French Bank Finds $7.14 Billion Fraud (AP)
These days, a loss of $7 billion at a major bank is hardly anything to get excited about. It's all in a days work. But this time it's different. At Societe General, a single trader is said to have been responsible for more than $7 billion in fraud. This sounds like a story that will take some time to unpack, because it's still not totally clear what's happened. Evidently, he used his knowledge of the bank's security systems (a little odd) to conceal his actions, which involved a scheme of "elaborate, fictitious transactions". Though apparently they weren't so fictitious that they didn't cost the bank money. Anyway, trading in SG shares has been suspended and, this is rich, the trader apparently tendered his resignation, which was accepted. Good chance the trader has more pain coming to him. WSJ has more. and AlphaVille liveblogged the conference call, which sounded like a mess. S[eaking of messy conference calls, did you see that SLM boss Albert Lord apologized for his behavior on that call last year? Too bad. He should've stuck to his guns.
Leeson for sale, before he goes on holiday (to Paris) (FT Alphaville)
Not surprisingly, the real winner of this Societe Generale news is Nick Leeson, the man who's name is synonymous with rogue trading. His losses were lower than this, but he had the bad luck of winding up in a Singapore Prison. The man's turned himself around over the years and last we heard he was working for a football (soccer) club as a GM or something. Anyway, word is that he's going to charge more than £1,000 per interview. That doesn't seem like very much.
Asian Markets Mixed After Dow's Rebound (AP)
After the US staged a dramatic reversal of fortune, the good kind, not the bad kind, the rest of the world turned in a mixed performance overnight. Some markets were up, while others were down. That's what we like to see though. Markets moving in lock step, either up or down, are always a bit scary -- sort of like lockstep soldiers walking over a bridge. Always good when they break things up a bit and do their own thing.
Next on the Worry List: Shaky Insurers of Bonds (NYT)
Apparently there are these companies called bond insurers and apparently they play a big, under-appreciated role in the economy. And supposedly they've taken on too much risk and may collapse, resulting in untold calamity. Have you heard of them? Probably not, cause they're the next worry. Something to watch out for though, for sure.
Wal-Mart Chief Offers a Social Manifesto (WSJ)
It's sometimes hard to tell with Wal-Mart whether its various eco-friendly initiatives are all about appearance or something bigger. The company obviously knows how to read the tea leaves and best position itself politically. But it's also done interesting things. In a new initiative, the company said it wants to reduce the energy used in developing its products by 25 percent. This is interesting. On the one hand, it's very Wal-Mart to try to squeeze every last bit of efficiency out of something. It's also possible that all they'll end up doing is shifting that 25 percent to some other party that goes unmeasured, which wouldn't really accomplish anything. And of course it's possible that the whole thing is lip service. Still, we're more optimistic about initiatives to reduce energy consumption than most efforts at changing where we get our energy from.
Alternative Asset Managers and Down Market Cycles: What to Expect (Information Arbitrage)
Roger Ehrenberg offers some interesting analysis on what to expect from hedge funds and their ilk during a prolonged market downturn. His take: not good. Most managers that are supposed to be able to play any direction by going short don't know how to do the short side as well. Their alpha evaporates in this direction. Definitely worth a read.
3 Prior Market Crashes (Big Picture)
An eerie chart comparing the latest downturn to some previous crashes. You have to see it for yourself, but the gist is that this could be just the beginning. Though past performance may not mean anything.
A Writer Comes to Davos (Dealbook)
Apparently at Davos, you get laughed at if you're a writer and not involved in business. With any luck, this will be the last year of that nonsensical event.