gamblers to the dole queue, or even jail?
4. wiltshire said...
Nicely put Shipbuilder. The economic well-being of this entire nation is in the hands of a few thousand people who have lost all sense of reality. These people live like kings at the expense of practically everyone else. It's truly shocking. Now it's time for the spotlight to be turned on them and we can all decide if they are fit for purpose.
5. titaniccaptain said...
Nonsense its a perfectly fair system in a fair world. Its so perfect that a father and son can both be president and so can a husband and wife (maybe), thats fair isnt it????? erm...no it isnt really...hmmmm. And why would the system need a scape goat for the HBOS???...youll be saying that its the HBOS's fault for their banking practices next and that their should take reponsability for their own actions.....nonsense.....its that rouge (French for red) or is it rogue trade chappie like that dirty rotter Nick leeson isnt it?????? MIlky tea for me nurse.
6. Stevie Dee said...
The real criminals are the people who created the financial mess in the first place.. this is just chaff.
7. bilko said...
Quite right it isn't acceptable, but I didn't hear anyone complaining when the market and house prices were being talked up and people were jumping into buying property like lemings. But then it was different wasn't it? Banks and financial institutions were making loads of money, estate agents, solicitors and mortgage brokers were all raking it in and Brown's 'miracle economy' was keeping Labour in power. If there had been some regulation on what was going on then we wouldn't be in this mess now and it wouldn't have been possible for rumours to put a run on a bank.
8. Landedgentry said...
I had a short stint in a "boiler room" in the city and got out quickly when I realised what a chop shop it really was. The firm has subsequently been closed down by the FSA.
9. Chloevienna said...
What really gets me is that the FSA are going after this chap with their criminal powers, what about all the fraudsters who sold newbuilds at vastly inflated figures and the mortgage brokers who supported the fudge! They are the ones who have stolen money from the man in the street, but I don't suppose that the man in the street is important enough.
10. Orwell said...
how long can this go on before we say enough is enough and consign this bunch of gamblers to the dole queue, or even jail?
Perspicacious words SB...
11. Blank Cheque said...
I'm Spartacus.
12. shipbuilder said...
I heard an interesting phrase by a BBC newsreader used in connection with this story - something like it being "an attempt to chip away at the foundations of capitalism". Completely unnecessary conclusion to draw, of course, so why was it mentioned? What with Gordon's warning on cyber security (and an article I read in the Times on the same subject) and S2R1's 'information war' due to start on the same day, it got me thinking - interesting times ahead, maybe? Who knows....
13. Last_days_of_disco said...
The fact is that if somebody didn't invent a rumor like this, it would happen anyway, some other way. I feel no compunction about HBOS shares being raided. Don't trade on the stock market if you don't want that to happen. Its the rules of the game, you can choose not to play. Its like Northern Rock shareholders complaining because their failed company's shares are worthless. What are we now going to start printing on every website, stupid labels.
"WARNING STOCKS AND SHARES CAN GO DOWN AS WELL AS UP"
Its like the warning on your mortgage, "IF YOU DON'T MAKE YOUR PAYMENTS, YOUR HOUSE COULD BE REPOSSESSED". I mean how stupid can you be and still breathe?
I love the one on electric power supply poles, "WARNING DANGER OF DEATH". I mean you could put that one everywhere! How stupid.
And now HBOS is all unhappy and the government is all stroppy because their shares went down, oh please, grow up. De-list and become a private company then. This is so infantile.
14. jack c said...
@bilko - interesting point however Banks, Solicitors and Mortgage brokers are regulated (EA's not currently regulated) - to them it's all just a game - do some research on the FSA individuals that were responsible for regulating Northern Rock and a bit more of "the game" will be revealed.
15. techieman said...
i was (after hearing all the news) about to apologise to Bystander. I have just looked at the HBOS chart in terms of that the move doesnt look out of the ordinary. I still may have got this wrong BUT i'm really not so sure about all this stuff, mmmmm will we know the truth?
Lets see what happens over the next week or so - if the price retests the £4 low then there may be more to this than a nasty trader shorting the market. Scapegoats are easily found - particularly when they can remain anonymous. Now im not saying there wasnt something dodgy its just well i think the jury is out. Another thing that escapes me on this site in general is this when shares go up people complain about the banks employees pocketing x grand in bonuses etc. When the price goes down compaints are also made. Can someone explain please?
16. d'oh said...
techieman - in response to the last 2 sentences of post 9 above, my feeling is that a lot of the models used to price derivatives have been based on unreasonable assumptions about correlations etc., moreover profits have been marked to model and the profits brought forward in these long term contracts and bonuses paid on profits that have not been actualised. My concern is that city bonuses are paid on short term performance, which encourages "increased short term profits" by loading risk into small catastrophic events. This is not increasing alpha, but just fiddling with distributions, i.e. my concern there is no value being added here by large numbers of these whizz-kids just improving earnings in the short term whilst setting everyone up for a fall. This is not to say that the banks haven't been encouraged in this behaviour. If a bank behaved truly responsibly whilst all the others did not, they would "under perform" and their share price would collapse and they would be taken over. It's a tragedy of the commons. I suppose my real venom is for regulators have fiddled whilst the bonfire has been constructed. It must have been obvious to them all that the growth of face value of derivatives has gotten out of hand over the past 10 years , and the collapse of LCTM and its knock on effects should have been a warning to regulators everywhere.
