Vanilla to blame for global crisis in stock markets?

[wayneL]

The assumption that the market is under-valued was never made, neither was the assumption that the "crash of 08" was/is caused by Pierre... simply the rather ??severe?? 3 day downleg starting Mon last was due to Pierre.. not some sudden fear plucked out of thin air that Mon. morning was the day the worlds punters woke up to the problems facing the worlds economies... but maybe this Mon.

Not by you, but the implication is being made in the medja. i.e. "It's all ok now, the selloff was all caused by some frog in a cubicle in the mail room of some unpronounceable French bank. Come back in, the water's fine."

 

[Timmy]

No doubt SogGen precipitated the severity of the sell-off...

Wayne ... the information coming out is incomplete, but based on what is said it appears the bulk of the position was built in 2008? If so, then SocGen must have been a net buyer in the first few weeks; now everything else being equal (which it never is) their buying would have provided support for the market, right? How much, for how long, etc. - how long is a piece of string - don't know, but the simple mathematics of supply and demand would tell you the market would have fallen faster in early 2008 if SocGen were not buying (which, if the current reports are accurate - question mark - they must have been).

When the time came to sell, it was with urgency ... which, like you concluded, precipitated the severity of that particular downleg.

My thoughts are the SocGen episode shifted the downmove to the right, as it were, and exacerbated the sharp leg down on the 21st and 22nd. But it was an episode played out with much bigger normal market forces in the background.

In a sense one can view the episode as a case-study of how a plunge protection team might impact on the market. On another thread there was an article that explained the PPT could buy time, and that is all, they could not halt moves that had the force of global macreconomics behind them.

I reckon that is worth.

 

[Timmy]

This from a report in the SMH:

"Societe Generale chairman and chief executive Daniel Bouton described Kerviel as a "crook, fraudster and terrorist" "

I would have thought that those who have lost family and friends to the actions of terrorists might find this comparison somewhat insensitive and offensive ... I know I did.

 

[Kauri]

Not by you, but the implication is being made in the medja. i.e. "It's all ok now, the selloff was all caused by somefrog in a cubicle in the mail room of some unpronounceable French bank. Come back in, the water's fine."

said the simmering pot to the lobster..


I'm in a negatively stirring mood today...


Carrying on with his well worn cry US Paulson has urged the US senate to quickly approve the $150bln stimulus package. Reuter"s reports that in a television interview Paulson said the plan was carefully crafted to be temporary and should be kept simple to get the money out as fast as possible. The urgency of the stimulus plan underlines the dodgy nature of the US economy and coincides with the IMF at the Davos shindig that a "serious" response was required to counter the risk of a US recession and slowing world growth, and as a former Treasury Secretary points out, this is the first time in a quarter of a century that the IMF has called for an increase in budget deficits....traditionally its all been about fiscal consolidation. This is hardly a great environment to be long stocks or anything else that follows the markets, which is most everything that re-acts to, correlates with, or has risk aversion possibilities built in.
Barclay"s Capital have just released estimates showing that if the American monoline insurance companies have their credit ratings downgraded across the board the world"s banks could wind up needing to raise as much as USD 143bn . Barclay"s reckons that about 75% of the USD 820bn in financial products with monoline guaranties are held by banks across the globe (which banks?? ) . If the products carrying monoline guaranties are lowered by one rank from the top AAA rating, the banks would need to raise USD 22bn, while a downgrading to single A would necessitate six times more capital.

Cheers
............Kauri

 

[Yeti]

I keep wondering what Jérôme Kerviel was hoping to gain from his actions and how. If his alleged trading had been profitable and instead of losing Billions had earned Billions or even just mere Millions, how would he have benefited? Surely he could not have simply transfered the funds into his own or any other account, or have walked out with a few Millions in his briefcase each day after work.

 

[Timmy]

I keep wondering what Jérôme Kerviel was hoping to gain from his actions and how. If his alleged trading had been profitable and instead of losing Billions had earned Billions or even just mere Millions, how would he have benefited? Surely he could not have simply transfered the funds into his own or any other account, or have walked out with a few Millions in his briefcase each day after work.

If he made loads he may well have earned a pay rise, promotion, bonus.

 

[Trembling Hand]

I keep wondering what Jérôme Kerviel was hoping to gain from his actions and how. If his alleged trading had been profitable and instead of losing Billions had earned Billions or even just mere Millions, how would he have benefited? Surely he could not have simply transfered the funds into his own or any other account, or have walked out with a few Millions in his briefcase each day after work.

Nah these things happen by digging a bigger hole trying to get back to zero rather than trying to make Billions. A huge profit should of also triggered the risk warnings. Classic averaging down.

 

[Timmy]

Nah these things happen by digging a bigger hole trying to get back to zero rather than trying to make Billions. A huge profit should of also triggered the risk warnings. Classic averaging down.

Yes, I think I answered the wrong question. His motivation for digging the hole would have been something like : "Oh sh*t, how am I going to get out of this?"

I wonder how many potential rogue traders are created each day as they average down, only to be saved by a blip back up or the firm's risk controls?

 

[IFocus]

I'm in a negatively stirring mood today...

Caused by late nights playing with pips?

 

[Kauri]

Caused by late nights playing with pips?

How did you know that ... Pippa and I lived in Riverside Gardens by the Serpentine until recently..

IG's platform is down today.. having to trade through my back-up dealer and not up to speed with it... yet..
Cheers
..........Kauri

 

[IFocus]

How did you know that ... Pippa and I lived in Riverside Gardens by the Serpentine until recently..

IG's platform is down today.. having to trade through my back-up dealer and not up to speed with it... yet..
Cheers
..........Kauri

Crack me up