The 10 Largest Trading Losses In History
Monday, March 10, 2008 | Dylan JovineRating:
P.T. BARNUM WASN'T LYING WHEN HE SAID THERE WAS ONE BORN EVERY MINUTE.But here at the Tycoon Report, we don't call them suckers. We call them "Munson's."
You may even remember the first time I introduced you to my very own friendly neighborhood "Mr. Munson". It was in an article I wrote on May 31, 2006, titled "Want to Know a Sure-Fire Bullish Signal? Meet Mr. Munson?"
Here's how the article started:
"THERE'S USUALLY ONLY ONE TO A VILLAGE …
No, I'm not talking about the village idiot.
Nor am I talking about the village moron.
Today I happen to be talking about the village "Munson."
Not quite familiar with the term? Let me explain:
In my group of friends, the village "Munson" is the kind of guy who …
ALWAYS spills ketchup on his shirt, no matter how hard he tries not to.
ALWAYS bets on the wrong horse, even though he personally knows the owner of the racetrack.
NEVER made a penny in the stock market, but SWEARS up and down that he told everyone he knows (including you) to buy Microsoft at the IPO …
PLAYS lotto every single day of his life, and truly thinks it's his "lucky day" if he wins back HALF of what he paid for the tickets.
Yep, you know exactly who I'm talking about - the good-hearted guy you love like a brother, even though you won't let him ANYWHERE NEAR your baseball card collection.
Usually there's only one Munson to a village.
But as luck would have it, I happened to grow up right next door to an extended family of them."
Well, it just so happens that there's not just a Munson in every village - there's one at each and every single firm on Wall Street.
Most of you probably already know that, simply based on the calls you get from Wall Street brokers trying to get you to buy the next best stock since sliced bread.
But for those who need further proof that there is indeed at least one Munson at every Wall Street firm on earth, I've taken the liberty of going to my favorite website in the whole world, www.Wikipedia.com, to share their list of the largest trading losses in history.
(If for no other reason, Wikipedia is awesome just for compiling information like this.)
In addition to having the distinction of being such awful traders, the people listed below have something else in common: each of their losses can be traced back to a serious need for approval from their fellow co-workers, friends, and neighbors.
Billions of dollars in losses. Thousands of innocent lives ruined as a result of firms going belly-up due to the staggering losses. Careers destroyed because of the upheaval.
And for what? Because daddy didn't give them as many hugs as little Timmy got from his daddy down the street? Yes, ladies and gentleman, sometimes it is just as simple as that.
(Note to Wall Street head honchos: I would tell you to beware of letting needy, insecure, Napoleonic, self-destructive, and annoying people trade your money, but you'd have nobody left if you fired everyone who works for you that fits that description.)
Anyway, for what is worth, I present you with my moment of levity for this Monday morning - the list of the top 10 biggest trading losses in human history:
| Name | Loss | Institution | Market |
Year |
| Jerome Kerviel | $7.1B | Societe Generale | European futures | 2008 |
| Brian Hunter | $6.5B | Amaranth Advisors | Gas futures | 2006 |
| John Meriwether | $4.6B | Long-Term Capital | Interest rate rates | 1998 |
| Yasuo Hamanaka |
$2.6B | Sumitomo | Copper futures | 1996 |
| Wolfgang & Helmut | $2.5B | BAWAG | Currencies | 2006 |
| Robert Citron | $1.7B | Orange County | Interest rate rates | 1994 |
| Nick Leeson | $1.4B | Barings | Nikkei futures | 1995 |
| H. Schimmelbusch | $1.3B | Metallgesellschaft | Oil futures | 1993 |
| Toshihide Iguchi | $1.1B | Daiwa Bank | Bonds | 1995 |
| David Lee | $800M | Bank of Montreal | Natural Gas | 2007 |
If you'd like to share the biggest trading loss of your career - and the lessons you've learned from it - you can do so here. The story with the most responses will be featured in next weeks Tycoon Report.
Enjoy the week. (Next week we'll get back into the mechanics of buying a private business!)
(Please let us know what you think about Dylan Jovine's article.)
Rate his article here »
Rate his article here »
Dylan Jovine
Chief Investment Officer
The Tycoon Report
Economic Calendar for the Week of Week of March 10 - March 14
Thursday, March 13
08:30 - Retail Sales
Release Details
Importance (A-F): This release merits an A-.
Source: The Census Bureau of the Department of Commerce.
Release Time: 8:30 ET around the 13th of the month (data for one month prior).