I, of course, do not have any problem with people who have consistently shown that they can increase alpha, such as Warren Buffet, but my feeling is that these people are the exception rather than the norm.
Now, in the case of a sinking market, if there was a rogue trader setting up a position and then spreading rumours about a bank then IMHO s/he should be locked up because they are threatening the financial security of millions. However, I'm not convinced that such a rogue existed in this case. HBOS has been looking ill for some time, and it would not be unreasonable for someone to buy large numbers of cheap options on the bank. I suppose even those increased volumes could start a rumour (would these volumes have been visible to the rest of the financial community?) I suspect that something is very much askew and that we are being fed disinformation at present.
In summary, I suppose the resentment of the city is to do with the fact that the rewards, even for very junior quants and traders etc, are very large by most people's standards. It is a well known fact of life that those who work in an industry tend to get a discount on the products of that industry. In the case of banks, the product happens to be money. This has a skewing effect on London house prices and this has then spread to the rest of the country leading to huge asymmetries in wealth. An academic, and engineer etc., who are just as educated, skilled, work as hard and are as important to this country's well being are paid pittances relative to those who work in and or are associated with the city. What has happened in the financial services industry may not be the fault of any one individual, but when the negative effect of the industry is so great on people's lives, surely one can understand that people feel resentment towards what they see as huge payouts (and I'm not talking about the million pound bonus boys here, a lot of junior people have been getting what I would consider to be excessive annual earnings, once bonuses are taken into consideration.)
What I would want to see is steady, responsible growth. Derivatives do have an insurance role to play etc. in a healthy economy, but the impression I get is that banking has turned into a combination of a pyramid scam and casino. The business model of Northern Rock and others put the savings of millions of people at risk. The lowering of mortgage standards has put millions of people into serious debt. In effect the regulators have basically allowed the banks to appropriate of a large percentage of the housing stock of this country by letting them get away with offering 125% mortgages. It could only ever end in disaster. People have a right to be angry, at those in charge of these banks and the regulators who said stuff financial prudence, let's have a huge binge at the expense of the nation.
17. shipbuilder said...
Techieman, in response to your last point – I’m really here for education and interest – I realised years ago that a life spent gathering money is a life wasted, so I’ve relatively little interest as to whether bank’s shares go up or down. What interests me is the fact that our society is constructed so as to make it virtually impossible for the average person to live outside this financial system – in fact every effort is made to lock us deeper and deeper in to become good little dependant consumers, from a younger and younger age.
As a result the ability of almost every person in the western hemisphere to have a roof over their heads, eat and provide for their families is affected by the financial markets – so yes, I get p*ssed off when a bunch of spotty gamblers make a fortune betting prices through the roof and yes, I get even more p*ssed off when they potentially destroy jobs and lives to make more money by betting those prices down again.
For every one of them walking away with more money than they can possibly spend, thousands of innocent people’s lives are degraded, the fruit of their labour effectively stolen from them.
The entire thing makes me utterly sick – thousands of people are jailed every day for less.
18. techieman said...
d'oh - yes i agree with almost everything you say. The authorities are in my view to blame by a relaxation of the rules and even when rules are broken enforcing them in the same way that we slap a £50 fine on John Terry for parking in a disabled bay!. Your point "If a bank behaved truly responsibly whilst all the others did not, they would "under perform" and their share price would collapse and they would be taken over." is EXACTLY right. If a trader for example buys a market and loses he will get less pressure if everyone else did that than if he was a maverick and took the opposite side but got it wrong. While property was booming the banks competed by making mortgages more "affordable" increasing LTVs / self-certs / Interest only / Low starts etc. BUT what they should have done was the opposite based on the increasingly unaffordable prices. Short termism is undoubtedly a problem - its just in this case Im not convinced (as you seem to be saying) that there is some rougue trader with a couple of 100 million wedged in his pocket from a short sale, that nearly broke the bank.
Shipbuilder - really (and i may be wrong) dont you think thats what they want you to think (in this case)? I can see your general point though, and yes what we value people at isnt right in my view, but we should be blaming society of which we are all part rather than the spotty kids who probably dont really know any better. But i agree with you the ones that dont know are not the problem - its the ones that do know and dont care - i.e. the rest of you are all suckers - types that p*ss me off.
19. shipbuilder said...
Its both what they want us to think and fast becoming the reality. Unless you can buy your own land, sink a well, cycle everywhere, build up a business trading with people totally undependant on the wider economy etc. etc., you are affected by the financial markets. Even then you must pay council tax (I think).
I personally think the whole system needs replacing and I welcome the day when that happens - you're right - we need to stop blaming the scapegoats (although they shouldn't be allowed off scot free because they all know what they are doing) and look at the whole system.
We need skills, education, tolerance and a sense of interdependence back in the centre of our society - not gambling, waste and this ridiculous idea of 'growth'.