From the story I didn't get the feeling the trader was a stupid person though, if he was he wouldn't be working for Refco to start with. Uncontrolled greed in his case has overshadowed his perception of rational decision making, happened to most of us at some stage in our trading lives. Nobody is perfect, hopefully we can live to learn from our mistakes though. Most humans, by nature, are greedy. Learning to control it takes time and effort, we can improve when we know and learn to control our weaknesses. Balance.
Balance? The rich get richer and the poor blow thier accounts trying to get rich. It's all about money, that's the bottom line. A friend once told myself that the markets can only be about getting it right. He was correct. Get it right, keep it small, and don't give the fuckers a chance.........that's the best you can do.
Yes. It's the new form of "psuedo-professionalism" in corporate america. Cheese, Not controlling risk and acts of stupidity are not one in the same. The person who blew 2 mil was taking an uncontrolled risk that bit him hard. I'll venture to say the guy made his account grow in a similar manner, via using uncontrolled risk and therefore creating significant reward. This isn't stupidity, its financial Russian roulette. Some people understand this and hence survive longer than others. Most do not. This isn't because of stupidity, its because of ignorance. Mike P.S. Am I wrong to believe that REFCO has a risk manager - someone that calculates the probability of ruin given any significant market exposure and acts if exposure gets too high? This trader seems like he would of set off red flags after the first few hundred contracts...
I have to agree overconfidence blew him the guy at refco He thought since he was doing so good and was always right he could not be wrong. Greed and overconfidence is very dangerous the only way i see a person can come up is slow and steady
The reason Refco didn't blow this guy out after a few hundred contracts was that a couple of order clerks on the floor conspired to cover it up so it wasn't discovered until the end of the day when the computers posted all the activity. Those guys also lost their jobs the next morning. I also believe, but can't prove, that the trader was doing a lot of coke at the time - giving him a more invincible feeling than he deserved. Drugs can kill you in more than one way.
As I've already said, this was crass stupidity by the culprit. I'd have fired his ass, even if his gamble had been successful. This mother was a loser. Also it does not seem to be realized that Refco was not 'top drawer'. It always had the scent of a cowboy outfit.
Refco was a fun place to work for in those days. It did have a cowboy, gunslinger attitude which got picked up by some of the employees. One year they chartered a jet and flew everyone to Las Vegas for a company party and gave them $ 1,000.00 each to gamble with. They liked to push the envelope and I think that was what led to their demise a few months ago. I will say though that if Tom Dittmer had still been running the company last year, they would never have gotten into such a mess. He was way too savvy to let things go that far out of control. Once again, greed may have been a major factor in the collapse of the firm. Time will tell.