Raw Data Available At: http://www.census.gov/svsd/www/advtable.html.
The retail sales report is a measure of the total receipts of retail stores. The changes in retail sales are widely followed as the most timely indicator of broad consumer spending patterns. Retail sales are often viewed ex-autos, as auto sales can move sharply from month-to-month. It is also important to keep an eye on the gas and food components, where changes in sales are often a result of price changes rather than shifting consumer demand.
Retail sales can be quite volatile and the advance reports are subject to rather large revisions. Retail sales do not include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income and consumption reports are released, typically two weeks after retail sales.
Highlights
Briefing.com Forecast: -0.1%, flat ex-auto
Market Consensus: 0.1%, 0.2% ex-auto
Key Factors
Another weak month led by declines in durable goods and a dip in gasoline prices.
Flat ex-auto sales in line with 2 month average.
0.2% gain in ex-auto/gas sales exceeds the 0.1% 3 month average and flat 6 month average.
Staples of food, clothing and health care expected to show gains.
Big Picture
Retail sales are slowing under the weight of high gas prices, falling home prices and weakening consumer confidence. The housing recession drags consumer durable goods (e.g. furniture, building equipment, appliances) as auto sales remain weak Despite the historically low unemployment rate and moderate income growth, high energy prices have had a deflating effect on consumer spending and big ticket durable goods purchases particularly. Retail goods sales add to service spending to leave total consumer spending.
Friday, March 14
8:30AM - CPI: Consumer Price Index
Importance (A-F): This release merits a B .
Source: Bureau of Labor statistics, U.S. Department of Labor.
Release Time: 8:30 ET, about the 13th of each month for the prior month.
Raw Data Available At: http://stats.bls.gov/news.release/cpi.toc.htm.
The Consumer Price Index is a measure of the price level of a fixed market basket of goods and services purchased by consumers. CPI is the most widely cited inflation indicator, and it is used to calculate cost of living adjustments for government programs and it is the basis of COLAs for many private labor agreements as well. It has been criticized for overstating inflation, because it does not adjust for substitution effects and because the fixed basket does not reflect price changes in new technology goods which are often declining in price. Despite these criticisms, it remains the benchmark inflation index.
CPI can be greatly influenced in any given month by a movement in volatile food and energy prices. Therefore, it is important to look at CPI excluding food and energy, commonly called the "core rate" of inflation. Within the core rate, some of the more volatile and closely watched components are apparel, tobacco, airfares, and new cars. In addition to tracking the month/month changes in core CPI, the year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate.
Highlights
Briefing.com Forecast: 0.1%, 0.2% core
Market Consensus: 0.3%, 0.2% core
Key Factors
Expected 0.1% gain is the softest since August.
Energy prices (gasoline) dipped before turning higher again in March.
Leaves annual CPI edging lower to 4.2% yoy from just 2% yoy in August before energy prices surged.
Annual core growth expected to ease off to 2.4% yoy from 2.5% in January and the 2.1% yoy lows of August and September.
Core commodity prices are up just 0.2% from a year ago, energy (20% yoy) as services (3.3% yoy) provide the core pressure.
Core hot spots: the services of medical care (6% yoy) and education (6% yoy). Owners equivalent rent has softened to 2.8% yoy from 4.1% at the start of 2007.
Big Picture
The core rate of consumer inflation reached a decade high of 2.9% yoy in September 2006, eased off to 2.1% and has climbed back to 2.5% yoy in January. The stickier prices for shelter and medical care and tuition will continue to hold firm as yoy core commodity prices are nearly flat from a year ago despite the pressure down the pipeline. Energy prices provide the monthly swing and the largest underlying pressure. In the big picture its aggregate demand which provides the price direction as sub-potential growth (below 3%) will ease the core inflation pressures over time. The Fed more closely watches core PCE prices as an inflation guide which stands at 2.2% yoy -- back above Fed expectations and its 'comfort zone'. Overall CPI reached a 14 year high of 4.7% yoy in Sept '05 as energy prices have provided the recent lift to the current 4.3% yoy.
10:00AM University of Michigan Consumer Sentiment Index
Release Details
Importance (A-F): This release merits a B-.
Source: The University of Michigan.
Release Time: Preliminary: 10:00 ET on the second Friday of the month (data for current month); Final: 10:00 ET on the fourth Friday of the month (data for current month).
The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading. Like the Conference Board index, it has two subindexes - expectations and current conditions. The expectations index is a component of the Conference Board's Leading Indicators index.
